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Developers Plan Equivalent of New St. Paul Downtown on Minnesota Superfund Site

Cleanup Site Would Hold 427-Acre Development
September 4, 2018
Developer Alatus is planning to build a master-planned development on a 427-acre Superfund site outside St. Paul, Minnesota.

A developer plans to transform a federal Superfund site in Minnesota into the equivalent of another downtown St. Paul on 427 acres in the Twin Cities' northern suburbs, taking advantage of one of the few parcels with the cleanup designation located near a major urban area.

After years of haggling and false starts, Ramsey County is preparing to sell the site to Minneapolis-based master developer Alatus with the hopes of breaking ground next year. It would take about 18 years to fully develop the site, which sits at the junction of Interstate 35 West and Highway 10. Alatus' plans call for single-family homes, townhouses, apartments and senior living. The company has also pledged to bring jobs, a corporate headquarters and flex space, offices, retail and a full block of entertainment, including a movie theater, brewery and a restaurant.

The project is a sign of how the redevelopment of once-polluted areas that were designated by the Environmental Protection Agency as Superfund sites is picking up amid a surging economy. In this case, the site now known as Rice Creek Commons was previously home to the World War II-era Twin Cities Army Ammunition Plant known as TCAAP, which went dormant in the mid-1970s. In 1987, the U.S. Army began cleanup efforts that ran through the 2000s. When Ramsey County bought the site in April 2013, it was fit for industrial and commercial use, but still too contaminated for residential development so the county spent 30 months on extra remediation.

Now the site’s soil is in the clear, which allows development of all kinds to go forward, but its ground water will still need to be treated for contaminants for the foreseeable future before the site is livable, said Amy Hadiaris, a hydrogeologist at the Minnesota Pollution Control Agency who has worked on the cleanup. The massive project in Minnesota stands out among developable Superfund sites, Hadiaris said.

"A lot of these Superfund sites are out in the boonies," Hadiaris said. "It's unusual for a site of this size to be right in the middle of a metro area, and ready for residential development. Those combination of factors really make a difference."

The Superfund program was created in 1980 to identify heavily contaminated sites and compel the responsible parties to clean them up or pay into a trust fund made for that purpose. Most were designated over the following decade and required years of environmental remediation to make them marketable again for industrial or commercial uses. Even more work is required if land is to be used for housing, which is held to more stringent standards than those used for commercial purposes.

There are 1,861 Superfund sites in the EPA’s database. According to the agency’s annual report for 2017, 487 were cleaned up and used for productive purposes such as development, and 403 properties have been delisted, meaning they are considered clean enough for a residential designation.

However, the county could be thwarted by the city of Arden Hills, which said it has been excluded from negotiations. Officially, the purchase price for the property is $62.7 million. If all goes according to plan, Alatus would pay the county $42.6 million for the site. An additional $20 million would be held in an escrow account and paid back in increments to Alatus, as a sort of performance-based developer fee.

The entire sum would be paid over five installments, as the build-out progresses.

The Ramsey County Commission discussed the deal during a meeting last week that was closed to the public but sent out a summary of the agreement afterward.

The total price Alatus is offering is double what the county paid five years ago, when it purchased the heavily contaminated property from the U.S. government for $28.5 million. Only about $5.5 million was for the land itself, with $23 million added to the bill to account for the environmental cleanup needed to make it safe for residential development.

The offer number is unlikely to change at this point, said Louis Jambois, a former St. Paul Port Authority official who has been retained by the county to represent its interests during the negotiations. He said Alatus and Ramsey County hope to close the deal by the end of 2018.

"We’re in kind of a hurry because we have a wonderful development market right now, and we want to be able to take advantage of that," Jambois said.

But the timing will be dependent on the will of the city of Arden Hills, which has three representatives on the five-person Joint Development Authority that is overseeing the effort. The county only has two.

Right now, Arden Hills is not quite on board. A vote on the agreement was added to the authority's agenda for Tuesday, but Arden Hills officials say the county is pushing the item forward unilaterally and asked that it be pulled, according to the city.

The letter adds that the city has not had enough time to review the document, and that most of the city’s wishes are either not addressed in the agreement or are flatly contradicted by it.

The city’s chief concerns at an Aug. 20 meeting centered on the amount it would have to pay to build infrastructure at Rice Creek and how much would go to the city to reimburse the costs it has already sunk into getting the project off the ground.

There is still more work to be done before private development can begin in earnest at Rice Creek. The site will need about $67.9 million in earthwork and construction of public infrastructure to support the development, including a new water tower and a spine road. The county estimates it will have the necessary infrastructure built by June 2020 for development.

Council Member Brenda Holden was also wary of what could happen if the national economy went south.

"We do have to cover our costs if the economy goes to hell and they don’t develop it. There are cities all over Minnesota where they’ve been developing and stuff went bad and the developer just walked away and it’s just sitting idle," Holden said.

The agreement puts Alatus on a detailed timeline, with development milestones that specify the type and scope of desired projects at the site, though it does allow the developer a grace period in the event of a recession or the discovery of yet more pollution.

Barring that, the company would have to obtain the first building permit within nine months of purchasing the land, no later than Dec. 31, 2020. It requires that construction begin within two months of pulling the permit.

Clare Kennedy, Minneapolis / St. Paul Market Reporter  CoStar Group   
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