Recently, several Miami parks have been discovered to be contaminated. Residents and park users are asking, "How could the government not have known that this park was contaminated?" The answer lies in a lack of appropriate environmental due diligence and stewardship.
When for-profit developers purchase land, they conduct at least a minimum level of environmental due diligence to protect against unwelcome surprises. Generally, the developer engages an environmental consultant to conduct an investigation known as a Phase I environmental site assessment. Phase I ESAs are the backbone of environmental due diligence for commercial real estate, including large tracts to be developed with single-family homes. A Phase I helps the developer determine the value of the land and whether the land is suitable for the planned development. More importantly, a Phase I helps the developer anticipate additional costs that may be incurred to address environmental issues, costs which can easily exceed the value of a severely-impacted property.
Developers conduct a Phase I to uncover environmental problems such as chemical spills, illegal landfilling and leaking storage tanks, as well as historic uses of the target property or nearby sites that may have caused environmental impacts to the property. A properly conducted Phase I includes a review of historic records such as fire maps, telephone directories, topographic maps and aerial photos to determine the prior uses of the property and its surroundings. The consultant reviews federal, state and local databases to determine whether the property or nearby properties have been the subject of reported spills or enforcement actions. The consultant also visits the property to inspect any structures and look for evidence of environmental problems. A Phase I, however, does not include any soil or groundwater testing on the property or any digging of test pits for buried debris or waste. As a result, even the best Phase I can miss environmental issues that become unearthed during site development, or worse, years after the property has been developed and people have been unwittingly exposed to contamination.
To prevent such nightmare scenarios, savvy developers take additional steps beyond the Phase I, even when the report indicates the property is "clean." This is especially true when the historic use of the property suggests that pesticides and other beneficial chemicals were legally applied over a long period of time, such as former agricultural land or golf courses. In those cases, developers take a closer look to ensure that those uses did not impact the property by conducting additional environmental due diligence about the maintenance practices on the property, including the types of pesticides, herbicides and other chemicals used on the site, the rates of application and where chemicals were stored. In some cases, developers go even further, conducting testing of soil to identify improper fill, potential "hot spots" or widespread areas of contaminated soils.
While for-profit developers have been conducting Phase I reports and similar environmental studies for decades, local governments acquiring property to use for public purposes (such as parks) have taken a less sophisticated approach. Environmental studies are expensive. For a for-profit developer, the studies are just part of the cost of doing business and a way to head off potentially more costly surprises once development has begun. A local government acquiring property, however, may choose to forgo conducting adequate environmental due diligence to save money or due to a lack of awareness.
Some of the contamination issues uncovered in local parks relate to the historic use of the properties or to filling of the sites with improper fill material, such as the use of a park to dispose of ash or other waste material. While there is no guarantee that a Phase I report would uncover all potential issues, a good Phase I report can identify past uses that may be red flags for environmental trouble. A Phase I can also identify sites that have been filled, by comparing the historic topography of the site with the current site observations.
The second part of the answer lies in appropriate stewardship of government-owned lands. Historically, governmental land stewards have used public lands as disposal sites, without considering potential environmental impacts. Private developers understand that inadequate inspection of material used to fill their property often results in unexpected contamination and enforcement issues, a lesson that many governmental land stewards have failed to grasp.
There is no one-size-fits-all solution to identifying or preventing contaminated sites. Until local governments begin to act more like private developers in acquiring and stewarding public lands, these problems will continue to occur.
This article is reprinted from the April 2, 2014 issue of the Daily Business Review. © 2014 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.
Howard E. Nelson spoke on The Effect of Mitigation Credits on Property Development and Values, and Recap of HB 521 (2019), during the 2019 Florida Association of Property Appraisers (FAPA) Post-legislative Conference.