Archive for Thursday, June 13, 2002

State to review new Sunflower plan

June 13, 2002

A Johnson County developer and a national real estate investment firm with a reputation for cleaning up and developing contaminated sites have approached the state with an offer to purchase the Sunflower Army Ammunition Plant.

The two developers, Kessinger/Hunter and Co. of Kansas City, Mo., and Cherokee Investment Partners of Raleigh, N.C., propose to buy the property for the cost of its environmental remediation. To do so, the partners are asking the state to pursue an early transfer of the 9,065-acre plant.

Unlike the proposal from Oz Entertainment Co. that failed to get needed county approval, they are not asking for tax incentives to pay for the cleanup. To recoup their upfront costs, the partners indicated they wanted to complete Sunflower's remediation in 10 years or less.

Charles Hunter of Kessinger/Hunter said investors' development plans are uncertain at this early stage, Hunter said. One thing was known, he said: The proposal doesn't include a theme park.

In a letter to Gov. Bill Graves, Hunter indicated the investors would make substantial public benefit transfers. Hunter said Tuesday the transfer would be on a par with those in the Oz plan and those shown in the Community in a Park land-use plan the Johnson County Commission approved in 1998.

"I can't tell you what the number of acres will be," he said. "We will sit down with the jurisdictions and agencies involved and come up with the appropriate number."

Gov. Bill Graves has appointed a four-member committee headed by Lt. Gov. Gary Sherrer to review the proposal and negotiate an agreement with the investment partners. Others on the committee are Kansas Department of Health and Environment Secretary Clyde Graeber, Kansas Wildlife and Parks Secretary Mike Hayden and Kansas Development Finance Authority President Jack Brier.

"I hate to judge too early, but there was enough positives in the proposal that we need to seriously sit down and visit with this partnership," Sherrer said.

The state negotiators would insist on the conditions Graves listed in letters to the Army and the developers, Sherrer said. In the letter, Graves wrote the developers must commit to an agreement that ensures Sunflower's environmental cleanup at no cost to the state of Kansas, produce an economic benefit to the local community and the state, and a plan consistent with the development plans of local governments.

Sherrer said the state will take the developers at their word and proceed with the assumption the agreement would not be dependent on state tax incentives.

Because of its dependence on public financing, the Johnson County Commission had to approve the Oz agreement. By eliminating that requirement, the latest proposal needs only the approval of the appropriate federal agencies and the governor.

The county would have zoning authority over any Sunflower development.

Hunter said the Community in a Park land-use plan "makes a lot of sense." It may have to be tweaked as the process moves ahead, he said. But he said the investors would suggest changes after discussion with the county and local communities.

"We're pretty good listeners," he said. "We're very open to ideas."

One of the frequent criticisms of Oz was that the company had no proven track record. By contrast, Cherokee Investment's Web site says the firm began buying contaminated real estate in 1990. Since then, Cherokee has acquired 294 sites in 32 states, eight Canadian provinces and four countries with a total purchase price exceeding $600 million. The firm will spend more than $130 million to clean up pollution at these sites, leading to $2 billion of further redevelopment.

Sherrer said one of the jobs of his committee would be to verify that record.

"What we need to find out is if this partnership is capable of doing what it says it is," he said. "We will do our due diligence on their background.

"Our preliminary look is that they do a lot of projects that tend to have successful results."

Micheline Burger, president of the citizen's watchdog group Taxpayers Opposed to Oz Inc, called the lack of development details "troubling."

"I'm sure they know exactly what they plan for the site," she said. "I would think they would want to involve the community as soon as possible. That would include full disclosure of who the principals are and what is planned for the site."

Blaine Hastings, who is handling Sunflower's transfer for the U.S. General Services Administration, said he was aware of the new proposal but was waiting for details.

The environmental remediation agreement and much of the minutiae of the transfer arrived during two years of three-way negotiations with Oz, the state and federal agencies could apply to the new proposal, Hastings said. That should make arriving at a new agreement much easier and quicker, he said.

One important thing would have to be renegotiated, Hastings said.

"We'll have to agree on a sale price and cleanup cost," he said. "We'll have to look at those numbers again."

The Oz agreement required the company pay a fair-market value of $37 million, roughly the cost of the cleanup estimate at that time. The latest estimate places the price tag of cleaning up Sunflower at $56 million.

Hastings said two TOTO lawsuits must be resolved before any Sunflower transfer can happen. Two years ago, TOTO filed lawsuits in the Kansas City, Kan., U.S. District Court contending that required historical studies be completed and that an environmental impact study was needed before Sunflower could be transferred.

The GSA requested and the court granted a stay of the TOTO lawsuit pending completion of the historical reviews. Hastings said the historical reviews should be completed in September. Unless they show a need for added protections of historical sites, the transfer can go forward, he said.

As for an environmental impact study, the GSA maintains one is not needed if Sunflower is transferred through the early transfer process. Under that process, the Army issued a finding of no significant impact that replaced the need for an environmental impact study. The finding differentiates the plant's transfer from its end use. The so-called FONSI, released in 2000, stated there were no adverse consequences from the plant's transfer.

The federal government has no control over future development, Hastings said. That is up to the purchaser and local zoning, he said.

Burger, however, said the court would side with TOTO and require an environment impact study from the plant's proposed future uses.

"We're going to have to have all the details before the government can make an appropriate environmental assessment," she said.

Commenting has been disabled for this item.