10/01/2006

Editorial

Petoskey Pointe tax credit application process tainted

Michigan economic development officials must immediately explain why $4.5 million in tax credits were granted to the Petoskey Pointe project even though tests indicating widespread contamination were shown to be wrong.

At the same time, Gov. Jennifer Granholm must demand some answers from members of the Michigan Economic Growth Authority: Why the credits were granted even though the state Department of Environmental Quality knew (and the MEDC should have known) contamination claims were wrong; why board members didn't immediately review the issue; who knew what and when did they know it.

Taxpayers may want to ask some questions of their own: Why has the state's brownfield redevelopment program morphed from an incentive to redevelop contaminated sites into a taxpayer-funded piggy bank for developers; and why no one at the state level blew the whistle on the Petoskey Pointe giveaway.

While the explanation of how we got here is convoluted, the upshot is clear: Taxpayers are doling out $4.5 million in tax credits for a project that, had accurate information been supplied from the beginning, should not have been funded.

In 2005 the consulting firm AKT Peerless Environmental determined there were high levels of a chemical called PCE on part of the Petoskey Pointe site.

In January, a claim by AKT that up to 10,000 cubic yards of contaminated dirt had to be removed from the site was central to a brownfield remediation plan submitted to Emmet County on behalf of the developers, Lake Street Petoskey Associates. Lake Street sought $450,000 to pay for the work.

A copy of the work plan was sent to the state Department of Environmental Quality, which in April questioned the PCE claims. The very next day Peerless officials admitted the results were flawed and blamed "laboratory contamination."

In late May, however, claims of PCE contamination and the need to remove 10,000 cubic yards of soil played a prominent role in a Lake Street application to the Michigan Economic Development Corp. for $4.5 million in brownfield cleanup tax credits.

Two weeks later the Michigan Economic Growth Authority Board granted the $4.5 million in credits, claiming they would help eliminate "a long-standing environmental problem."

Even after learning that the pollution claims were flat-out wrong — the cost of soil removal is now estimated at $7,500 — MEDC and MEGA officials have endorsed and defended their actions.

"We don't see a problem with what transpired, frankly," said Mark Morante, vice president of Development Finance at the MEDC. "It was an error. Some people make errors all the time. We don't have a problem with it."

MEDC spokesman Michael Shore said the Petoskey Pointe credits served a larger public good.

"There was a public purpose well served here ... and we stand by it," Shore said. "I don't know whether the process was flawed or not."

That ignores the fact that the brownfield tax credit program is predicated on redeeming contaminated sites — thus the name. And there is no question the process was flawed.

According to the MEDC's Web site, credits are awarded "on a case-by-case basis to help with the expense of demolition, environmental cleanup and other remedial actions."

If the Petoskey Pointe application hadn't included claims of widespread PCE pollution and 10,000 cubic yards of contaminated soil, it shouldn't have gotten even a second look from MEDC or MEGA — based on their public criteria, at least. Existing groundwater contamination on the site isn't even going to be cleaned up and wasn't part of the application.

Should environmental cleanup totaling a measly $7,500 count? Should an application that makes grossly inaccurate claims be rewarded? Taxpayers probably don't think so.

There are parallels between Petoskey Pointe and Traverse City's failed parking deck proposal, which both depended heavily on state brownfield funds.

In Traverse City, the state awarded more than $1.5 million to clean contamination; later studies showed little, if any, cleanup was needed.

Petoskey partner David Jankowski and Michael Uzelac, a key player in the Traverse City effort, are cousins; Uzelac helped lead both projects through the public process.

State Sen. Jason Allen, R-Traverse City, helped quash a competing parking deck plan in Traverse City. He also attended the initial Emmet County Brownfield Authority meeting at which the Petoskey Pointe project was discussed, though it hadn't even been on the agenda.

Allen's political accounts received $20,000 from Louis Ferris Jr., CEO of the development company that proposed the Traverse City project. James Wilson, a Lake Street Petoskey Associates partner, contributed $1,000 in 2004 and his wife, Joy, gave another $1,000 that year. James Wilson made a $10,000 committee donation to Allen last year.

The questions keep piling up, but so far there are few answers (in part because most officials involved refused to talk to a reporter). How can officials simply brush off the fact that $4.5 million in credits were granted to rehabilitate a site where the cleanup totaled just $7,500? Who polices the process? Will anyone be held accountable?

Taxpayers have so far been the ones left out of this process. It is time well-paid state employees and high-ranking elected officials like Allen and Granholm step in and get some satisfaction for taxpayers.