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[whitespace] River Street Project
Links to the Future: Behind this trash-covered fence north of Pacific Avenue lies a developer's dream--if someone can clean up the waste below.

Digging In the Dirt

Huge cleanup costs from defunct businesses have prevented the development of the River Street Project. An EPA-funded cleanup project could break that impasse--and clean out local business.

By Jennifer Pittman

DOWNTOWN Santa Cruz's shining commercial front abuts a chain-linked block of dilapidated buildings and trash-strewn lots on North Pacific Avenue and River Street. Flanked by Bulkhead Street, this almost triangular-shaped commercial district is a developer's dream. But until now, proposed projects for the area (including a movie complex, low-rent apartments, student housing, a courthouse annex and a health-food store) have always hit a wall: it would cost millions of dollars to clean up contaminated soil below the 1.4-acre site.

What's more, the people who own the land now have nothing to do with pollution that dates back decades--except they have to clean up the mess if they want to develop the land. Ongoing soil tests have yet to identify the extent of a thick, oily mass that is barely moving below the surface of the ground, and there may be other nearby areas of toxins in the triangle.

The contamination dates back to defunct businesses that disappeared long before any toxic disposal was regulated and pollution was even recognized as a problem. But now the problem is in Richard "Blue" Wilson's commercial yard.

"It's my job to get that dirt clean," says Wilson, president of the family business, Wilson Entities Ltd., which owns most of the land in the triangle. It is a difficult truth. Wilson says he has spent about $300,000 on cleanup consultants. He describes contaminated soil samples as gunk "like taffy," or "fudge."

Cleanup Blues

WILSON HAS wanted to develop the property at 125 River Street for at least 5 years. Preparing the site for its next incarnation--an upscale building of commercial office space and retail shops--he is partnering with developers Devcon Construction, builders of downtown Santa Cruz's Logos Books & Records and El Centro Residential Suites. They want the site cleaned up by fall.

Until recently that goal seemed nearly impossible. Years of stunted negotiations, however, have finally yielded an agreement among the parties involved: Wilson Entities Ltd., Pacific Gas & Electric Company, and Andrew and Cynthia Lenz of Lenz Arts. All three "responsible parties" have finally signed on to a joint cleanup plan with the help of the California Environmental Protection Agency Department of Toxic Substances Control.

The parties hope the state will foot most of the bill under the Expedited Remediation Reform Act of 1994. Wilson estimates that 4,000 to 5,000 tons of soil will have to be dug up and trucked out of town for burial in a Class One dump for toxic soils. He estimates the project may cost as much as $3.5 million. "We haven't figured out how that pie's going to be divided," Wilson says. That's up to the state.

Corporate backers of the Expedited Remediation Action Program (ERAP) had landowners like these in mind when they pushed for an alternative to the usually highly litigious liability battle over costly cleanup bills. The program provides state-supervised cleanup funds for up to 30 sites through a single agency--the Department of Toxic Substances Control (DTSC)-- and also allocates responsibility among parties who agree not to litigate.

The program "brings all the responsibilities together right up front as opposed to having that all fought out in the court system," explains Megan Cambridge, chief of the ERAP unit. "ERAP provides for mitigation rather than litigation by revising the liability scheme based on fair and equitable standards."

In addition, landowners beset with cleanup costs relating to companies that are either insolvent or cannot be located or identified can seek state reimbursement from a DTSC hazardous waste fines and penalties fund. To date, 18 sites have been designated as remediation action sites, four have been "satisfactorily remediated" and two, one in Alhambra and one in Santa Rosa, have received reimbursement of more than $3.5 million.

As a pilot project, ERAP is limited to providing "orphan share" funds for up to 10 sites--based on eligibility and the funding that's available. Wilson has been through this process already. Across River Street sits a parcel known by the DTSC as "the Lindberg Street Site." Less than an acre of land near the San Lorenzo River levee behind Outdoor World, it used to house a former auto repair shop and junkyard where there are shallow pits of contaminated soil, probably the remains of old batteries.

Wilson paid about a half million dollars to have trucks haul away 4,500 tons of mostly lead-contaminated soil from that site in February. Legally, he could have conducted a much less stringent cleanup. He intends to pave it over for parking to accommodate the proposed office building across the street, but it was excavated to a higher, residential building standard in case the family wants to develop the land at a later time. ERAP has agreed to reimburse Wilson 84 percent of his out-of-pocket cleanup costs.

"The good news is the state is picking up the tab for most of it," Wilson says. "The bad news is there was more of it than we thought."

The River Street site, however, is far more complex. PG&E is involved because it owns property across North Pacific Avenue that belonged at the turn of the last century to a company that turned coal to natural gas and dumped byproducts of coal tar oils across the street. Initial soil tests found petroleum hydrocarbons (TPH) and polycylcic aromatic hydrocarbons (PAHs), lead and arsenic.

Some of the TPH contamination is known to have resulted from leading underground storage tanks that have already been removed. Some of the contaminants have been cleaned up. Atlantic Richfield Co. sold the property to Wilson Entities in the 1960s.

Buyer Beware

ANDREW AND CYNTHIA LENZ, who own a nearby art store, unwittingly bought a warehouse in the triangle about 10 years ago. For them, the Wilson/Devcon project is not a harbinger of promise. Instead, it's an unknown financial burden that threatens to flatten their business.

If the site was left alone, they could continue their art-supply business as usual, sawing frames and storing materials in the warehouse near their main store. Instead, the cleanup looms. "We have no idea of what our liability can be or will be until that actually occurs," Andrew Lenz Sr. says. "The figures just bounce all over the place. I think it's a little bit unfair for the state to come in and do this to someone who has only owned property for a short time."

The Lenzes are hoping the Wilsons will provide them with an equal amount of space downtown near their existing shop, but that hasn't happened so far. The longer cleanup is put off, the better, says Lenz. "At this point, they're building around us unless it's clean," he says. "It's their project. We'd be happy just to stay as is. Because of their project we're sucked into this whole black hole."

But they signed on to the agreement. It was their only chance for state reimbursement. Lately, the parties have become concerned that financially challenged PG&E won't come through with its shares, but the company assures them it will.

"It's nothing I would worry about," PG&E spokesman Scott Blakey says. "The problems that we're having right now are not directly related to the day-to-day operations of something like this. We probably would have waited to sign the contract had we been worried we wouldn't be able to meet our obligations."

Wilson's optimistically counting on a fall groundbreaking for the $10 million building. But the cleanup and building project still need to go through a public comment period and receive city and state approvals.

"It's really important to me. If I miss this window this year, it sets the project back another six months," Wilson says.

Leap of Faith

LOCAL DEVELOPER Craig French, who is handling the project with Devcon separate from his responsibilities as head of Redtree Properties, says he realizes some people will want to see housing put there, but the city's decision to limit the number of units and the high cost of residential development fees prohibited that route. "The project will be a catalyst to fix up the north end of town. It will bring greater value to the properties around us," French says.

A black-and-white stencil depiction of the proposed building by local architects Thacher & Thompson shows people in the street milling along a wide, tree-shaded sidewalk, near a two-story building. At the River Street and North Pacific Avenue corner, a curved facade with low awnings would be home to a cafe or restaurant set back from the sidewalk behind wide planters with trees and landscaping.

The first floor of this 10,000-square-foot proposed building is all dark brick and glass. Architect Matthew Thompson envisions retailers in 6,000 square feet along the North Pacific side of the building. Earth-toned stucco walls and brick are partially covered by spreading ivy on the second floor and a glass and aluminum, penthouse-style third floor is setback from the North Pacific Avenue side. Up to 300 people could eventually work there.

"Right now it takes a real leap of faith that somehow this is ever going to look like the rest of downtown in a positive sense, but all the ingredients are there," says Thompson. Thompson counts out nearby banks in the surrounding blocks--Coast Commercial, Wells Fargo, Washington Mutual, Bank of the West, Bank of America, World Savings--and declares it "the banking center for the county."

"Right now. it's a blighted site, but the whole point of this is to revive the blighted area. In a very real sense what we've done is follow the guidelines of the [downtown Santa Cruz earthquake] recovery plan and applied it to a part of downtown that's getting to it pretty late."

For years, tech companies and their real estate agents have complained about having no place to grow in downtown Santa Cruz. Expanding companies such as Nokia and Tapestry.Net recently opened offices in Scotts Valley because they couldn't find enough space downtown.

Even in these slower economic times, companies are looking at where they're going to grow next year, according to Yancy Lind, president and chief executive officer of Santa Cruz-based Lutris Technologies.

"Although we can all fit into one building today, we absolutely anticipate growth," Lind says. After more than doubling in size in a year, the company laid-off 30 workers last month and consolidated offices into two floors at 1200 Pacific Ave. Lind says the restructuring doesn't mean the company isn't growing and he's interested in seeing the new building built.

"Space continues to be an issue for us downtown," Lind says. "If you look out three to five years on the horizon, we'll need more space."

That's what Wilson and Devcon are counting on. "For basically five years now, I've been trying to get the dirt cleaned up," Wilson says. "The Expedited Remediation Action Plan is anything but expedited," he notes. Obviously just to get the three parties to agree to participate with the state program was no small victory.

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From the March 21-28, 2001 issue of Metro Santa Cruz.

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