The Recycling of the Kenosha Lakefront PropertyWinter 1995
On November 9, 1994, the Kenosha Common Council approved a resolution that authorized the city’s acquisition of the 42-acre lakefront property. This parcel, which is a key component for future downtown development in Kenosha, would not have been acquired but for the availability of the new Land Recycling Law (Act 453) recently passed by the Wisconsin Legislature this year. Godfrey & Kahn, S.C. represented the city of Kenosha in this transaction.
Since approximately 1850, this site was used for industrial activity which included the Simmons Mattress Company and American Motors Corporation; and, most recently, it was the site of the former Chrysler plant. In 1988, the city and the state were shocked by the Chrysler announcement that it was closing this facility. The property had remained vacant since the demolition of the facilities in 1990 and during the pendency of litigation surrounding the responsibility for approximately $11 million in cleanup costs incurred by Chrysler and KAT Realty Corporation, the owner of the site. Without some resolution of the outstand-ing environmental disputes involving the site, it was doubtful that development would occur in the surrounding Tax Incremental Financing area which includes a new multi-million dollar marina developed by the city.
The city, under the leadership of Mayor John Antaramian, decided that Act 453 could provide the key to removing the road block to development presented by these environmental disputes. This new law creates an exemption to cleanup liability under the Wisconsin Spill Law for the purchaser of property provided certain conditions are met. First, there must be a thorough environmental assessment of the property conducted by either the seller or the purchaser and approved by the DNR. Secondly, the purchaser must agree to conduct a cleanup of the property for those conditions discovered as part of the required assessment process. If these conditions are met, the new law also creates a pass-through liability exemption for any future purchaser of the property, such as a private developer, if maintenance conditions are met.
After six weeks of discussions with DNR officials, a letter was issued by the agency on November 9, 1994 which generally will provide Act 453 protection for a significant portion of the lakefront property, provided the city: (1) completes the install-ation of a protective "cap"; (2) conducts any necessary cleanup related to a storage tank; and (3) performs long-term groundwater monitoring at eight specified locations on the property. The city is also required to execute a contract with DNR that confirms its remediation obligations at the property.
Without question, this transaction would not have been possible before the passage of Act 453. Although the city has assumed an aspect of environmental risk in this transaction, the Act 453 application to the site served to reduce the amount of risk that would otherwise apply for latent environmental condi-tions in the future under the Spill Law. As a practical matter, the DNR determination of the adequacy of the environmental assessment served to provide the city with a certain amount of "comfort" that the risks associated with the property had been adequately identified.
Godfrey & Kahn has now been involved in representing purchasers in the first two transactions involving Act 453 in the state of Wisconsin since its enactment in May 1994. Whenever a purchaser is contemplating the acquisition of property that may be contaminated in the state of Wisconsin, consideration should be given to the application of Act 453 to the transaction. However, not every transaction is suitable for the application of this new law. With the experience of the only two Act 453 transactions consummated to date, Godfrey & Kahn’s Environmental Practice Group is uniquely qualified to provide parties with a cost/benefit analysis of this new law for transactions. Please feel free to call us to discuss whether your next Wisconsin transaction should include taking advantage of this new law.