Blame it on the rain.
Developers are lining up in opposition to new storm water requirements they say will dramatically increase the cost of development in the commonwealth, and may even scare off the sort of large companies that could bring thousands of new jobs.
The proposed regulations, part of Gov. Tim Kaine’s environmental agenda, would reduce the amount of phosphate runoff permitted by new developments from .45 pounds per acre a year to .28 pounds. Environmental advocates say that will help improve the water quality in the Chesapeake Bay.
But critics say the rules put too high a burden on builders.
Commercials and residential developers will have to spend more money on planning, lawyers and engineers to meet the tougher standards. They will also have to dedicate more of their land to storm water retention systems, such as ponds and wetlands, leaving less land to build on.
Several local developers said they would have to alter current plans for some new shopping centers.
The new costs for a developer to manage storm water could increase by as much as five times, depending on the size and type of development, according to several sample projects drafted by Richmond-based engineering firm Timmons Group. For example, the estimated storm water costs for a 134-acre mixed use development of $1 million could rise to more than $4.6 million under the new regulations. That cost includes the value of 1.62 acres of extra land used for retention devices.
Tim Davey, principal of Timmons, said the new regulations will ultimately lead to more suburban sprawl by creating barriers to dense urban development.
“Trying to get more projects with more density closer to the core is going to be severely hampered with these tight storm water restrictions,” said Davey. “The laws are disproportionately going to penalize developers, and good development that is vertical and dense.”
According to the new rules, developers building on previously developed land would have to reduce phosphorus run off 20 percent below that of the existing buildings or surfaces. The previous standard was a 10 percent reduction
Davey said the increase will impact urban revitalization efforts throughout the city.
“For a two acre site you end up with obviously 10 percent less of a site that you can develop,” said Davey.
The costs associated with planning will also go up, because legal and engineering firms like Timmons will need to spend more time navigating the ins and outs of the new standards. According to an economic impact analysis from the Virginia Department of Planning and Budget, the new regulations will create a greater need for “environmental consultants and engineers to design storm water plans and oversee the implementation of storm water practices, there will likely be more demand for their services and some increase in the value of associated firms.”
But Davey said that there will be less development across the state as a whole, which is bad for his business.
“If you provide more service those additional jobs are offset by the loss of jobs you are going to get because it kills certain projects.”
Stuart Grattan, principal of engineering firm Grattan Associates, agrees.
“The net effect at this point is a deterrent to development, so I will have less work,” said Gratin.
Grattan, who is also a trout fisherman, said his firm would probably have more billable hours for each project, but Gratin said he expects fewer projects to come down the pipeline.
“I think the way they are written it will be devastating to development,” Gratin said.
Gratin said his own site comparisons were in line with the ones produced by Timmons.
“It means you have less building and less parking and you get less yield out of it,” Grattan said, “Rents go up to make up the difference.”
The new rules will raise costs for everyday citizens as noted in the state impact analysis: “A portion of those costs will be passed down to buyers of newly constructed properties, homeowners, and business.”
The cost to state and local government to enforce the rules will be between $13 million and $17.5 million, according to the state’s economic analysis. The costs are expected to be recouped by additional fees imposed on permit applicants.
That is yet another cost developers will have to pass down to consumers, said Gray Stettinius, principal of custom homebuilder Tuckahoe Creek Construction and a former president of the Home Builders Association of Richmond.
“Any cost to a developer, whether residential or commercial, is going to be borne by the users,” said Stettinius, “Much like you have water and sewer, there is also talk that there will be a rainwater fee.”
Stettinius said he fears the impact the regulations will have on large economic development projects.
“When the economic development guys looking to pitch the state to companies looking to relocate and expand in Virginia, one of the things is the regulatory environment and the costs associated with those regulations,” Stettinius said.
“I’m not going to be building homes if Virginia isn’t bringing in companies and their executives.”
The Virginia Soil and Water Conservation Board and the Department of Conservation and Recreation were given the authority to revise the previous state rules on the control and treatment of storm water by the General Assembly in 2004.
DCR spokesman Gary Waugh said that tougher rules are needed in order to clean up the Chesapeake Bay. Runoff from farms, developments, and waste water treatment plants pump nutrients into the bay that feed large algae blooms. The alga consumes all of the oxygen in the water, choking out other forms of marine life.
“The Chesapeake Bay is on the federal dirty waters list, we’re under basically a court order to clean up the bay,” said Waugh, “Land development is one of the leading sources of this water pollution.”
While not the leading source of pollution, Waugh said runoff from development is the only form that is increasing. Meanwhile pollution from farms and wastewater treatment plants is declining.
“Basically what these regulations are trying to do is get the development community to look at storm water differently,” Waugh said.
State officials say the costs will not be as high as those claimed by developers.
“There will be in some cases an increase, in some cases there will not be an increase,” said Waugh.
“We want to get designers and developer to think of rainwater at the beginning of their process and not the end.”
Waugh said several new approved practices, such as green roofs and using recycled rainwater, will offer developers less costly alternatives if implemented. Also in some cases developers can use off-site methods to meet water quality objectives.The regulations are currently in the midst of a public comment period which closes Aug. 21. At that time, the board can consider changes. Kaine is expected to sign off on the changes in December, which would go in effect next year.
More than 200 people turned out to a public meeting earlier this week at the General Assembly building, and Waugh said they have received a number of alternative proposals from the development community.
Citizens can also post public comments online, of which there are currently 107 comments.
The Homebuilders Association of Virginia has proposed increasing the amount of phosphorous allowed and make up the difference with the current standard by funding water quality improvements.
“Our proposal relaxes standards on development from.45 to .60 pounds for onsite mitigation, then each developer would pay $15,000 per pound to make up the difference between .45. to .6,” said Brett Hardiman, the homebuilders’ director of regulatory affairs.
Those fees would go into a fund managed by the Department of Environmental Quality that pays for agricultural improvements and retrofits older neighborhoods to better deal with storm water.
“Relaxing the existing the existing standard is not something we will look at,” said Waugh, “The concept of buying down is something we can look at, and cap and trade is certainly something we will be looking at.”
Gratin said he could support come sort of cap-and-trade compromise.
“Say there is a timber company that owns a gazillion acres and never had any intention of developing them,” Gratin said, “They’d be happy to sell phosphorous release credits.”
Once the credits are sold the development potential is limited on that property, similar to a conservation easement, he said.
Another alternative offered in the state impact analysis is to apply different water quality criteria to different water sheds, as opposed to a statewide standard of .28 pounds per acre. The standards would be set according to the quality of benefits that can be achieved in that particular watershed.
Whatever the case, developers across the state who have projects on the slate for 2010 and beyond will have to go back to the drawing board if the regulations go into effect as is.
Kay Pangraze, executive in charge of Winding Brook, a large development planned in Hanover, said if the regulations go into effect, they would have to revamp plans to complete a 375,000 square foot outlet mall in fall 2010. Currently, Bass Pro Shops is the only inhabitant of the large tract off of I-95.
State Sen. John Watkins told the Chesterfield Observer in June that he would have to cut a million or more square feet of planned office space at the Watkins Centre development in Chesterfield.
James Downs, vice president at Crosland, said his company plans to finish the redevelopment of Cloverleaf Mall before the rules go into effect but said if passed the regulations will have an adverse impact on future development and land values.
While much of the development community seems to be allied against the new rules as drafted, there is at least one industry that stands to benefit greatly.
Mike Perry, president of Virginia Beach-based Building Logics, a firm that installs green roofs, said the new regulations will be a boon to his business.
“I think it will have a huge effect,” said Perry, “I’ve been contacted by cities already to talk about what the effect might be.”
Green roofs use natural vegetation to absorb excess rainwater, one method builders can use to meet the strict storm water requirements. Perry recently did work at Rocketts Landing and a residence in the Fan, in addition to multiple projects across the United States.
The green trend has been slow to take off in Virginia. When Perry started out in 2002 his first job was in Portland, Ore., but now he does most of his work within the Chesapeake Bay watershed.
Building Logics also installs rainwater recycling systems that can use runoff to flush toilets or other “grey water” uses.
While any direct benefit from the proposed changes is a ways away, Perry said contractors are increasingly offering green roof services.
“Already seeing it,” Perry said, “everywhere we go more people are jumping on board.”
Note: An error was made in a previous version of this story. A source for the story, Chris Simone, a project manager for EDC, was misquoted. His full comments were retracted from the original story. The text in question did not properly represent Chris Simone’s view on the stormwater regulations, nor did they represent the views of his company in any way.
Al Harris covers development and commercial real estate for BizSense. Please send news tips to Al@richmondbizsense.com.