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Rainwater rules cast cloud over development

Al Harris July 17, 2009 9

stormwaterBlame 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.

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9 Comments »

  1. Dillon Franks July 17, 2009 at 7:34 am - Reply

    The rain water management discussion is a good example of the issues private enterprise and public agencies must face and resolve during this period of forming new strategies which must be economically sustainable.

    There is a factor when building costs into economic models that has not been previously considered, That is the social responsibility cost. Relevant business strategies must consider the costs of NOT including social costs and as a result leaving them to governments to cover with “creative financing” which inevitable leads to higher taxes, fees etc.

    In my long business career, I have been a real estate developer and railed against the costs imposed by municipalities and other government institutions. All of those cost that I thought were ruinous ( in the 1960s and 70s) are commonplace today. Indeed, without the amenities and services the extra cost added, the projects would not have built out.

    All stakeholders must sit down and negotiate relevant strategies to make sure our economic and social quality of life is sustainable.

  2. Roger Petersen July 17, 2009 at 8:32 am - Reply

    We have read with much interest the strong opposition the local and national developers have expressed to the proposed storm water regulations. The fact is they are wrong!!! While the new regulations may increase the cost of land development the cost will go down as the process becomes main stream – just like green building. The real problems are that most all entities who develop land in the area only know how to do it one way and cannot dream that they may other ways to work the land without distroying the environment. It may be with a little knowledge, an open mind and a willingness to change they may even increase their lot yield in a project. An that is what they are all about – lot yield – and the short term bottom line.

  3. james July 17, 2009 at 8:49 am - Reply

    Good story, Al, but there are a few crucial things you missed.

    First, commercial development of any significant size, like a strip mall, small office complax or larger, cannot meet the .28 phosphorus standard. Not “will have a difficult time meeting it.” CANNOT. It cannot be done.

    Second, the DCR estimates for financial impact are strictly a guess by them. The economic impact analysis done by the state planning and budget office said the costs could not be determined at this time. Meanwhile, the report does say it’s clear that everyone, not just developers or new homebuyers, will pay more. Timmons’ projections are based on actual projects in the pipeline today. Timmons says the impact will be $30,000 per home. I’ll believe them over guessing by DCR.

    Third, these rules will cause residential developers to have to use larger lot sizes to trap more phosphorus. That not only means no affordable housing, but also more land needed to build the same number of homes — urban sprawl. It also means more infrastructure costs for local governments because it costs more to put in water and sewer for large lots than small.

    Commercial developers will have the same problem. Sen. Watkins will have to give up his office space component at Watkins Centre because he’d have to have more than 2x the land he has currently to control the stormwater runoff to the state’s liking. That’s 2x the cost and he’s not going to shell out that much more money. That will tell business looking to locate here that it’s too expensive and even a state senator can’t do anything about it. Bye Bye, business.

    Fourth, this sprawl flies in the face of what the state has said it wants. Urban development areas, or UDAs, are being planned for development use. They guarantee higher densities nearer to roads and other conveniences to help promote mass transit and more urban community life. With these stormwater rules, UDAs can’t be used because the developer cannot provide higher densities.

    This whole stormwater management plan is ridiculous. It’s Kaine way to pay back the enviros who helped him get elected and have supported him through his four years. Every competent civil engineer will tell you the costs this will put on development are staggering. And have we forgotten what our economy looks like right now? This is a bad idea all around. It should be scrapped and the governor ought to order DCR and DEQ to start doing their jobs and enforcing the regulations currently in place. If they would do that, the engineers say we could eliminate 75 percent of the problem in the Bay in 10 years.

  4. Scott Burger July 17, 2009 at 9:43 am - Reply

    Roger Peterson has it right.

    Stealing Apple’s old grammaticaly incorrect tagline-

    BUILD DIFFERENT!

  5. Joey July 17, 2009 at 11:35 am - Reply

    Great now we will never see a 40-50 foor tower in downtown richmond because of this. If only we had less harsh regulations then we could really see alot of nice 40-50 and possibly 60 floor towers in downtown richmond one day.

  6. Jim Meadows July 17, 2009 at 1:22 pm - Reply

    I agree that greenroofs and rainwater / greywater recycling (or harvesting) is the way to go for a sustainable future. I only wish others would agree!

  7. Matt July 18, 2009 at 11:20 am - Reply

    Are the objections to say that we should allow the big banks and GM to continue their profiteering as well? While ‘We the People’ foot not only the bill, but pay the social consequences as well??? This issue runs parallel to a number of critical imbalances in our nation today. Massive trade deficits, offshoring jobs, tax havens, Swiss bank account usage, unethical lending practices, and other forms of unregulated enviornmental disaster-creation name a few.

    “We the People” tire of this constant lamentation. This great nation was founded on honest value WITHOUT appreciable social or national detriment. Far indeed have we strayed from such values.

    The developers (who WILL pass the added cost along to the subsequent occupants) would do well to embrace the changes we all need to enter a new era of progress as a people and nation. The changes in business are proportional to those which will be made in every neighborhood by the citizenry. Holdouts will pay the price of inaction, and late-coming.

    Our nation has come to a cross-roads in it’s adolescence. It is an awakening much like that experienced in revolutionary times. The path we have thus traveled no longer benefits us as a whole. Somehow, our identity as a truly great and daring people has to become our call to arms. We can only ask those forwarding antiquated ideals to ‘Get Out of the Way’!

  8. Beth Stewart July 30, 2009 at 3:41 pm - Reply

    The conversation about these proposed regs needs better exploration of the cost-savings of Low Impact Development (LID) stormwater solutions – the concern about increased costs should be contrasted with actual experience. An EPA report of 17 LID case study projects around the country found that total capital savings of LID vs. conventional stormwater practices “ranged from 15 to 80 percent, with a few exceptions in which LID project costs were higher than conventional stormwater management costs. As LID practices become more common, it is likely that they will become cheaper to use.” For model projects in the Birmingham, AL area, LID has also in general cost less.
    For a copy of the report: http://www.epa.gov/owow/nps/lid/costs07/
    LID practices are innovative stormwater management practices to manage urban stormwater runoff at its source, to mimic the way water moved through an area before it was developed by using design techniques that infiltrate, evapotranspirate, and reuse stormwater. Some common LID practices include rain gardens, grassed swales, cisterns, rain barrels, permeable pavements and green roofs. LID is small scale and can fit into areas already devoted to required site landscaping. Team it with reduced standards for street widths and parking for even greater cost savings. A recently-built Bass Pro in Leeds, AL is a great model for this.

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