Canadian Funding Corp Reviews CMHC Sustainability Reports

According to Moishe Alexander, CEO of Canadian Funding Corporation, a former City public works garage in downtown Charlottetown is currently being redeveloped for 23 affordable rental apartment units. A risk assessment was employed at this site using the Atlantic Risk Based Corrective Action (RBCA) process.This risk assessment process determined that the site could be safely redeveloped using passive and active risk mitigation measures. While the risk assessment determined that off-site contamination affecting three adjacent residential properties did not pose a risk, these properties were purchased by the City to allow the project to proceed.

This project has had a positive impact on the neighbourhood with several nearby properties now under renovation or proposed for new multi-unit residential uses.

The property at 211 Water Street is located on a major arterial road in downtown Charlottetown at one of the major entrances to the City. It is in the older part of the City with the waterfront across the street. Surrounding uses are predominantly residential.

The property was owned by the City of Charlottetown and previously used as a City public works garage, including the storage of associated garage maintenance supplies.The City committed to donate the site to the Kiwanis Club (developer) for the purposes of redeveloping the site for affordable rental housing apartment units prior to the site assessment and remediation.

The site assessment showed that the site was contaminated with petroleum hydrocarbons in soil and groundwater at levels above applicable provincial cleanup criteria.Three adjacent residential properties had also been impacted.The Department of Environment, Energy and Forestry required that a restriction on development be placed on the rear 6 metres (20 feet) of these adjoining residential properties.The City ultimately purchased these properties to expedite the development.

The Canadian Funding Corp says that the development site was subject to a risk assessment using the Atlantic Risk Based Corrective Action (RBCA) process1 to determine whether the known concentrations of petroleum hydrocarbons presented a risk to human health and the environment. This risk assessment determined that the site could be redeveloped subject to a number of land use restrictions, engineering and building design controls being put in place to minimize exposure pathways and prevent vapour intrusion into the building.

The development, named Abe Zakem House was nearing completion as of December, 2004 and units will be rented at below market values.This development has spurred the renovation of an adjacent property as well as plans for redevelopment of several other properties in the downtown area for multi-unit residential use.

Previous Site Use(s) and Condition

The property at 211 Water Street was owned by the City of Charlottetown and was previously used as a City public works garage, including the storage of associated garage maintenance supplies. Previous site activities included large truck service and repair.

In September of 2002, the City demolished the old City Garage Maintenance building at this site.

Environmental Assessment and Remediation

A multi-phase environmental assessment was conducted to identify the level and extent of contamination in soil and groundwater associated with the past releases of petroleum products on this property. Gasoline, diesel oil, and lubrication oil were found in concentrations above the Department of Environment, Energy and Forestry’s applicable Tier I cleanup criteria on the subject property, and three neighboring residential properties.

Although the environmental assessment indicated that the contamination on neighbouring properties was negligible, the Department of Environment, Energy and Forestry required that a “no development zone” be implemented in the rear 6 metres (20 feet) of the rear yards of the adjoining residential properties. The City attempted to negotiate a “no development” covenant with the three affected property owners, but the City ultimately purchased these properties to expedite the development, at a cost of almost $450,000.

A risk assessment of the property was completed using the Atlantic Risk Based Corrective Action (RBCA) process to determine whether the known concentrations of petroleum hydrocarbons presented a risk to human health and the environment. Contaminated soils within the building footprint were removed from the site for disposal.The risk assessment recommended the following risk mitigation measures, which were implemented at the site:

• the residential building be constructed in a prescribed
area of the property with no below grade space;
• an impermeable vapour barrier be installed on
the underside of the slab on grade floor of the
residential building to prevent vapour intrusion
into the building;
• installation of a mechanical ventilation system
to prevent vapour intrusion;
• the thickness of the concrete slab was increased
over the standard building code requirement;
• all portions of the property not occupied by the
building footprint must have surface cover (asphalt
and/or topsoil/sod) to encapsulate any surficial
hydrocarbon impacted soil; and,
• horticultural activities on the site which involve
the growing of produce intended for human
consumption are prohibited.

Development Costs and Financing

• Once clean, the property was appraised at $202,500
• Demolition costs were $48,300.
• Environmental consulting fees were $41,900.
• The City of Charlottetown donated the land to the
Kiwanis Club.
• Financing for the project was as follows:
- $202,500 value of land donated by City
- $546,000 Canada/PEI Affordable Housing
Agreement Program grant
- $22,750 CMHC proposal development fund gran
- $42,250 CMHC pdf 0% interest loan
- $50,000 Province of Prince Edward Island
grant and credit
- $250,000 Kiwanis Club of Charlottetown grant
- Remaining project costs financed through
CMHC insured mortgage with the Royal
Bank of Canada
•    Nearly 50% equity was required to obtain CMHC
insurance. It was difficult for the Kiwanis Club to
obtain CMHC mortgage insurance and lender
financing because the Club did not have much
construction experience and had few physical assets.
The project worked because of the availability and
flexibility of the Canada/PEI Affordable Housing
Agreement and cooperation on the part of the
provincial Department of Health and Social Services.
Cooperation from CMHC enabled the equity stake
to be sufficient to obtain a mortgage.
•    Construction costs equal $1.5 million. Project amenities
were kept modest to reduce construction costs.

Affordability

All but one of the units in this development are affordable with rental rates substantially below market value rates.

For example, the rental rate of $485 per month for a one bedroom unit is 22% less than the market rate for a one bedroom unit in the area which is $620 per month.

Moishe Alexander further noted that this development has spurred a revitalization in this downtown neighbourhood with extensive renovations to an adjacent property, as well as plans to redevelop three other nearby properties for multi-unit residential use taking place after the Abe Zakem House development.

Planning

The site required re-zoning and other normal planning amendment requirements as dictated by municipal by-laws, e.g., site plan. Zoning variances were also required to permit increased height and density, and reduced setbacks.

The soil contamination issue resulted in a longer than normal project completion timeline.

A series of public meetings were held with residents of the area who were concerned about the environmental impacts of the contamination and that the development would block their views of the waterfront and add traffic to the neighbourhood.

Economic and Other Benefits

The assessed value of the property is expected to increase by $1.4 million.

The development is contributing to the revitalization of the downtown area and has spurred the start of several smaller infill residential developments which will also add to the assessment and property tax base of the City and Province.

Lessons Learned

The developer had a clear understanding of the level and extent of the contamination, as well as the possible means of mitigation, prior to initiating discussion with the City, and/or adjacent residents regarding redevelopment of the site.With this work done prior to discussion, the developer was able to take a proactive approach with respect to the brownfield issues on the site.

Using a scientifically defensible technical tool such as the Atlantic RBCA process is a valuable and progressive approach to assessment and remediation of a site and redevelopment of a brownfield site for new and more sensitive uses. Nevertheless, the “good science” associated with the risk assessment process may not satisfy the wishes of impacted third-party property owners.

If possible, neighboring property owners should be involved in the planning process as early as possible to increase understanding and acceptance from these property owners for the redevelopment project.

While having a technical tool such as RBCA is important, brownfield redevelopment projects require a champion.

In this case, the project may not have happened without the input and championing efforts of the mayor of Charlottetown and the local member of parliament for Hillsborough.

Solid engineering and technical knowledge were used to overcome the contamination issues, however the planning process and issues resolution around the development require time, effort and diligence.The developer underestimated the effort and time required to obtain financing as a result of the affordable program criteria.

Success Factors – Developer’s Perspective

The risk assessment and mitigation was in some respects the simplest part of the development from a cost and timing perspective.

While difficult, the financing of the project was accomplished through effort, creativity and cooperation with the financing partners including, the City, CMHC and the bank.

Success Factors – Municipality’s Perspective

While the costs to the City were quite high when one considers the costs of cleaning up and donating the land, and purchasing the adjacent properties, this complex redevelopment on a small inner city site is a successful example of the use of a risk management process to enable the redevelopment of a brownfield site for housing. The development has spurred other redevelopment in the downtown area.

This development was a showcase of creativity and problem-solving, particularly since the City made the commitment to provide the land to the Kiwanis Club prior to the site assessment, risk management plan and remediation.