The Cost-Benefit Group, LLC News

Within 24 hours of being contacted the Cost Benefit Group, produced a 12-page report on the Effect of Potential Superfund (NPL) Designation of the Gowanus Canal upon Nearby Property Values for Toll Brothers; Sive, Paget & Reisel; and Environmental Liability Management.

The Gowanus Canal, located in northwest Brooklyn, New York is connected to the Gowanus Bay in Upper New York Bay. The canal borders the neighborhoods of Red Hook and South Brooklyn to the west and Carroll Gardens to the east.

Kenneth Acks directed the research which reviewed the literature on the effects of potential Superfund designation upon property values, and determined that the evidence indicates that Superfund designation will generally increase risk associated with a site and surrounding properties -- and thus diminish property values. The designation will reduce values beyond diminution levels expected from the contamination absent placement on the list. The report also noted that the current economic crisis increases the likely diminution from Superfund designation. In a buyers’ market developers and homebuyers will be able to easily find properties at affordable prices that do not face the risks posed by Superfund designation. In addition, risks tend to be multiplicative, and the combination of greater financial risk, market risk, economic risk, environmental risk and regulatory risk is likely to prove devastating.

The Gowanus neighborhood was originally a tidal inlet of navigable creeks in original saltwater marshland and meadows. The first gristmill patented in New York was built in Gowanus after1635. On May 29, 1664, several residents were granted permission to dredge a canal at their own expense in order to supply water to run the mill.

In 1849, the New York Legislature authorized the construction of the Gowanus Canal by deepening Gowanus Creek, to transform it into a mile and a half long commercial waterway connected to Upper New York Bay. After exploring numerous alternative (and some more environmentally sound) designs, the final was chosen for its low price tag. The canal was essentially complete by 1869.

Despite its relatively short length, the Gowanus Canal was a hub for Brooklyn's maritime and commercial shipping activity. Factories, warehouses, tanneries, coal stores, and manufactured gas refineries sprang up as a result of its construction. Much of the brownstone quarried in New Jersey and the upper Hudson was placed on barges with lumber and brick and shipped through the canal to build the neighborhoods of Carroll Gardens, Cobble Hill, and Park Slope. In addition, the industrial sector around the canal grew substantially over time to include: stone and coal yards, flour mills, cement works, and manufactured gas plants, tanneries, factories for paint, ink, and soap, machine shops, chemical plants, and sulfur producers, all of which emitted pollutants.

Thriving industry brought many new people to the area but important questions about wastewater sanitation had not been properly addressed to handle such growth. All the sewage from the new buildings drained downhill, into the Gowanus. The building of new sewer connections only compounded the problem by discharging raw sewage from neighborhoods even farther away into the Canal. By the turn of the century, the combination of industrial pollutants and runoff from storm water, fortified with the products of the new sewage system, rendered the waterway a repository of rank odors, euphemistically called by wise-cracking locals "Lavender Lake". After World War I, with six million annual tons of cargo produced and trafficked though the waterway, the Gowanus Canal became the nation's busiest commercial canal.

The US Army Corps of Engineers completed their last dredging of the canal in 1955 and soon afterward abandoned their regular dredging schedule, deeming it to be no longer cost effective.

In 2002, the U.S. Army Corps of Engineers entered into a cost-sharing agreement with the DEP to collaborate on a $5 million Ecosystem Restoration Feasibility Study of the Gowanus Canal area to be completed in 2005, studying possible alternatives for ecosystem restoration such as dredging, and wetland and habitat restoration. The DEP also initiated the Gowanus Canal Use and Standards Attainment project, to meet the City's obligations under the Clean Water Act.

Toll Brothers has vowed to abandon plans to build 460 condos and townhouses along the waterway if it becomes a Superfund site, saying the stigma attached to the program will make it impossible to finance the project or sell the homes.

Shortly after the report was issue Mayor Michael Bloomberg came out against Superfund Designation (We have no evidence, however, of a causal connection, or even that Mayor Bloomberg saw the report).

According to an April 20, 2009 press release (http://www.tollbrothers.com/homesearch/servlet/HomeSearch?app=IRhome) Toll Brothers, Inc. is the nation's leading builder of luxury homes. The Company began business in 1967 and became a public company in 1986. Its common stock is listed on the New York Stock Exchange under the symbol "TOL". The Company serves move-up, empty-nester, active-adult and second-home home buyers and operates in 21 states: Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Texas, Virginia and West Virginia. It was ranked #1 in five of the nine rating categories among Home Builders in Fortune magazine's recently released list of World's Most Admired Companies 2009.

According to its website Sive, Paget & Riesel (http://www.sprlaw.com/thefirm/index.html) has been a leader in Environmental Law and Litigation since the early 1960's. More than four decades ago, Sive, Paget & Riesel lawyers led the administrative and judicial proceedings that followed after the initial landmark Storm King Mountain litigation in New York's Hudson River region. Their attorneys also led the successful fight to stop the Hudson River Expressway, which resulted in an opinion that is the first reported decision contained in the Environmental Law Institute’s Environmental Law Reporter http://www.eli.org. The Storm King Mountain disputes preceded the first Earth Day in 1970, the enactment of the National Environmental Policy Act and the creation of the United States Environmental Protection Agency. Sive, Paget & Riesel continues to be a leader in this field, having been selected by two independent ranking agencies – Chambers and Partners USA and Who’s Who Legal – as the leading firm for environmental law and litigation in New York http://www.chambersandpartners.com/us/, http://www.whoswholegal.com.

According to their website Environmental Liability Management of New York, LLC (ELM - http://www.elmofny.com) is an environmental, engineering and risk management firm. ELM's professional staff has demonstrated expertise in assisting you in the management of multimedia environmental concerns. They combine in-depth regulatory knowledge along with project management expertise and technical insight to control costs while meeting in-house objectives, and obtaining any necessary agency approvals. ELM's services range from simple consultations to the management of day-to-day operations for multimillion dollar environmental compliance and remediation programs.

On March 12th a jury awarded about $150 million in compensatory damages to 91 households in Jacksonville Maryland due to a gasoline leak that occurred at a nearby Exxon Mobil Corp. gas station.

For emotional distress most adult plaintiffs in the suit received $500,000 in non-economic damages, plus $50,000 in non-economic damages for their children for emotional distress resulting in a total award of about $71 million. ExxonMobil was also held responsible for lifetime medical monitoring, which is expected to cost nearly$14.5 million.

Each family also received the full appraised value of their home resulting in total property damages of more than $61 million. The Maryland Daily Record reported “The fact that plaintiffs were, for the most part, compensated for the full value of their homes, some of them worth as much as $1.3 million, was surprising and cathartic to many homeowners.”

On December 30th and 31st 2008 Ken Acks CEO of the Cost-Benefit Group testified before the jury regarding the diminution in property values resulting from the underground gasoline storage tank leak. Jacksonville is an affluent community about 20 miles north of the City of Baltimore. The tank spilled about 26,000 gallons of gas over 37 days until it was discovered on February 16, 2006. Jury selection began October 1st 2008, and the trial started on October 14th. Several environmental and health experts, and most plaintiffs testified before Mr. Acks.

Mr. Acks directed the valuation estimates for 91 properties. As part of the process Richard Kern, SRA, a local appraiser, estimated property value as uncontaminated at the time of the spill, The average property value was determined to be about $690,000. Mr. Acks then used a variety of techniques to estimate expected diminution levels, based upon contamination probabilities provided by Whitman Associates and other environmental consultants, an extensive search of academic literature, surveys, interviews, investigations of real estate activity in the area, and other research..

Mr. Acks had been deposed over four days by attorneys for the defendant, ExxonMobil, in the year prior to the spill. Robert Weltchek a name partner at Snyder, Weltchek & Snyder, the attorneys for the plaintiffs, directed questions to Mr. Acks on December 30th. He then faced cross examination from attorneys for the defendant, and a redirect by Mr. Weltchek.

Mr. Acks has been assessing the economic impacts of environmental factors, conducting financial analyses, valuing real property, providing litigation support, and producing cost-benefit analyses for more than 30 years. He has estimated property damages from nuclear power plants, oil spills, dry cleaners and numerous toxic chemicals. In conjunction with the NASA-Goddard, Columbia University he produced a cost-benefit analysis of green roofs in New York City and presented a Cost-Benefit Analysis of a Green Brownfield Redevelopment Project at the Society for Benefit-Cost Analysis in June 2008.

On March 3rd 2009 Kenneth Acks, CEO of the Cost Benefit Group LLC, spoke before the Regional Meeting of the Auditing Roundtable in New York City. The title of the talk was “The Economic Impact of Environmental Liabilities on Real Estate Values” The presentation reviewed the issues surrounding the valuation of contaminated properties, basic valuation methods and procedures, and included a summary of empirical results. It also presented a positive spin on the issue by discussing how greening buildings can increase values.

The conference was entitled “Valuing Environmentally Toxic Assets”. The program of the conference follows:

I. Welcome – Howard Apsan/Jerry Atlas (9 AM – 9:15 AM)
II. Introduction – Jeffrey Teitel, EHS Consultant (9:15 – 9:30 AM)
A. "Toxic Assets" – Financial community borrows a term from the EHS world
B. Greater role for the EHS Auditor – Discovering and Valuing Impaired Assets
III. How and Why The Financial Crisis Has Changed the Role of the EHS Auditor: The Legal Perspective - Holly Cannon, Principal, Beveridge & Diamond PC (9:30 – 10:30 AM)
Coffee Break (10:30 – 10:45 AM)
IV. Discovering and Valuing Environmental Liabilities - Muriel Robinette , CEO, New England EnviroStrategies Inc. (10:45 – 11:45 AM)
Lunch (11:45 AM - 1:00 PM)
V. Economic Impact of Environmental Liabilities on Real Estate Values – Kenneth Acks, CEO, Cost-Benefit Group, LLC (1:00 – 2:00 PM)
Auditing Roundtable Announcement – Jerry Atlas, Consolidated Edison
VI. Environmental Considerations Impact Banking Industry – Eric Rothenberg, Partner, O'Melveny & Meyers LLP (2:15 – 3:15 PM)
Q & A (3:15 – 4:00 PM)
ADJOURNMENT

The presentation was prepared using OpenOffice's www.openoffice.org "Presentation" Software and converted into a "PowerPoint"

The Auditing Roundtable is a Professional Organization for Environmental Health and Safety (EHS) Auditors. For more information on the Auditing Roundtable go to:
http://www.auditing-roundtable.org
For more information on The Cost-Benefit Group, LLC go to:
http://www.costbenefitgroup.com

Link: http://www.envirovaluation.org

According to AWSTATS, in 2008 Environmental Valuation & Cost-Benefit News, located at http://www.envirovaluation.org edited and published by Kenneth Acks, CEO of the Cost-Benefit Group, welcomed an average of 20,742 unique visitors per month. During the year these visitors paid a total of 660,956 visits and viewed 3,064,462 pages; and 115,039 spent at least 5 minutes on the site. The Hit Count was 5,305,351.

The site has achieved top, top five or top fifteen Google Search status for such keywords as cost-benefit, environmental economics, cost-benefit analysis, and cost-benefit green buildings/brownfields/green roofs/environment/environmental, ...

Among those linking to the site and its affiliated web portal www.costbenefitanalysis.org have been

The U.S. Environmental Protection Agency (EPA) National Center for Environmental Economics http://yosemite.epa.gov/ee/epa/eed.nsf/webpages/Publications.html and http://yosemite.epa.gov/ee/epalib/eelinks.nsf/e3539284c59a3f548525675a006180b6/59a36469b7f7ac39852568f3006f2acb!OpenDocument;

The United National Development Program - Economics Toolkit http://www.undp.org/gef/05/documents/ld/Economics_toolkit_2edition.pdf;

The U.S. EPA’s Guidebook of Financial Tools http://www.epa.gov/efinpage/publications/GFT2008.pdf; Sustainable Development Online via EnviroWindows - the European Environment Agency Platform for Knowledge Sharing and Development, http://sd-online.ewindows.eu.org/Tools/URL_94/index_html?prettyprint=1;

The Association of Environmental and Resource Economists http://www.aere.org/resources/research.html; Resources For the Future http://rfflibrary.wordpress.com/;

The National Association of Business Economists http://www.nabe.com/publib/links/maclink.htm; the Australian Association of Resource and Environmental Economics http://www.aares.info/links;

The Society for Risk Analysis http://sra.org/resources_nonprofit.php;

The Kyoto University Graduate School of Economics http://www.econ.kyoto-u.ac.jp/~ueta/link.html;

--The Indian Institute of Sciences;
--Wikipedia-Cost-benefit analysis;
--The American Economics Association’s Resources for Economists on the Internet;
--New Jersey Future;
--Environmental Economics Blog - Whitehead and Haab;
--Inomics;
--The Environmental Health & Safety (EH&S) Management Systems / ISO 14000 Center;
--Wikipedia-Contingent valuation;
--A Contract with the Earth;
-University of Cal. at Santa Barbara Economic & Environmental Sciences Electronic Resources

For more hyperlinks go to http://www.cost-benefit.com/LinksLinkers.htm

On December 30th and 31st 2008 Ken Acks CEO of the Cost-Benefit Group testified before a Baltimore County jury regarding the diminution in property values resulting from an underground gasoline storage tank leak in Jacksonville, Maryland. Jacksonville is an affluent community about 20 miles north of the City of Baltimore. The tank, located at an ExxonMobil gasoline station, spilled about 26,000 gallons of gas over 37 days until it was discovered in February 2006. Jury selection began October 1st 2008, and the trial started on October 14th. Several environmental and health experts, and most plaintiffs testified before Mr. Acks.

Mr. Acks directed the valuation estimates for 91 properties. As part of the process Richard Kern, SRA, a local appraiser, estimated property value as uncontaminated at the time of the spill, The average property value was determined to be about$690,000. Mr. Acks then used a variety of techniques to estimate expected diminution levels, based upon contamination probabilities provided by Whitman Associates and other environmental consultants, an extensive search of academic literature, surveys, interviews, investigations of real estate activity in the area and other research.

Mr. Acks had been deposed over four days by attorneys for the defendant, ExxonMobil, in the year prior to the spill. Robert Weltchek a name partner at Snyder, Weltchek & Snyder, the attorneys for the plaintiffs, directed questions to Mr. Acks on December 30th. He then faced cross examination from attorneys for the defendant, and a redirect by Mr. Weltchek.

The Cost-Benefit Group valued seven industrial buildings in Freeport, NY containing a total of 70,762 square feet situated on 132,635 square feet;

Seperately, we valued a 12,000 square foot building and excess land on a 3.286 acre site occupied by an environmental services firm in Deer Park, NY

Link: http://evans.washington.edu/node/1267

On June 25, 2008 Kenneth Acks, CEO of the Cost-Benefit Group, LLC chaired a Session at the Annual Meeting of the Society for Benefit-Cost Analysis entitled: States, Localities, and Benefit-Cost Analysis. He also presented a paper entitled “The Costs and Benefits of a Green Mixed-Use Brownfield Redevelopment Project in New York”.