Friday, August 24, 2018

The miraculous transformation of 3,250 acres of industrial wasteland

When Aaron Tomarchio, Senior executive in administration, government relations, communications and public affairs approaches the gate which secures the southern end of one of the country's largest brown-fields, towering high in the company SUV,  he still has to show his badge. Since his passenger doesn't have one, the guard says: "I better scan your license plate".
Everything is big at Tradepoint Atlantic: Approach road with shoulder,
walk and bikeway, trees

Such is the security for international shipping. Everyone else out knows Aaron. After all, Tradepoint Atlantic is a small organization of only 75 people, 25 of which run a short-line railroad and fix up rusty tanker railcars, the others hold the strings for a future which affects Baltimore County, the Port of Baltimore, the region, Under Armour and in a very small way also Fed Ex, Harley Davidson, and even Amazon. Exactly 23% of the future have already arrived in only four years. The final development is estimated to amount to 14.4 million square feet.

Tomarchio reports to Hilco Global and Redwood capital who bought the old Bethlehem steel plant after some short term property transfers (2013 Environmental Liability Transfer Inc.) in 2014 for a mere $100 million. RG Steel, the last company making steel there, had gone bust in 2012. It looks like the investors landed a good deal.

They immediately understood that the name "Sparrows Point" did not properly convey the giant scale of the site. 3,250 acres, that isn't just a point for a tiny bird. They called it "Tradepoint Atlantic", a much more apt name for one of the best development sites on the entire Atlantic sea-board of North America. The site, surrounded by water on three sides would cover the 45 acre demolished Owings Mills mall 72 times,  Baltimore's HarborPoint (2.7 million square feet of development) 125 times and the proposed Port Covington area 14 times. There are still 100 miles of usable railroad track on Sparrow's Point which the investors bought lock, stock and barrel, including five engines which already ply the tracks, repainted and rebranded in the Tradepoint colors.
Recent aerial view before Amazon was completed

Pretty much everything else has been demolished. The famous Bethlehem star which crowned the blast furnace during the holidays sits on the ground awaiting reinstallation somewhere, along with the Bessemer furnace arch. A lone water tower will remain standing,  the towering old powerplant stands half-way dismantled.

Regret that such structures didn't find a new use are met with a shrug: Too costly, too impractical. It is clear, the team is looking forward, not back and its mindset is engineering and economics, not design and city building. What gets the new owners excited are features like a protected deep-water shipping basin (to be stabilized with a $20 million federal TIGER grant) and a long finger pier allowing for a total of 5 shipping berths which will be dredged to up to 47' depth, allowing the biggest ships to dock.  The dredging will be paid by Tradepoint, the spolis will be deposited in coordination with the Port's own dredging efforts. The large cranes on the pier were removed because they were specialized for steel and didn't work to unload other bulk cargok, Tomarchio explains, a bit exasperated by the constant search for artifacts which could have remained as witnesses to the history of steel making. Competition with the Port of Baltimore? No, Tomarchio says, "we are working with the Port". Bursting out of its seams from record business, the State's Port Authority is already directing some bulk cargo to Tradepoint just as then then Delegate Olszewski and the late County Executive Kamenetz had envisioned when the future of Sparrows Point was debated before Tradepoint Atlantic came in.
[In the short term, piers on Coke Point's east side are] "immediately available for bulk commodities, including loading and unloading of automobiles," Kevin Kamenetz in May 2013 to the SUN.
Room for big ships. Unloading with their own rigs
Exactly this is happening now.
Other success stories about the redevelopment of the gigantic site have come in regularly, a Fed-Ex distribution center, and a Pasha car import operation are already active, a huge 1,3 million square-foot Under Armour distribution center is almost complete and now a 857,500-square-foot Amazon "Fulfillment Center" is about to be opened. That is a hall with a usable area of nearly 20 acres! On-site inspection clearly confirms that Under Armour’s distribution warehouse is much bigger than the endless Amazon facility. In other words, ginormous. Tamarchio shrugs off any worry that Plank may have overestimated their own needs, even though it is curious that the company is delaying moving into the completed facility, rare in the world of real estate.

Regardless, those distribution warehouse facilities alone will shortly employ more workers than RG Steel had in its final years. In the complete build-out, Tradepoint Atlantic employment will be around 10,000 people, a third of the 30,000 workers that found employment at Bethlehem Steel during the peak of steel production here, but a significant employment center, nevertheless.
Aaron Tomarchio, Senior Executive explaining the TIF

Woven in between the shiny new warehouses and enterprises are business opportunities that arise during the transition. The enterprise of fixing up railcars is such an opportunity, on-site facilities which turn rubble into crusher run for roads and parking lots another, so is a legacy scrap-yard as well as being landlord for a Baltimore County public works yard and a fire station. The site also hosts a basin for the treated water of the Middle River sewage treatment plant (during steel production the water had been used for cooling and processing) and accommodates space for over 20,000 Volkswagen TDI Diesels which the company had to buy back as part of a settlement with the US Department of Justice because of  cheater software they used to "pass" emission tests. The ultimate fate of the cars is unknown as of yet. On the giant peninsula those acres of cars are only a spec in the landscape.

On the east side, facing the outlying areas of Edemere across Jones Creek, are the North Point and the Pleasant Yacht Clubs, part of a larger green buffer bisected by a railyard and Wharf road. All part of Tradepoint's territory. Wouldn't this be a great area for recreational trails that could loop through the peninsula providing amenities for employees and nearby residents alike? Tomarchio looks non-committal. Yes, he admits, that could be nice and quickly adds, that already the new roads are equipped with separated walk-bike-ways.  "This isn't Port Covington", he points out several times, meaning this isn't a new town but "an industrial development with large trucks".

Sparrows Point tells the story of America, the story of an industrial nation in the midst of finding a place in a post industrial world. This, of course, is also Baltimore's story. In the many intermediate years of industrial decline, the workforce, the transportation connections and the entire setting declined as well, In Baltimore as well as at Sparrow's Point. This forces the current owners not only to clean up contamination in a consent decree with the Environmental Protection Agency (EPA) and remove the wreckage of blast furnaces but to re-build from the ground up. Tomarchio says that there are no really bad pollutants, "just the residue from more than a century of industrial production". The consent decree contains a less benign sounding alphabetical list including  arsenic, cadmium, chromium, copper, iron, lead, manganese, nickel, tin, ammonia, benzene, cyanide, ethylene glycol, hydrogen cyanide, hydrogen sulfide, naphthalene, polycyclic aromatic hydrocarbons, polychlorinated biphenyls, pentachlorophenol, phenols, pyrene, sodium phenolate, styrene, sulfuric acid, toluene, trichloroethylene, xylene, coal tar, oils, lime sludge, waste alkaline rinses, and mill scale. A 135 page phase 1 report includes more detail. Some of the soils are removed, some are capped, requirements vary by location. In 2014 Tradepoint agreed to allocated $48 million for cleanup.
Lots of infrastructure: Railroad, water treatment plant

One of the challenges: Stormwater. The Maryland Department of the Environment (EPA) has strict standards which are hard to meet with uses that entail huge roofs, impervious truck loading areas and parking lots. About one half of the site is drained via sheet-flow into the Tin Mill Canal, a legacy ditch which served the same purpose already during steel production and which now needs a lot of remedial clean-up. It directs the water into a waste-water treatment plant equipped to deal with oil, fuel and other pollutants that have to come out of the water before it can be released into the Bay.

The #63 MTA bus which already began to loop through the site is no match for the first streetcar that went to the steel plant in 1907. Whatever remaining workforce housing in surrounding communities isn't up to par with current standards. No housing is planned in Tradepoint Atlantic's masterplan. The old water and sewer service is insufficient, in spite of the huge historic user. The distribution centers are simple large warehouses with barely any architecture. But they are filled with the latest in storage technology, logistics software and robots. People are rare in those places where goods are not made but simply stored and assigned destinations, even though right now the Amazon plant is teaming with workers putting the last touches on the facility.
the old power plant in the process of being dismantled

The Tradepoint owners have identified distribution warehousing as the particular niche for this land, the huge nearby population centers, the size of the available property, and the existing land, sea and rail shipping modes made the site destined for it. Distribution is  a hot commodity all along the Atlantic coast, but there is no other site which combines deep water access, interstates and direct railroad access in one centrally located place.

There certainly can be debate whether the economy of distribution warehouses and fulfillment centers is a worthy successor to steel making. The necessary skills are relatively low, so are the wages. Automation will take a further bite out of whatever workforce there is planned for now. A study of the Economic Policy Institute published in February of this year was titled "Unfulfilled promises" and stated that Amazon centers "do not generate broad-based employment".
Two years after an Amazon fulfillment center opens in a county, overall private-sector employment in the county has not increased. It is possible that the jobs created in the warehousing and storage sector are offset by job losses in other industries, or that the employment growth generated by Amazon is too small to meaningfully detect in the data. This finding of no effect is also robust to a series of statistical controls.
Salvaged Bethlehem star waiting for re-use
Thus are the growing pains of the transformation of the region's economy. Asked how Tradepoint will be prepared for a future where production could be decentralized and very local with just in time production in an age of highly customized, low volume, on demand production via 3-D printing, in which large distribution warehouses could potentially become obsolete, Tamarchio is unfazed. We will accommodate the new manufacturing, he responds happily, pointing his fingers to a bunch of future warehouses shown on the masterplan as numbered "logistic centers". "We already have windpower" he says, not meaning installed windmills, but a place where Deepwater Horizon would assemble them, once the agreements about the installation of windfarms in the Atlantic are complete. On site, north of the actual former steel site, already operates a hydropnic greenhouse, a Harley Davidson rider training center is in design, there will also be a 130 acre mixed use shopping center. (So far only a Royal Farm gas station/convenience store has signed on). One can easily see how uses can be adjusted in many ways in this particular new industrial city with its public streets and private railroad.

Baltimore County and the State have tied some $19 million in incentives to the promise of 1,500 jobs at the Amazon center. Additionally Tradepoint has already indicated that they would seek tax increment financing from the County, "it will probably be about $120 million in TIF money", Tomarchio says ( a number that is lower than the public amount of $150 million) and adds when asked about the new County Executive after the upcoming election, "we will try to get the TIF done with the current administration."  The TIF request was made public in July and a document outlining it from Tradepoint's perspective can be found here. Of course, the current  Executive is Tom Mohler who stepped in after the sudden death of Kevin Kamenetz who saw himself as a father of the deal which gave the steel site a new future. The total of $120  million is the total cost of the necessary infrastructure, neatly depicted on a separate map, including roads, sewers, water lines and pumping stations, improved interchanges and enhancements such as bike and walkways.  Some of it has already been constructed. "We expect some reimbursement",  Tomarchio explains. The justification for the TIF to fund infrastructure solely needed for the envisioned businesses, is the economic development it spawns. That number is estimated to be a total of $2.9 billion from direct and indirect economic activity by the Sage Policy Group. Those numbers are always hard to verify.
An inkling of the future. Trucks and more trucks
"To put into perspective the projected impacts of this project, Tradepoint stands to add a full percentage point to gross state product by 2025." (Anirban Basu, 2016)
While economic development is also the reasoning behind the $535 million (plus fees) Port Covington TIF, there no TIF money goes towards the planned Under Armour HQ, Sagamore says. It all goes into what can best be described as a "new town".

For all their differences, Tradepoint and Port Covington have in common that a rich local investor stands behind the respective development vision. With the large amounts of foreign capital sloshing around the globe the question where the money comes from is important. Tomarchio assures it’s all local! The main investor actually lives in Baltimore County he laughs. Redwood, Allegis, Erickson. Jim Davis, the person behind those companies lives in Cockeysville and he is richer  than Kevin Plank but much less in the limelight. (A detailed expose about him can be found in the BBJ). Allegis is the largest private company in Maryland with revenue reaching $11.5 billion in 2016.
The peninsula in context: Right is Millers Island, left the Beltway and
the key bridge

Having once devoted the vast once fertile and lush peninsula to just one business, another mono-culture should be avoided.

Now that the owners of the site have indicated that they would like to have the new infrastructure financed by the public through TIF, Baltimore County should consider a few conditions before they say yes to the request.

There is plenty they could ask for: The almost complete absence of public participation in the determination of the future of Sparrow's Point is somewhat alarming, even though Tomarchio assures that dialogue with nearby communities is well underway.  Owning the property fair and simple, the owners have pretty much unfettered rights to do what  is allowed under zoning as long as they follow the EPA mandated cleanup. But with the TIF, the County could ask for good public access, recreational loops and waterfront promenades, shuttle transit services, use of renewable solar energy on the vast warehouse roofs as a condition of future permits (Amazon apparently considers a retrofit of their completed mega warehouse) and an accelerated payback of the TIF bonds if the peninsula keeps filling up at the current rate. Basu expected in 2016 an annual County tax benefit of $26 million after full build out. This suggests that tax payers would have to foot the TIF bonds for a while, especially since usually not 100% of the additional tax revenues are used for repayment. The TIF request is currently studied by the County's own economic consultant, RKG Associates. County council members reserve judgement until they have seen the analysis.
Masterplan: Top warehouses, bottom: Shipping

Driving back from Sparrows Point the roads are lined with posters for Dundalk's very own Johnny Olszewski and "Hogan endorsed" Al Redmer, ocurrently Insurance Commissioner in Hogan's cabinet, both for County Executive.  It is unlikely that either one will see the miraculous transformation of the former Bethlehem Steel at Sparrows Point much different from Kevin Kamenetz or the current Executive, Tom Mohler,  who had all along expected additional County support for the project. But if Tradepoint's schedule works out, the new Executive won't even be asked.

Klaus Philipsen, FAIA

A look inside's new Sparrows Point fulfillment center. Business Journal
Amazon offers sneak peek at massive high-tech fulfillment center opening soon at Sparrows Point, SUN
Tour of new Amazon Fulfillment Center, Baltimore SUN video

Previous article on this blog:

Tradepoint Atlantic: Missing an Opportunity? 2016
Megalomania brought steel down and wants to bring it back

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