Cash collateral provided for brownfield loan
Rochester City Council on Tuesday, May 29, approved a minor amendment to a development agreement between the city and developer Frank Rewold that will allow for cash to be used as collateral for a $1 million brownfield redevelopment loan from the Michigan Department of Environmental Quality (DEQ). The project, located at the former ITT Automotive site, 400 Water Street, includes an estimated $2.3 million in environmental cleanup and the construction of an office building at the location. The project includes a $1 million grant and $1 million loan to the city from the DEQ to clean up and mitigate environmental contamination at the site. The city will repay the loan through a tax increment financing district, which captures new taxes generated after the land is redeveloped. The agreement requires Rewold to post a letter of credit as collateral for the loan to the city. Contamination at the site stems from historical industrial uses at the Western Knitting Mills building in the 1940s, after the knitting corporation was dissolved. It was later purchased by McAleer Manufacturing, which was the largest producer of flash bombs and flares in the United States during World War II. It was later used by ITT Automotive, which produced push rods and tubing until 1994. Today, the site has contaminated soils with lead and trichlorethylene, according to the DEQ. Contamination at the site has migrated over the years to the Paint Creek, forcing ITT to work with the DEQ to build an underground containment wall and install monitoring wells to ensure pollutants aren't moving to the creek. However, the land can't be developed without remediation conducted, which is ultimately the responsibility of the city of Rochester. Deputy City Manager Nik Banda said Rewold requested the city allow the company, Rewold & Son, the option of paying cash to be held by the city as collateral. By doing so, Rewold would skirt a bank fee for the letter of credit. It would also allow the city to draw down the cash as the city repays the loan, thus retaining collateral equal to the outstanding loan balance. Councilwoman Ann Peterson said she was in favor of the amendment, as she would rather have cash held by the city than a letter of credit. Council voted 5-0 to approve the amendment, with members Nancy Salvia and Kim Russell absent.