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FAIRFIELD — Town officials and developers of a proposed 245-apartment, mixed-use project on a contaminated lot said they may reject a $3 million remediation grant from the state, due to stringent conditions that could boost project costs by $25 million.
Since the Bullard Machine Tool Company factory was demolished in 2014, the 4.9-acre lot beside Fairfield Metro Train Station has sat untouched. Developers have long kept away from 81 Black Rock Turnpike, as any new construction would require a costly environmental cleanup of the contaminated soil below the site.
Looking to transform the vacant lot into a new, five-story apartment building, Post Road Residential — a local property development company — worked with town officials to secure a $3 million grant from the State Department of Economic Community Development in June to clean up the low-level PCB contamination, which originated from aged underground storage tanks used to heat the former factory.
But at a Jan. 23 Town Plan and Zoning Commission meeting, Post Road Residential partner Tom Montelli said the company may reject the grant altogether.
“[What] we’re trying to figure out is how or why it makes sense to take a $3 million grant, to then add $25 million of hard costs,” Montelli said.
According to Montelli, the Brownfield Remediation and Development Municipal Grant came with three conditions that developers are unwilling to meet: increased wage rates, affordable housing requirements and state control over the property.
State-mandated wages
Rather than creating their own hourly rates, private developers who accept the state grant must pay construction workers increased wages set by the state Department of Labor. Hazardous material workers made $24.62 per hour in the first quarter of 2023, but the grant would require Post Road Residential to pay the same workers $36.50 per hour, a 39 percent increase.
On Monday, Fairfield’s Department of Community and Economic Development Director Mark Barnhart told CT Examiner that the developers knew they would have to pay the increased wages to remove the contamination, and were prepared to do so. But he said the developers were unaware that the prevailing wage requirements would apply to the entire $125 million project, including the planning and construction of the building, parking and landscaping.
“Not too many developers would choose to pay a 25-30 percent premium on the cost of labor to secure a $3 million grant,” he said.
Similar to those addressing the contamination, workers hired by Post Road Residential would also earn significant pay bumps if the company accepts the grant. A general laborer’s rate would jump from $24.64 per hour to $33.50, and a roofer’s pay would increase from $24.66 to $43.
As currently proposed, the project includes the construction of 237,465 square feet of apartments, 6,025 square feet of shared office space and 313 parking spaces. At the meeting, Montelli said the state rates would likely increase the Post Road Residential’s cost by about $20 million.
“In taking that $3 million, you have a new business partner and your project costs went up $20 million. So if I had to explain that to investors and lenders, I might have a tough time,” he said.
Department of Economic Community Development Spokesperson Jim Watson said on Monday that the wages are required by state law, not the department.
Watson added that the department also does not determine whether the prevailing wage laws apply to specific projects. Rather, he said, applicability depends on a wide variety of factors, like the total amount awarded and whether the project is private or public.
Limits on affordability, property uses
Along with the wage standards, Montelli said accepting the grant requires applicants to follow state-mandated affordable housing regulations.
Under state statute 8-30g, municipalities encourage developers to build state-designated affordable housing for which rent is capped at specific income levels. During his presentation on Tuesday, Montelli said 30 of the 245 apartments would be restricted to households earning 80 percent or less of the area median income — about $55,000 for one person, $63,000 for a family of two, and $71,000 for a family of three.
But to receive the grant funds, Post Road Residential may need to increase its number of affordable apartments from the current 12 percent, or lower its income requirements.
According to the original grant announcement, the state’s affordable housing policy requires that developers set aside either 20 percent of apartments for households making 80 percent of the area median income — $117,400 — or 10 percent for households earning 50 percent of the area median income.
Watson said the department attaches affordability requirements to remediation projects to keep in line with state housing goals.
“Because these are state dollars, DECD includes affordability requirements to try and encourage and increase the supply of much-needed affordable housing units in the state,” he said.
While the department typically completes the funding process within three to four months of sending the award letter, Watson said, staff occasionally work with project teams to negotiate a “reasonable plan.” He said municipalities and developers typically do not decline the grant after negotiations.
Montelli told commissioners that the affordable housing requirement is one of the key reasons why — more than seven months after the state offered the funds — Post Road Residential and the town have yet to decide whether to accept the grant.
“The state can be flexible, and that’s also one of the reasons why we’ve been talking about this for so long,” he said.
A third condition delaying the company’s decision involves signing off on state control.
As outlined in the grant announcement, the state department requires the project team to enter into a “Negative Pledge” contract, meaning Post Road Residential cannot sell, lease or transfer the property without approval from the department commissioner for the first 10 years of the contract.
The state also limits the uses of the property for the first 10 years, restricting developers solely to the purposes they detailed in their original applications. According to a document submitted to the Town Plan and Zoning Commission, the property will be used for housing, co-working space and to enhance connections to transit.
If the company were to accept the grant, Montelli said it would be giving up key power over the property.
“The state has a seat at the business table for major business decisions,” Montelli said of the contracts.
According to Barnhart, the town and developers haven’t yet declined the grant, but that they are “moving in that direction.”
Montelli told commission members that the developers intend to move forward with the project with or without the state funding, adding that the contamination would be remediated in accordance with state guidelines.
At the end of the Tuesday meeting, members closed the public hearing for the 81 Black Rock Turnpike proposal; the commission plans to make a decision on the application at an upcoming meeting. Post Road Realty is awaiting commission approval before purchasing the property.