How Delaware legislators quietly created ability to give millions to developer

The News Journal | by Karl Baker
1386 School House Road property

190-acre parcel of land near Delaware City / Photo from Colliers International

Lawmakers in Dover last week quietly gave the state authority to hand over millions in taxpayer dollars to developers.

Buried 30-pages deep in the epilogue of the state’s bonding legislation, the new legal authority stated that Delaware can help to fund 3% of the construction of facilities that cost at least $75 million and would eventually employ 500 workers or more.

No developer or property was identified in the bill.

But numerous sources confirmed that lawmakers approved the language in order to give money to Northpoint Development, a Kansas City construction company planning to build a shipping and warehousing center on a 190-acre site that is now a wooded area, agricultural land and a capped landfill.

The 1386 Schoolhouse Road property is situated between the Delaware City refinery to the east and Del. 7 to the west.

Northpoint Founding Partner Brent Miles estimates his construction costs at as much as $140 million. A 3% grant would amount to $4.2 million.

Miles declined to say whether he spoke with Delaware officials about a potential grant, but said his company has yet to apply for one.

When complete in 2020, Miles’ tenant, or tenants, at the four-building, 2-million-square-foot logistics facility will employ hundreds of people and the number “could crest over 1,000 if all goes well,” he said.

Northpoint has built similar distribution centers outside of Delaware for Amazon and other companies.

Amazon will be among companies that Northpoint solicits as a potential tenant Miles said, noting he has not yet talked to the online retailing giant about the area.

He said Northpoint also is working with Delaware economic development officials and the governor’s office to find companies that could fill the space.

Whichever company eventually fills the space, it promises to be the latest in a yearslong transformation of Delaware’s job market away from chemicals and manufacturing and toward warehousing and shipping.

Construction of such e-commerce distribution facilities without a tenant is a growing trend in the Mid-Atlantic, a region home to tens of millions of consumers but also one where traditional blue-collar manufacturing jobs have been decimated.

“The Mid-Atlantic … is highly sought after by the e-commerce community,” said developer Tom Hanna who is building a separate distribution facility at the former GM auto plant, near Newport. “That 1-day delivery turn to the consumer, that’s what is driving it.”

The price of land is surging in many logistics hotspots areas, such as the Lehigh Valley. Therefore, companies are again looking to New Castle County, more than six years after Amazon opened a distribution center in Middletown.

Always with an eye toward landing new jobs, Delaware government officials have welcomed the attention even as e-commerce companies rush to automate many of their tasks.

In announcing Northpoint’s purchase of the Delaware City property last month, real estate broker Mark Chubb said Delaware’s competitive edge lies in its proximity to big cities, coupled with low costs and government officials who “are supportive in the attraction of new business.”

Government support was on full display for the Delaware City facility as a complex mobilization of state and county officials worked to accommodate construction plans.

Office of Management and Budget Director Mike Jackson requested that legislators add the multimillion-dollar grant language to the bond bill.

Jackson did not reply to requests for comment, but OMB spokesman Robert Scoglietti said officials from the Delaware Department of State had asked Jackson to make the request. Scoglietti said he did not know why the bond bill language failed to mention the Delaware City Logistics Park, specifically by name.

He said a grant to Northpoint still must be approved by the state Council on Development Finance – a body that has never denied a grant proposal recommended under the state’s new public-private economic development system.

In a prepared statement, Division of Small Business Director Damian DeStefano called the language in the bond bill a “clarification,” and claimed that “shifts in the market” made it necessary to remain “competitive.”

“Thanks to the legislature’s inclusion of this clarification, Delaware is now better able to compete for jobs in this industry,” DeStefano said.

But critics counter that the rule change simply will benefit politically cozy builders.

Other developers’ plans to capitalize on the new legal language are unclear today.

The legislation now authorizes the state to give taxpayer dollars, which had been dedicated for companies that will create long-term jobs, to commercial developers building facilities at costs of “at least $75,000,000 and result in the creation of at least 500 new jobs.”

Sen. David Sokola, D-Newark, said it was sold as a “win-win,” even as “some of us were a little skeptical.” He said that any such grant still must be reviewed by the director of OMB.

“These things are interesting,” he said. “You’ve got to keep some level of confidentiality but there’s still a public process when you’re giving public money.”

Often the face of skepticism in the legislature, Rep. John Kowalko, D-Newark, said most lawmakers probably weren’t aware that they were voting to allow developers to receive Delaware Strategic Fund grants when they approved the bond bill.

“To me, it was strategically placed (in the bill’s epilogue) to avoid a lengthy discussion,” Kowalko said.

In the past year, New Castle County also has approved a sewer line to the Delaware City parcel, changed zoning of a portion of the land to allow for heavy industry, and proposed a temporary property tax break, conditioned on the creation of jobs.

“We lose no tax money on the property, but when they make improvements to the land we delay their obligation to pay the full county property tax on those improvements,” said Jason Miller, a spokesman for New Castle County Executive Matt Meyer.

County officials also are fast-tracking Northpoint’s permit applications through a new initiative it calls JobsNow – a program that is a clear response to county critics who for years have argued the county requires developers submit to unnecessary and arduous permitting stipulations.

As a logistics center will bring additional heavy trucks to the area, the Delaware Department of Transportation suggested a number of traffic and transit upgrades, to be paid for by the developer, that could occur on surrounding roads, including wider lanes, new pavement and a potential traffic circle on Del. 72 and Schoolhouse Road.

Beneath and near the Schoolhouse Road property – which once housed the Akzo Chemical plant and sits next to the shuttered Formosa Plastics factory – are aquifers polluted with elevated levels of toxic chemicals, including PCE, which has sparked Superfund designations in Newark and Hockessin.

Today, a 5-acre portion of the parcel contains a groundwater treatment system and contaminated areas that were capped off “with synthetic membranes overlain by grassed soil covers,” according to the EPA.

According to a November EPA report, groundwater from the site should not be used as a “potable supply.”

“For future facility and construction workers, the calculated risk is within EPA’s acceptable cancer and non-cancer risk range,” the report stated.

Miles said Northpoint has a long history of developing polluted sites safely and so the environmental issues “did not scare us.”

In fact, the fact that Schoolhouse Road property has environmental issues was part of the draw, he said, because it allows his company to exploit its competitive advantage with respect to such brownfields.

“My read is that this project is something the community wants and needs,” he said.

Read original article.

Posted in News Articles.