Scrapping The Scrapyard

As I am sure you will remember, I predicted that our Mayor would make the Zalev scrapyard another of his monumental projects. It was hardly my brilliance but rather reading a Gord Henderson column the day after the election when he talked about the Zalev property.

Poor Max Zalev. I hope that his friends are understanding and that he still gets invited to dinners and parties. After all, it's bad enough that he is involved in the Enwin/Windsor Utilities Commission fiasco. Every time there is an environmental mess in Windsor, the "Zalev" scrapyard is mentioned.

My understanding is that the Zalev family sold its ownership interest. According to Crain's, in 1996, Detroit businessman Anthony Soave became the majority shareholder in Ferrous Processing. Ferrous Processing made a few acquisitions after the Soave purchase, including $200 million-a-year Zalev Metals Inc. in 1998. I wonder if there was a term in the agreement that the new owner should change the name of the scrapyard. If not, there should have been.

We have just had the typical Star series of stories process leading up to a big climax when something significant is going to be announced involving City Hall. The Star is oh so predictable already about how it softens up its readers to accomplish its mission. You must remember the recent series of stories about the Zalev scrapyard:

1. City demands solution to Zalev truck tracks, 09-26-2007
   
   City council is refusing to co-operate with the ministry of environment and Zalev Bros. Co. to begin developing settling ponds to limit iron oxide runoff into city sewers until the company tackles a long-standing problem of trucks "tracking out" rust deposits onto city streets and sidewalks.
   
   The ministry had requested that it, the city and the Windsor- Essex County Health Unit develop the on-site settling ponds, but councillors decided Monday they would not sign off on any on-site agreement until the tracking out problem has been solved.
   In the meantime, iron oxide from the company's Grand Marais yard continues to enter the Grand Marais Drain.
   
   Ward 3 Coun. Fulvio Valentinis said the tracking out problem has been going on too long."
   


2. Zalev tips toxic scale; Firm pushes Ont. to No. 1 in emissions over Texas, report says 10-18-2007
   
   Windsor's Zalev Brothers recycling company accounted for 19 per cent of Ontario's toxic emissions in 2004, according to a NAFTA Commission for Environmental Co-operation report.
   
   The annual report, Taking Stock 2004, takes into account both "releases" -- such as gases vented to the air -- and "transfers" -- wastes sent to a treatment site or a recycler.
   Zalev shows up as a source of pollution on paper, but in reality, it recycles scraps of metal that come from elsewhere and discards only the material that can't be recycled.
   
   Still, Windsor Mayor Eddie Francis said he's "anxious" to see the report.
   
   "Given the government's focus on environmental sustainability ... if (Zalev) turns out to be a major source of pollution, we look forward to working with the province on this," he said.
   
   Francis said the city has tried "for years" to get the company's Grand Marais iron and steel scrap recycling yard cleaned up. In the past, there have been discussions about replacing the large site near E.C. Row Expressway with a commercial or light industrial development."
   


3. Emissions report has it wrong, Zalev says
   ‘Spreadsheet error’ 1,000 times too high
   
   "Zalev Brothers says data in a NAFTA report calling it one of the largest single polluters in Canada and the United States was exaggerated by 1,000 times because of an error by the environmental consulting firm that crunched the numbers.
   
   “It was an error in a spreadsheet,” said Gavin O’Neill, vice-president of the consulting firm, Waterloo-based CRA. “I guess we just didn’t see the numbers. “It’s human error with big ramifications.”
   
   Added Zalev spokesman Emile Mahanti: “We’re not the polluter that people think we are, according to the report...
   
   Zalev’s Mahanti said the company’s emissions were much smaller than the volumes reported, and said the company has made a serious attempt to clean up the site since new owners took over in 1998.”

But lest anyone think that Zalev may not be a concern now because of the error, the Star quoted other with issues about the site in the same story:

• "Even if the numbers are too high, Windsor should still be concerned about the situation, said Frank Butler, president of the Citizens’ Environment Alliance.
  
  “The city has great reason to be concerned,” Butler said from Toronto. “God only knows what’s leaching out of that site. They’ve been there for generations.”
  
  He said pollution from the site is a major concern no matter what numbers are finally proven correct. “Even if they’re lower, we should still be concerned. First, find out what the real picture is. Taking Zalev’s word is not a good idea.”

Even in a correcting story, the owners of the facility get a shot taken at them. It must have been important for the Star to get that quote since they had to call Mr. Butler in Toronto.

And then we come to Gord Henderson's column on Saturday.

• "Time to scrap Zalev here
  
  Is the timing right for a deal between Windsor and Michigan waste disposal magnate Anthony Soave, the Grosse Point Farms resident who owns the former Zalev Brothers recycling yard and perennial city eyesore...
  
  Windsor councillors, who fired a shot across the company's bow late last month in refusing to endorse an agreement with the provincial environment ministry and Zalev for a capital investment until action is taken on rust being tracked onto nearby city streets, are now screaming for the ministry to get off its butt and become aggressive in supervising the company's environmental performance.
  
  Meanwhile, Mayor Eddie Francis, who made a 2003 election commitment to eliminate the 50-acre Zalev mess once and for all, recently asked the company to schedule a meeting on the operation's future. "The time has come for us to have a serious discussion, to see what is possible and what is doable," said Francis...
  
  As for the environment ministry, Francis said he's not happy with its low profile here. "In terms of frustration, it's right up there. Seriously, where are they? We would certainly welcome a more robust and proactive role....
  
  Ward 3 Coun. Fulvio Valentinis...thinks the site could become a "poster child" for senior government co-operation in brownfield development.
  
  In the meantime, he believes Windsor must start raising hell about inadequate provincial environmental enforcement and monitoring here since cutbacks in the 1990s...
  
  Does Soave, described in U.S. media as Michigan's "trash baron" and a major financial supporter of Detroit Mayor Kwame Kilpatrick, need the aggravation of this minor Windsor asset? Surely not. It's time to talk turkey."

Frankly I didn't understand the story. Have there already been conversations? Is there a deal in the making for which we are being softened up because of costs? Have they turned out poorly so that there is no deal?

In looking through my database, I note that the Star reported in 2005 that there was

• "a now-abandoned two-year-old initiative to turn Zalev's Scrapyard in the heart of Windsor into an eco-industrial park...
  
  Admitting the Zalev's initiative is "dead because the owners don't seem interested in selling the site."

Perhaps they're still not interested in selling.

Don't you find it very strange that on a complicated and possible huge land transaction like this, someone has gone public. Now let me think... who could possibly have spilled the beans? Gord gave us an inkling. It is someone with an "intimate knowledge of the Zalev operation." Other than the people who work there now, I can only think of two other people that fit the bill. Can you guess who they are?

Wouldn't this be the normal matter that you would treat in camera? Of course and who could object? In fact my sources tell me that this subject has been bandied about City Hall for some time now. What this suggests to me is that there may been overtures made but the owners have rejected any idea of a sale.

So why then is there the article in Henderson's column? I'll answer that in a minute.

I found it very interesting to see the numbers $50 and $100 million mentioned in Gord's column.

• "The value of that property has diminished because the business has shrunk," said this individual. In his view, it's probably worth no more than the value of industrial land, less reclamation costs, and rumoured price tags of $50 million to $100 million are way off."

Gee, I like how this disinterested person is telling the Detroit owner of the property what its land is worth. How nice of him to provide a free appraisal.

The hundred million dollars came from Eddie Francis as far as I know at the time he was running for mayor the first time. I remember a friend of mine wanting to support Eddie as a candidate provided that Eddie committed to get rid of the Zalev scrapyard. I remember Eddie coming back to me and telling me that this would be impossible to do because the selling price was $100 million based on conversations that he had.

I had a discussion with an insider at City Hall recently and the Zalev property came up for discussion. I jokingly said that I bet that the price is reduced now by half to $50 million. It was confirmed to me that this number has been used in relation to Zalev. And there is that number in Gord's column too.

Let's try a different assumption: there have been no conversations about buying the property. Let's assume also that the business is in as bad a shape as Henderson's column states. Let's assume as well that perhaps someone is very smart, may understand the business and is interested in buying that business and especially the land cheaply.

What would a good price be? My guess is that the land is probably not worth very much except for redevelopment provided that someone is prepared to take on the risk of the environmental disaster and the gigantic cost for cleanup. My guess is that someone might go to the owners saying that they won't give them very much for the land and business but will give them a complete indemnity against any cleanup costs imposed by the Environmental Ministry since the City is getting so aggressive.

Surprisingly, that could be an attractive deal. It eliminates a huge potential cost to the owners of the property and the new owner gets to buy it cheaply.

Who in their right mind would do something like that-- obviously only a person who thinks he/she can make money in the scrap business. Perhaps someone with experience or a competitor.

But if that person is very smart he/she would have another plan. That person would know now, after the Star story, that he/she could turn around and probably sell that property to the City which can turn it into a brownfields redevelopment model supported by the two Senior Levels of Government. Imagine, getting the property almost for nothing and then getting Governments to pay you for it and to eliminate the cleanup risks. This would be a significant brownfields redevelopment since this plant is said to be one of the major polluters of the area!

Now that's a land transaction. What a deal for Eddie and for Sandra and Dwight who can talk to their Environment Minister cabinet colleague to start putting on the pressure! And not too shabby for the new owner too who makes a few bucks on the flip.

Another variation, amongst others, is the City partnering with a land developer to do all of this. I can think of several developers who would love to partner with the City on such a project. The City arranges for the purchasing, financing and the cleanup with the Senior Levels and the developer makes the profits. Yes, yes yes...the excuse will be that the City makes property taxes from the project and we had to encourage someone to get involved with this "dirty" site using incentives. Since it gets rid of Zalev, no one will care!

So it turns into a redevelopment but a redevelopment for what? There was some talk one time about the arena going there but that's not going to happen now. My source told me that there has been conversation involving that property and rail lands consolidation. Interestingly, one of my readers speculated upon this matter some time ago:

• "It would require local leaders of great vision to say that we don't need an Light Rail Transit today, but we might 20 years from now. Let's set aside the corridors and do the planning so future generations can enjoy a transportation mode that Kitchener-Waterloo-Cambridge, Hamilton, Ottawa, Calgary, Edmonton, Toronto and other Canadian cities have or are planning on building. This wouldn't be folly, this would be forward thinking and optimistic instead of reactionary and pessimistic.
  
  Speaking about EC Row yesterday, and how it could tie into the Zalev site, look how an LRT line along the DRTP corridor could connect the University of Windsor with the commecial areas in the south of Windsor, and also intersect an east-west line along EC Row right at the Zalev's site. The mayor does a lot of talking about the Zalev's site, when will he actually do something about it? It is an eyesore, an environmental disaster and sits, quite possibly, in one of the most strategic spots in the city in terms of development and infrastructure."

And another thought from a reader

• "Could the potential closure of the Dougall and Dominion interchanges lend itself to plans for the Zalev lands north of the expressway?
  
  Could there be tie-ins with the Rail Rationalization study, such as creating a platform for a east-west regional Light Rail Transit corridor adjacent to the expressway?"

Remember as well that there was talk of a Motion of Reconsideration respecting Lauzon/E C Row and the need for a connection if there is going to be development on the Airport lands.

Now here's a wild idea that ties all of this into Greenlink. Here's what the Mayor said in one of his 1966 State of the City speeches:

• "City Council and I have started the plans that provide the framework for transforming the city’s old rail lines from a rundown, divisive old web across our city, into a system of trails and opportunity.
  
  It will run through all five wards, connecting neighbourhoods to one another, creating green space and recreational paths, converting brownfields and scrap yards –all the way to the riverfront...
  
  A rail study being conducted in partnership with the Federal government is nearing completion. It will provide the technical framework for rationalization and consolidation.
  
  Our brownfield and environmental report will provide us the tools to convert these lands to new uses."

I don't think anybody talked to the owners of the Zalev property. I think that this is all part of a softening up process. Beat them up in the media, beat them up at Council, get the public against them, don't do anything with the Ministry of the Evironment, and be as uncooperative as you possibly can. With a declining business and all this misery, why wouldn't the American owner of the scrapyard sellout.

Hey do you know what... isn't this the same tactic that the three levels of Government are using against the Ambassador Bridge Company ie threaten their business to force them to sell out. Use the power of Government to force a sale of a private interest by threatening to destroy what they have built up using their own money. Make their business valueless by using the power of Government so they sell out and sell out cheaply.

What's fascinating though is that Eddie will try and set up a meeting with the Zalev owners but he won't set up a meeting with the owners of the Ambassador Bridge. It just makes you wonder why not.

PS. Check out Agenda Item #1 on next week's Council agenda. It's "City-wide Brownfield Redevelopment Strategy and Community Improvement Plan Consultant Selection."

Can the proposed Integrity Commissioner deal with matters in which Council treats taxpayers as fools!