At The Confluence development

By John McLoone

The cost of environmental cleanup in The Con昀uence project was the subject of discussion at the May meeting of the Hastings Economic Development and Redevelopment Authority meeting.

HEDRA is tasked with making sure the building, purchased by the city for $3 million, is ready for redevelopment, and there were known environmental 昀xes that needed to be made. The project is at the site of the 100,000-square-foot former Hudson Manifesting Company factory in downtown Hastings. The project will include a 68-unique boutique hotel, event space for 350 people, as well as 20 loft-style apartments, as well as a restaurant and some of昀ce space.

The project was supposed to have been completed at the end of 2020. Developers told the city council last summer that the hotel could open as early as July of this year.

Director of Community Development John Hinzman told HEDRAat a recent meeting that interior construction is moving along on the project.

The purchase of the building was done with the use of Tax Incremental Financing. Tax revenue generated on the increased value of the redeveloped building are used to repay the debt. A large overage in an environmental project that had to be redone will be added to that TIF bill, Hinzman told HEDRA May 12.

HEDRA was tasked with approving two bills related to environmental clean-up at The Con昀uence site, one expected and the other very much not.

The vapor cleaning environmental project came in at $30,000, and that was expected.

This is somewhat that was anticipated,” said Hinzman. “It was included in the budget. The payment is just coming later because of the delays in the project.”

Then, HEDRA had to pay a bill for $174,000 for encapsulation of wood beams.

“That one was not expected and frankly much higher than anticipated,” said Hinzman.

Hinzman said that as of December 2021, it was expected that the encapsulation would cost approximately $100,000.

The work was conducted by Mavo Systems. Hinzman explained that much of it entailed redoing the encapsulation that was previously done in 2019, because the product didn’t adhere to the wood. The wood had to be manually scraped, and it took 1,100 hours of work, twice what was expected.

“They had to physically scrape those areas and put the encapsulation on,” said Hinzman. “It’s an unanticipated expense.”

Hinzman said that when the TIF plan was set up for purchase and renovation of the building, there is capacity for using that funding mechanism to pay for the overage.

“The basis for that TIF District was to pay ourselves back for the initial investment of the building, which was about $3 million, as well as some development costs. We had put down a little over $1 million for environmental remediation and utilities in that TIF budget,” said Hinzman.

So far, of that $1 million, about $440,000 has been spent. The project also received grant funding to help pay for the environmental projects, so the TIF reserves weren’t fully utilized.

He told HEDRAmembers that the encapsulation bill will be paid for out of the project fund balance, which has $800,000 in it. That will be repaid by TIF proceeds when they come in.

“It’s not great information that I’m bringing forward to you today relating to that one, but this should be the end of the encapsulation project. We’re done with that. It was much more expensive than we anticipated,” he said.

HEDRA members voted to approve payment, but HEDRA board member and Hastings City Councilmember Mark Vaughan questioned why the encapsulation process wasn’t successful the 昀rst time.

Hinzman explained that the original contract for encapsulation of the building was for $400,000 and was completed in 2019.

Vaughan asked, “So can you give us a high-level summary of why the encapsulant failed the 昀rst time and why it won’t this time?”

Hinzman said that there previously was a moisture problem in the building which has been solved through reconstruction of the roof and closing the building up.

“I know the information we got back from the contractors was that there may have been moisture in the building, moisture within the wood that the encapsulation was not adhering. He said testing was done also and has been monitored to make sure the wood is properly sealed.

Hinzman said there is a oneyear warranty on the project.

“Within that one year, we will be checking,” he said.

The initial project also had that warranty, but problems came up after that expired, Hinzman said.

Vaughan said that project consultants, Stantec, which is overseeing the project, should have been on top of this problem.

“Where are they?” he asked. “That’s who I would like to point a 昀nger at saying, ‘We hire you to be the inspector and make sure we get through the warranty, so we don’t have to pay bills like this.’ I would question what happened and who we can blame. The moisture and everything else that’s in there. There should have been awareness about this in 2018. This place is not sealed. It’s not ready. This is potentially going to happen. That’s what surprises me about this is there’s too many opportunities before that where someone could have said this isn’t really the right time to do it, the right place to do it.”

Vaughan said the community wants to see The Con昀uence project completed and not hitting further delays.

“We keep going backwards on this project. Yes, we had COVID. We had a lot of this project delayed,” said Vaughan. “Is this holding up the other project to get the developer going because we had to get this building completed? I’m worried about timelines here. I don’t want this ever coming back again.”

Hinzman said he hadn’t heard from Stantec on the matter, but Mavo Systems representatives are con昀dent the problem is solved.

Vaughan expressed hope that this is the last hurdle before the project kicks into high gear.

“I think now we need some timeless. We need to update the community. The community needs more answers,” said Vaughan. “We’ve been told I know as a city council and HEDRA that there’s going to be more communication about this building, and we haven’t seen that yet.”