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Erie County is betting big on Bethlehem Steel

The decaying Bethlehem Steel ovens and abandoned engine and boiler houses along the hundreds of acres on Route 5 in Lackawanna remind passing motorists every day of the region’s decline.

But local leaders see the opposite. They see unmatched potential.

“This property represents one of the most marketable pieces of industrial property in all of North America,” said Deputy County Executive Maria Whyte. “And that is not a small claim to make.”

The county has signed a purchase agreement, after years of negotiations, to take control of nearly 150 acres of remediated Bethlehem Steel property before the end of the year. The first 60 acres are expected to be transferred to county control before the end of the month. Within five years, county leaders envision roads, waterlines, lighting, rail spurs and high-speed internet service. And within a decade, they imagine private businesses occupying an industrial campus that propels advanced manufacturing and green technology.

This is not the first time the Bethlehem Steel property has been reimagined. Redevelopment plans for the 1,100-acre steel site date back to at least 1987, when leaders said a harborfront with a marina, shoreline recreation and “related waterfront development” could be built on the property.

Lackawanna Mayor Geoffrey M. Szymanski said there have been many occasions when the current land owner and other local leaders have made promises and pledges that went nowhere.

“It’s a ‘show me, don’t tell me’ scenario,” he said.

But the latest county claim is backed with money. Nearly $19 million in local, state and federal money already has been spent or committed to purchasing and redeveloping almost 150 acres of the Bethlehem Steel property.

[Gallery: A look at what remains of Bethlehem Steel today]

“There are a lot of skeptics out there,” said County Executive Mark Poloncarz, as he stepped over chucks of slag and black coke. “But you have to believe that the advantages that brought the Lackawanna Steel Co. to this site are the same advantages that exist today.”

Fifty years ago, the manufacturing giant that bought Lackawanna Steel produced millions of tons of steel a year, employed 22,000 workers and supported entire cities. “Help Wanted” posters papered the complex. The legacy: hollowed-out buildings, piles of brick and broken glass, and tall trees that grow in places that once would have withered a blade of grass.

Poloncarz and local leaders believe the county’s $5.5 million land-purchase agreement with Tecumseh Redevelopment will make 148 acres of remediated brownfield some of the most coveted advanced manufacturing property in the nation.

They point out that the Bethlehem Steel property offers easy transportation access by water, railroad and highway. The land sits close to an international border, enjoys road visibility and qualifies for lucrative brownfield tax credits.

With the proper infrastructure, county officials say, Bethlehem Steel can transform from a symbol of decline to a symbol of resurrection. Whyte said Bethlehem Steel is destined to give birth to the region’s next generation of advanced, high-tech manufacturing jobs.

“Right there,” she said. “That’s where it’s going to take root.”

Overcoming the past

The steel giant’s descent from being a shiny buckle in the Steel Belt to a black hole in the Rust Belt has sunk deep into the region’s consciousness.

At one time, the prosperity and jobs associated with steel manufacturing were powerful enough to give birth to an entire city. Lackawanna was built on steel. Its blue-collar sensibilities still permeate the region.

Over the span of 60 years, Bethlehem Steel came, flourished, declined and closed. The company’s local rise to 22,000 workers by the late 1960s was meteoric.

Its fall was catastrophic.

Former steelworkers recall how one mill closed after another.

“I’m an old-timer now, but it went so fast,” said Bill Daley, 75, a former steelworker who tried to reconcile the crowded buildings and miles of snaking railroad tracks with the empty landscape now before him. “You couldn’t go 50 feet without hitting a building when we were here. When you looked at this place, who would ever have thought it would go down?”

A concrete staircase emerges from a scrap pile that has become overgrown with plants at the former Bethlehem Steel site. Click on the image to view more photos from the site. (Derek Gee/Buffalo News)

The hundreds of toxic acres remained the symbol of a lost legacy. The massive fire on Bethlehem Steel property last year furthered that stark, visual imprint. Some of the property will remain too ruined to build on for years, if ever.

Wind turbines, high-tech agricultural businesses and manufacturers such as Welded Tube have raised the profile of the old steel site, but county officials say this land purchase agreement represents the first comprehensive and financially viable redevelopment plan the Bethlehem Steel property has ever had.

The need

Manufacturers elsewhere hope so. There isn’t enough industrial land readily available, and few offer the financial and transportation benefits the Bethlehem site can.

Less than 5 percent of the 66.1 million square feet of the region’s industrial space is vacant and available, according to the CBRE brokerage firm. That rate remains persistently below the national average.

“It’s very important to have large industrial sites that are available and shovel-ready in our territory,” said Richard Schechter, a Pyramid Brokerage real estate agent.

That’s why the project matters.

Explore the interactive map of the Bethlehem Steel site:

National site-selection firms routinely ask for local help locating new industrial sites. The Bethlehem Steel property already is on their radar screens, according to Invest Buffalo Niagara, the regional economic development organization formerly known as Buffalo Niagara Enterprise. Site selectors insist on seeing it.

“This tells me this has got to be one of the top sites in the Northeast,” said CEO Thomas Kucharski.

Poloncarz said serious interest in the steel site already exists.

“We’re not talking about mom-and-pop shops,” he said.

A difficult deal

Cleaning and transferring such a big chunk of private brownfield property comes with complications.

Miles of railroad tracks must be ripped out or relocated.

The owner of the Bethlehem Steel property, ArcelorMittal, is headquartered in Europe. Negotiations included companies leasing or owning adjoining property.

Finally, nobody wanted to make a move until there was money to grease everything along, Whyte said. Erie County has allocated some $7.6 million in borrowed money toward the $18.8 million raised to date in federal, state and local dollars.

Source: Erie County. Some costs are projected.

Poloncarz said his biggest challenge locally is getting residents to believe that the rebirth of Bethlehem Steel is more than a pipe dream.

“There were others who said, ‘You’re never going to see it. It’s going to be a wasteland forever,’ ” he said.

Lackawanna Mayor Szymanski doesn’t believe that, but he’s also not a pie-in-the-sky dreamer. He’s mayor of a city hardened by cheap talk.

“There’s been a lot of talk for decades with regard for that property,” he said. “We’ve been promised a lot.”

Shovel-ready Bethlehem Steel parcel called a 'game changer'

Bethlehem Steel Corp. rolled out a comprehensive redevelopment plan for the Lackawanna property that included recreation areas, business and light industrial centers, and a distribution and shipment center. That was nearly 20 years ago, three years before the company went bankrupt. The public/private partnership that was supposed to lead the redevelopment effort failed.

But Poloncarz, a Lackawanna native who was raised on stories from this place, said he still has faith.

He stepped inside a towering, old boiler building and laughed when he glimpsed an abandoned break room coffee pot through a broken glass window. He pulled out his phone and snapped a picture.

The project connects with something deep in him.

“There is a pride factor, from people saying it couldn’t be done,” he said. “We’re going to get it done.”

Winning combination

Reusing an existing, developed manufacturing site fits with the region’s strategic economic development plans and companies’ desire for lucrative financial incentives. That’s why Empire State Development earmarked nearly $2.8 million in state money toward the county’s land acquisition efforts.

“Bethlehem is ideally suited for large industrial parcels, similar to RiverBend,” said Howard Zemsky, CEO of Empire State Development Corp., referring to the SolarCity site in South Buffalo. “We’d prefer to repurpose these existing sites as opposed to creating new greenfield sites, which often cannibalize agricultural land.”

The 148-acre property has the utilities and other infrastructure in place – including natural gas, water, sewer, electrical power and roads – though some of it will need to be extended as the site is subdivided.

The property also offers rail and water access at the Port of Buffalo, as well as convenient links to highways. And it sits close to the international border with Canada.

“You’re not putting infrastructure on a place that didn’t have it before,” said Alan Rosenhoch, director of business development at Invest Buffalo Niagara. “It’s a matter of connecting it again.”

Newly rerouted train tracks on the former Bethlehem Steel site. Click on the image to view more photos from the site. (Derek Gee/Buffalo News)

For manufacturers, the Bethlehem Steel property offers lucrative brownfield tax credits.

It’s one of the few remaining large sites grandfathered under the old rules of the state’s Brownfield Cleanup Program. That means businesses that locate on the cleaned-up and state-certified Bethlehem Steel site would be eligible to recoup 18 percent of their entire investment.

There’s no dollar limit. Additional property tax breaks would last 10 years and spill over to the next user.

“It’s incredibly valuable,” said Rosenhoch. “It really lengthens the time period during which we can market the site and attract users.”

That’s why county and industrial development agency leaders are under the gun to get the cleaned-up Bethlehem Steel property transferred into public hands as quickly as possible. To maintain those benefits under the old rules, cleanup must be formally completed and state certified by Dec. 31.

Under the gun

County officials stood cautiously to one side of a private road and watched as trucks rumbled off with load after load of tree branches, trunks and scrubby vegetation.

Tecumseh is responsible for dropping a foot of cover, such as soil or slag – a stony steelmaking byproduct already on the site – on top of most of the property that the county will purchase. But it has to move fast.

Lackawanna mayor, in State of the City address, hails redevelopment of Bethlehem Steel site

To help Tecumseh finance the capping of the brownfield property, the county is buying the 150-acre parcel in four phases. The payment for Phase I will help pay for the capping of Phase II, and so on. By the end of the year, all four phases must be transferred to the Erie County Industrial Development Agency’s nonprofit land development corporation.

Brown to green

The idea of the contaminated Bethlehem Steel site “going green” may seem preposterous. Tecumseh still must remediate roughly 500 acres of brownfields, addressing everything from coal tar on the land to benzine in the ground water. At one time, the site contained tar pits that turned cyanide-laced soil blue.

But the possibility exists that an eco-friendly, energy-producing advanced manufacturing park may one day grow on the cleaner parts of the site. Local leaders like the idea of furthering Buffalo’s emergence as a green technology hub.

Lackawanna is a rare city to feature both solar and wind farming within its boundaries. Indoor, controlled agricultural companies have expressed interest in the property.

The Erie County land purchase agreement includes a donation of land by Tecumseh to establish a pedestrian and bike Shoreline Trail along Route 5 that would connect to the existing Outer Harbor Trail.

Finally, the ECIDA has also already spent or earmarked more than $4 million to build a “zero net energy” building on the north end of the county-bought parcel that would offer office and light manufacturing space to interested tenants.

The proposed building would harness geothermal, solar and wind energy, and it would use architectural features to create a healthy space with low energy needs and a carbon-neutral footprint with little or no waste.

Martha Bohm, an assistant professor in the University at Buffalo’s Department of Architecture, is working with the ECIDA to consider ways to make Bethlehem Steel projects models of sustainable technology and affordable energy.

“We can change the conversation about how the site is thought of,” she said.

Looking ahead

Two flags fly in front of the Welded Tube company – an American flag and a Canadian one. Every few minutes, the gates of the steel-link fence open, and out runs another flatbed truck loaded with long steel tubes of differing diameters, meant for natural gas drillers and others.

The pioneering Canadian manufacturer expanded operations on 40 acres of Bethlehem Steel property in 2013, capitalizing on tax breaks and proximity to the international border. The county installed an industrial-sized water line that serves Welded Tube and can also be used by future companies.

Welded Tube offers proof Bethlehem Steel can once again become a great manufacturing hub.

“When we do bring prospects through, we can say there’s a lot of land, and you can see that a company has already done it and received brownfield credits,” Rosenhoch said.

A truck carries a shipment out of the Welded Tube plant on the former Bethlehem Steel site. Click on the image to view more photos from the site. (Derek Gee/Buffalo News)

Once the land has been turned over to county control, the ECIDA’s land development corporation will begin master planning, said John Cappellino, the ECIDA’s lead Bethlehem Steel project manager.

“The current owners have been doing the remediation side of it, but they’re not developers,” he said.

Lackawanna officials want public access to the waterfront, and they worry about lost tax revenue since the property will be removed from the tax rolls until the county resells the parcels to private companies. Even then, those businesses would receive property tax breaks for years.

But, despite reservations, Mayor Szymanski still supports the project. He pointed to old rail lines past county leaders promised to move 15 years ago. They’re finally being moved now.

“This is more than just talk,” he said. “It’s action. We actually have a game plan. We actually have funding for it. It looks like it’s actually going to happen.”

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