The crowds and stores were long gone. Northwest Plaza, once billed as the world’s largest shopping center, stood decaying at one of the busiest intersections in metro St. Louis, done in by new malls in more upscale areas.
Brothers Robert and P. David Glarner announced plans to buy the mall at Lindbergh Boulevard and St. Charles Rock Road and began seeking tax money for most of the redevelopment costs — nearly $50 million.
The city of St. Ann would devote $33 million in tax-increment financing. St. Louis County would kick in $10 million in New Market tax credits. But the Glarners told the state $7.8 million in additional tax credits were needed for the project to go through. They relied on a consultant with a track record of getting tax credits from Gov. Jay Nixon’s administration. But the work had to be a hazardous waste cleanup to qualify for those.
The consultant, Environmental Operations Inc. of St. Louis, said more than 1.1 million square feet of materials in the mall contained asbestos, enough to cover 20 football fields.
Now Northwest Plaza wasn’t just blighted. According to Environmental Operations it was brimming with hazardous waste requiring careful removal by specialists.
The company decided what work was needed for the cleanup. Then it invited companies to bid on the asbestos removal. It submitted its own bids for the work and told the state it was the low bidder.
Its bids for removing the hazardous waste and demolishing the mall totaled $7.8 million. In October, the state Department of Economic Development authorized brownfield redevelopment tax credits to cover Environmental Operations’ work. The mall is about two-thirds demolished.
A Post-Dispatch investigation has found that Environmental Operations overestimated the job to bidders — driving up the cost — and devised a bidding process that ensured it would win. And officials in the Nixon administration rubber-stamped the firm’s actions at every step.
The newspaper found:
• Environmental Operations solicited three bids for the asbestos work but did not submit the lowest bid to the state. Instead, it represented its own bid as the lowest, even though it was $288,000 higher.
• Environmental Operations provided bidders with vastly overestimated asbestos quantities. Just a month after the state director of the Department of Economic Development authorized the tax credits, the firm began filing for permits to remove less than half as much asbestos as it had used to solicit bids.
• Environmental Operations got bids to “completely remove” asbestos containing materials from the mall. But once it had the contract, it left asbestos in some of the mall buildings that were being renovated. That change was made without notifying the Department of Natural Resources, which oversees cleanups.
• Because the state will pay demolition costs equal to the amount of the remediation, the bids on overestimated quantities of hazardous waste helped the developers dramatically increase the amount of subsidies they could get for demolition.
• The owners of the mall received bids for demolishing the mall from three companies: Environmental Operations and two companies that do not specialize in big demolition projects. The mall’s owners also obtained a lower estimate from one of the region’s largest demolition companies, Spirtas Wrecking Co., but did not disclose it to the state.
Stacy Hastie, the owner of Environmental Operations, through a spokesman, has defended his handling of the Northwest Plaza project. In response to questions from the state, he said in an April 23 email obtained through a Sunshine Law request that he had “better things to do than jump through hoops for a witch-hunting reporter.”
“You will see all is aboveboard,” Hastie’s email said.
Environmental Operations’ domination of Missouri’s taxpayer-funded environmental cleanups has been the subject of an ongoing Post-Dispatch investigation. The company has been both the consultant and the environmental contractor on cleanups totaling $85 million at high-profile sites such as Busch Stadium, the NorthPark business park and River City Casino.
The Post-Dispatch revealed last year that Environmental Operations designs Missouri brownfield cleanups, chooses which companies can bid, submits its own bids and sometimes hires itself for the job. The firm sometimes seeks bids from companies that are too small or unqualified to perform the full scope of the work.
It is highly unusual for a consultant to be allowed to design a job, manage the bidding process and bid to itself in a public or private construction, demolition or environmental project. A consultant is supposed to get the best price from a contractor for its client. A contractor wants to maximize his profit.
“You’re either in one role or the other role in this industry,” said Chip D’Angelo, owner of WCD Group in Pennington, N.J., who is credited with helping develop the procedures that have become standard for asbestos abatement.
Since the Post-Dispatch stories last year, Missouri Auditor Tom Schweich has criticized the lack of competition at an earlier cleanup funded with the brownfield redevelopment tax credits. His staff has started an audit of the hazardous waste program within the Department of Natural Resources and plans an audit of the brownfield redevelopment tax credit program in the Department of Economic Development.
Tax credits do not come directly from state coffers. Instead, they reduce the taxes owed by the individuals and companies that buy them, resulting in reduced state tax revenue.
The newspaper’s examination of the Northwest Plaza cleanup shows the extent to which Missouri has lost control of taxpayer-funded environmental projects — and how Environmental Operations has benefited from that lack of oversight.
Until the Post-Dispatch began asking questions, neither the Department of Economic Development nor the Department of Natural Resources knew about the low bidder for asbestos abatement, the significantly reduced quantities of asbestos being removed from the mall, or that some asbestos was being left in place, according to spokesmen for the agencies.
“To date we have not received notification of a revised scope of work for the project; however, the tax credit will be limited to actual costs incurred regardless of the amount authorized,” John Fougere, spokesman for the Department of Economic Development, said in an email in April.
But because Environmental Operations is also the consultant on the project, the department has no independent source to determine the project’s actual cost. Asked whether Environmental Operations would reduce its billings to reflect a smaller scope of work, owner Hastie responded through his spokesman with an email: “The scope is not smaller.”
Other bidders on the project said Hastie’s response was absurd. They said their bids were based on the 20 football fields of asbestos-containing material. Not nine.
“If it was half the quantities, our bid would have been half,” said Jim Daiber, vice president of CENPRO Services of Madison, one of the bidders.
At Northwest Plaza, state officials gave Environmental Operations the latitude to design a cleanup that maximized its own profits, said Gabriel Bluestone, an antitrust consultant with Bloom Strategic Counsel in Washington, who reviewed files for the Post-Dispatch.
Bluestone, a former adviser to the U.S. Senate on antitrust issues, said the way Environmental Operations was awarded the contracts at Northwest Plaza was unfair to competitors and may violate the Sherman Antitrust Act, the landmark federal statute that restricts anticompetitive business activities.
“Since the owner is permitted to submit bids however it sees fit, EOI has abused its consultant role to assign itself the work and receive an inflated tax credit at the expense of the other bidders and taxpayer funds,” he said in an email.
The Missouri Department of Economic Development requires a brownfield tax credit applicant to obtain at least three bids for remediation. But the department said brownfield tax credits are not subject to state laws requiring competitive bidding for goods and services. There are no rules about how companies are invited to bid, no requirement to advertise bids or open them in public, and no requirement to hire the low bidder.
Environmental Operations invited three firms to bid on removing asbestos at Northwest Plaza: CENPRO, of Madison; General Waste Services, of Alton; and Spray Services, of Washington, Mo., according to a copy of Environmental Operations’ emailed invitation shared by CENPRO.
Spray Services submitted the high bid of $4.3 million. President Jim Bennight said his company’s biggest project until then had been about $1.6 million.
“I assumed we wouldn’t be doing the whole project,” he said, adding that he hoped Environmental Operations would hire his company as a subcontractor. “I doubt that I would take the whole project. It is a very large project.”
The middle bid came from General Waste, at $3.8 million, which also was also hoping to get a piece of the project, according to the company’s director of operations, Donnie Breden.
Environmental Operations came in at $3.7 million.
The state file reviewed by the Post-Dispatch under a Sunshine Law request included no mention that CENPRO had even been invited to bid on asbestos.
A Post-Dispatch reporter discovered CENPRO’s asbestos bid while interviewing representatives of the company about their bid for another portion of the project.
CENPRO officers provided a copy of their bid: $3.4 million, $288,000 less than the bid submitted by Environmental Operations.
They said they didn’t know, until a reporter showed them copies of the bids on file with Department of Economic Development, that Environmental Operations had left theirs out.
“We are upset that we were the low bid and we don’t get any opportunity to do any of it,” said Daiber, the CENPRO vice president, “especially since it’s taxpayers’ money.”
Richard Callow, spokesman for Hastie, said Hastie considered CENPRO unqualified because its bid of $3.4 million exceeded its $3 million bonding capacity — the amount that a surety company would put at risk in bonds it writes for a construction professional. But Spray Services, whose bid Hastie did accept, had an even lower bonding capacity — just $1.5 million.
Callow said Hastie wasn’t familiar with CENPRO’s work, while he “was familiar with Spray’s work in the field.”
Yet CENPRO is no small player in St. Louis-area asbestos projects. In sales, it is the biggest of the three companies that Environmental Operations invited to bid. The company said it is prequalified to bid on asbestos projects for 21 major St. Louis-area companies, including Anheuser Busch InBev, BJC HealthCare, Laclede Gas, Nestle Purina PetCare and Washington University.
Records obtained through a Sunshine Law request show the department did not know about CENPRO’s bid on the Northwest Plaza project until a reporter asked about it. Fougere, who was the department spokesman until leaving for a new job last week, said in an email “there is certainly an expectation” that Environmental Operations would submit “all responsive bids.”
Seeking bids from small companies on projects that are too complex or outside their specialty — and freezing out large companies with the resources to offer competitive prices — are common to projects reviewed by the Post-Dispatch in which Environmental Operations is the consultant.
For example, Environmental Operations designed the $16 million cleanup in Lemay of the site that became River City Casino. The developer, Pinnacle Entertainment, got one bid from Crystal Environmental, a small company in downtown St. Louis that could perform asbestos removal and demolition but had no ability to dig, haul and spread the tens of thousands of tons of dirt that the job required. A Crystal representative said last year the company couldn’t compete with Environmental Operations on a price for a job like that, and said he didn’t know why developer Pinnacle Entertainment had invited the company to bid. Environmental Operations won the job.
At the cleanup of the former Carondelet Coke site in St. Louis, which cost Missouri taxpayers more than $12 million, Environmental Operations sought bids from two small trucking companies to dig out tens of thousands of tons of hazardous waste. It underbid them and hired itself to do the work.
Hastie acknowledged in an interview last year that neither of the trucking companies was qualified to handle the excavation. He said he knew those companies would need to hire someone else to do the work.
He said he preferred that to letting one of his competitors win a contract by submitting an artificially low bid and inflating the cost with change orders.
HOW MUCH ASBESTOS?
At Northwest Plaza, the problem wasn’t that the bids were artificially low — but artificially high.
Environmental Operations greatly overestimated amounts of asbestos to be removed, and it solicited bids on those amounts.
Over the first half of 2012, an Environmental Operations inspector collected at least 580 samples from throughout the mall. He cut out pieces of floor tile, mastic, fireproofing and drywall and sent them to a lab for analysis, according to the remedial action plan filed with Department of Natural Resources in June 2012.
Based on these inspections, Environmental Operations told the Department of Natural Resources that more than 1.1 million square feet of material had asbestos and had to be removed.
After the first inspection of Sears, for example, Environmental Operations asked bidders to give the price to remove 276,000 square feet of floor tile containing asbestos. But the firm would later file for a permit with St. Louis County indicating that just 65,000 square feet of floor tile was being removed at Sears.
In the office tower, Environmental Operations told bidders 100,000 square feet of floor tile and mastic, and 200,000 square feet of drywall and joint compound needed to be removed. The permit filed for later called for removing 70,000 square feet of floor tile and 1,200 square feet of drywall and joint compound.
Almost every area of the mall came in lower after the tax credit money was secure. Experts in asbestos abatement said it would be rare for an asbestos consultant to revise the quantity by more than half after the bid procurement, as Environmental Operations did.
Bungart, of Department of Natural Resources, said Environmental Operations explained that the mall’s previous owner, a limited-liability corporation formed by bondholders, would not let its inspector conduct “destructive testing” to obtain more precise measurements, so to be safe, the firm assumed some materials had asbestos. The former owner declined to comment.
Experts said the explanation was misleading. Destructive testing usually means drilling into walls or doors to hunt for asbestos that could be out of sight. Most of the asbestos at Northwest Plaza was suspected to be in floor tiles. Those are out in the open.
“You don’t have to break open walls to find that,” said Jeff Ruhl, senior project manager for Environmental Consulting Group in Chicago.
Said D’Angelo: “It is small probes and cuts, can be done quickly and easily and with a vacuum cleaner and water to clean up quickly.”
To the extent that sampling them could be considered destructive, the mall owner allowed it hundreds of times, according to the inspection reports.
D’Angelo said “any decent … pre-demolition or abatement survey, done by a professional, should not miss the quantities by more than 25 percent, plus or minus, and that is even high.”
Other experts said even if the earlier quantities were too high, Environmental Operations should have told the state about the new quantities.
But reducing the amount of the tax credit for remediation would also reduce the amount the state would pay for demolition. For example, calculating the amount of asbestos removed under the permits using CENPRO’s bid per square foot totals just $4.5 million available for the whole project, compared to the $7.8 million authorized.
And Environmental Operations told the state in March that it wasn’t removing all the asbestos from renovated sections of the mall. The remaining asbestos will require a plan for careful management.
Removing the asbestos was just half the job. The other half was demolishing the mall.
For this work, the property’s owners, the Glarners, solicited the bids. Ballmann Earthworks of Augusta and Contegra Construction Co. of Edwardsville submitted bids to demolish the mall except the office tower.
According to records at the Department of Economic Development, Ballmann bid $3.9 million, Contegra bid $3.6 million and Environmental Operations bid $3.4 million.
By any measure, the task of demolishing a 1.8 million-square-foot mall was too big for Ballmann, which employs three people and has annual sales of $600,000, according to a business profile. Owner Jon Ballmann said his company could have performed one-third of the project and could have hired subcontractors. He declined to comment further.
Contegra, a general contractor, did not respond to requests for comment. The company describes itself on its website as “dedicated to providing quality construction and management services.” It cites projects it has managed, but only one mentions demolition.
During the summer of 2012, the Glarners’ plans changed and the buildings formerly containing three anchor stores — Macy’s, Burlington Coat Factory and J.C. Penney — would remain standing. Although Contegra lost the demolition bid, St. Ann City Manager Matt Conley said Contegra was hired to manage the renovation of three stores at the mall.
Notably absent were bids from well-known St. Louis-area wrecking companies, including Spirtas Wrecking Co. or Hayden Wrecking Corp., or companies such as Brandenburg Industrial Service Co., the Chicago-based demolition giant. Several experts said a major demolition job would attract demolition bids not just from the region, but from around the country.
For example, the Indianapolis Airport Authority this year requested bids to demolish a 770,000-square-foot passenger terminal. The request drew 13 bids, all from wrecking companies, including Brandenburg. The winning bid, from Veit & Co. USA in Rogers, Minn., came in at $4 million. With other costs, the project came in at half its $11 million budget.
“I don’t understand why there are firms bidding on a project that don’t appear to have the capacity or qualifications to complete a job like Northwest Plaza,” said Sarah Coffin, associate professor of urban planning and real estate development at St. Louis University. “The fact that they are being solicited calls into question what’s behind it — what are the motives?”
She said there should be a fair bidding process in publicly funded projects to make sure taxpayer dollars are well used.
The Department of Economic Development “needs to oversee this project,” she said. “Why are they allowing this to happen?”
The Glarners did finally connect with a demolition company. Arnold Spirtas, chairman of Spirtas Wrecking Co., said Robert Glarner asked him for a price for demolishing most of the mall — about 1 million square feet — leaving three anchors and the office tower standing. The bid did not include any interior demolition on those buildings, Spirtas said.
Spirtas said he told Glarner he would do the job for $1.8 million, considerably lower than the $3.4 million bid from Environmental Operations. Fougere, with Department of Economic Development, said the state was never told about Spirtas.
Spirtas said the conversation went on for several weeks. The Glarners asked Spirtas to estimate the value of metal in the mall that would go to the demolition company. In a letter dated Sept. 21, Arnold Spirtas estimated between $1.1 million and $1.3 million.
Arnold Spirtas said Bob Glarner told him Environmental Operations had “the inside track” for the demolition contact because it handled the brownfields tax credit application.
“He said, ‘Look, it’s not final yet. I’m trying to get the lowest price.’ Or something like that,” Spirtas said. “... I worked like hell. My son and I worked like hell to get (a bid) out to him.”
The Glarners’ lawyer, David Richardson of the law firm Husch Blackwell, wrote in an email that his clients “never received a firm bid from Spirtas.” He said Bob Glarner had asked Spirtas for an estimate as a “gut check” against the prices from Environmental Operations and two other bidders. The Glarners didn’t give Spirtas enough information for them to make a bid, he wrote.
“The Glarners felt comfortable with EOI’s bid as it was the lowest firm bid, the lender was comfortable with EOI being the contractor, selecting EOI saved money by having only one disbursement agreement, and selecting EOI avoided having multiple contractors on the site thus avoiding increased coordination costs and the likelihood of delay,” Richardson wrote.
Arnold Spirtas and his son, vice president Joel Spirtas, insisted the Glarners promised they were in the running.
Joel Spirtas shared a voice message he received from Bob Glarner on Oct. 16, shortly after the Glarners hired Environmental Operations.
“Spirtas will not be doing the demolition of Northwest Plaza,” Glarner said in the message. “I need some separation of a week or two or three, or longer, (before) I can tell you what happened. But I want to make sure you relay the information to your father. I know it’s not what you guys wanted to hear.”
Glarner said in the message that he wanted to give Spirtas the courtesy of the first phone call.
“It probably wasn’t necessarily what (we) bargained for, it wasn’t necessarily what (we) were promised,” Glarner said. “Nonetheless, you live in the same world as I do, and that reality is what it is.”
The reality is that only one company gets contracts for big ticket environmental projects paid for with tax credits in Missouri.
And that reality means someone is paying extra, Arnold Spirtas said.
“That’s the taxpayer.”