Environmental Cleanup Costs Add to S&L Bailout Woes
Amy Kaslow, writer of The Christian Science Monitor, The Christian Science Monitor
THERE is a new, potentially explosive dimension to America's savings-and-loan debacle.
Experts are beginning to conclude that a large but undetermined number of properties seized from the failed thrifts may carry serious environmental liabilities.
The taxpayers' soaring costs for cleaning up the S&L mess may escalate further, despite the government's attempts to recoup some of its losses.
The Resolution Trust Corporation (RTC), a government agency set up to dispose of failed thrifts, plans to auction off in the fall some of its $200 billion portfolio - holdings seized from insolvent savings and loan associations - but only what it classifies as the "premier properties."
Among the properties that will probably not make it to the auction block are those that are environmentally impaired. Residential, commercial, and industrial properties can fall into that category. Their necessary cleanup costs can very easily turn assets into liabilities.
Estimates of problem assets run wild. Observers do agree most of the troubles will involve RTC's commercial and industrial holdings, which account for some 20 percent of the RTC's overall portfolio.
James O'Brien, a Chicago-based environmental attorney with Chapman and Cutler, says his firm surveyed the portfolios of lenders it represents and found that 70 percent of the transactions were environmentally risky. The RTC took on the same kind of deals and will probably determine 70 percent of its commercial holdings are environmentally problematic as well, he says.
The remediation of just one site - where a manufacturing plant has disposed of waste, underground storage tanks leak into the soil and water supply, or a shopping center rests on leaching landfill - can cost tens of millions of dollars to address, says Jerry Harrison, president of Harrison-Kroll Environmental Services Inc.
O'Brien says the RTC's first step should be to match its potentially troublesome holdings with the list of 30,000 sites for which the United States government has received notice or information of potential environmental problems. This index is publicly available.
"Right now we're writing guidelines and setting policies regarding the environmental issues affecting RTC's portfolio," says James Davis, senior asset specialist in the RTC's asset disposition office. He says RTC's concerns are two-pronged: properties that impinge on conservation and wetland concerns and ones that are environmental hazards.
Of the latter, Mr. Davis says, "You can't own 36,000 properties and not find problems." He says the RTC is just in the earliest stages of assessing the environmental risks. He and three co-workers have not examined the government's list of 30,000 potentially problematic sites.
"Eighty percent of our holdings are residential single-family homes," he says. …