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A Resolution Approving a First Amendment to the Limited Environmental Indemnity Agreement Between 427 Madison, LLC. and the Village of Oak Park for the Property located at 427 Madison Street and Authorizing its Execution
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Introduction
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In 2017, the Village entered into a Limited Environmental Indemnity Agreement with the owner of the property at 427 Madison Street to allow for contamination to remain in the public right-of-way (ROW) from the former gas station. Per the original agreement, the property owner is responsible for potential future costs associated with the testing, removal, and disposal of contaminated soils in the ROW for Village construction or maintenance projects. In consideration of a one-time cash payment of $30,000, the current owner is requesting to amend the agreement to no longer be financially responsible for these environmental-related costs for Village projects.
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Recommended Action
Adopt the Resolution.
Prior Board Action
The Board has taken the following prior action:
• The Village Board approved an Ordinance Granting a Special Use Permit to Construct Townhouses in the MS - Madison Street Zoning District at 427 Madison Street on June 18, 2024 (ORD 24-129)
• The Village Board approved an Ordinance approving a Highway Authority Agreement and an Environmental Indemnity Agreement between Second Century Enterprises, Inc. and the Village of Oak Park for the property located at 427 Madison Street on April 17, 2017 (ORD 17-194)
Background
In 2017, the Village approved a Highway Authority Agreement (HAA) and a Limited Environmental Indemnity Agreement with the property owner of 427 Madison Street. The 427 Madison Street property was a former gas station that had a leaking underground storage tank which released contamination into the soil over time. Following an environmental site investigation by the property owner, it was determined that soil contamination spread into the public right-of-way on Madison Street and Elmwood Avenue. The HAA is an agreement that allows for the contamination to remain under the ROW and allows the property owner to obtain a No Further Remediation status from the Illinois Environmental Protection Agency. The Limited Environmental Indemnity Agreement was a separate agreement with the Village that required the property owner to pay costs associated with environmental testing and disposal of contaminated soils in the ROW should the Village need to perform work in the area covered by the HAA.
The current property owner has received approval from the Village to construct six townhomes on the long-vacant property. The current Environmental Indemnity Agreement creates concerns for the owner since this Environmental Indemnity Agreement has an undefined dollar amount associated with it. Per the current Environmental Indemnity Agreement, the future owners of the six townhomes would be required to pay all of the Village’s environmental costs for testing and disposal of soils for any future Village project or maintenance work. This undefined and potentially large sum of money would not be realistic to manage for such a small association of townhome owners.
As a result of this future financial risk which would encumber the property and likely make the townhome development infeasible, the current owner (427 Madison, LLC.) is requesting that the Village consider accepting a one-time cash payment of $30,000 to amend the Environmental Indemnity Agreement to remove the future financial responsibility for environmental costs for the property owner for Village projects or maintenance work in the HAA area. The HAA needs to remain in place to still allow for the contamination to remain buried underground in the ROW. This amendment to the Environmental Indemnity Agreement just removes the property owner’s financial responsibility to pay costs associated with the contamination for Village projects or maintenance work.
Engineering staff has reviewed this request and supports the request for a one-time cash payment of $30,000 to amend the Environmental Indemnity Agreement. The $30,000 amount is a reasonable estimation of potential future Village costs for environmental testing and disposal of contaminated soils in the ROW on Madison and Elmwood for a future potential water main or sewer main project in the area. Staff also supports the request as it will be easier for staff to administer a future Village project since coordinating these environmental issues and costs can be challenging especially with property owners that are not accustomed to these environmental agreements. Typically, these environmental agreements are with gas station and dry cleaner owners that have environmental professionals and attorneys on-call to administer these types of issues, not a six-unit townhome association.
Timing Considerations
Adoption at this time will allow the property owner to confidently move forward with the proposed development and construction of the six townhomes on this parcel.
Budget Impact
The $30,000 revenue will be deposited to the Capital Improvement Fund, Public Works for miscellaneous revenues account no. 3095.43700.101.441462.
Staffing Impact
There is no staffing impact associated with this item. There will be savings in staff time for any future Village projects in the ROW along this property’s frontage since environmental coordination with the property owner will not be required and staff can just manage the soils in the ROW.
DEI Impact
There is no DEI impact associated with this item.
Community Input
There has been no community input given in relation to this item.
Staff Recommendation
Adopt the Resolution, which will allow for the developer to move forward with the construction of the six-unit townhome development in exchange for a one-time payment which will cover future Village environmental costs and make it easier for staff to manage future projects in the area.
Advantages:
• This amendment to the agreement will allow for the construction of the six-unit townhome development.
• Reduced staff time for future Village projects or maintenance activities in the area.
Disadvantages:
• The $30,000 is a reasonable estimate of future potential environmental costs. Should future environmental costs exceed this $30,000 amount the Village would be responsible for any of these costs.
Alternatives
Alternative 1:
The Board can delay action to gain additional information.
Advantages:
• Board Members would be presented with the additional information they requested.
Disadvantages:
• The timing of the eventual Board action could delay the construction of the proposed development.
Alternative 2:
The Board can vote down the item.
Advantages:
• Potential future cost savings
Disadvantages:
• The developer may delay the construction of the project.
• The developer will need to re-evaluate the project’s viability and may choose to not move forward with the project if they think they would not be able to sell the townhomes with this existing agreement in place
• Additional staff time will be required to administer future projects in the area
Anticipated Future Actions
There are no anticipated future actions in relation to this item.
Prepared By: Bill McKenna, Assistant Public Works Director/Village Engineer
Reviewed By: Rob Sproule, Public Works Director
Approved By: Kevin J. Jackson, Village Manager
Attachment(s):
1. Resolution
2. Amendment Limited Environmental Indemnity Agreement
3. HAA and EnvIndAgrmnt 427 Madison
4. Owner’s Request Letter