Efforts to transform a pulp mill into a waterfront gem have consumed a decade (so far) of legal navigations by Frank Chmelik and Jon Sitkin
Published in 2014 Washington Super Lawyers magazine
on June 13, 2014
Updated on June 17, 2014
You might say Frank Chmelik and Jon Sitkin have a nose for innovative dealmaking. Chmelik, Sitkin & Davis in Bellingham has spent the last decade helping its client, the Port of Bellingham, spin polluted property into golden opportunity.
In 2001, when Georgia-Pacific Corp. shut down its industrial pulp mill on Bellingham’s waterfront, the city faced a grim specter. The process of bleaching toilet paper and paper towels had left several zones of the 137-acre property contaminated with mercury, and the site—which until the 1980s had emitted that distinctive pulp-mill smell—threatened to become an expanse of vacant land surrounded by a chain-link fence.
Determined to avert this fate and do something great with the largest urban bay on the West Coast where such an opportunity existed, city and Port officials appointed a citizens committee, the Waterfront Futures Group, to help brainstorm a more appealing scenario. Plans call for a mixed-use commercial and residential development including up to 5.2 million square feet of floor space with parks, trails, condos, and—as a focal point—a waterfront Western Washington University branch campus.
“The idea is to connect Bellingham to its waterfront,” says Chmelik.
Getting there, though, was complicated, messy and expensive. That’s where business and environmental lawyer Chmelik and land-use and real estate attorney Sitkin came in. Their firm, which started in 1987 but took its present form in 1998 when Sitkin joined, divides its practice between municipal clients—like ports, cities and utilities—and business clients.
“I like the technical areas of the law, while Jon’s great with the aspects that involve people—land use, regulatory, zoning,” Chmelik says. Both skill sets would prove vital for providing legal guidance in a master plan that got the OK to move forward last December from the city and the Port. Cleanup and development have already begun.
Pulling together a deal with an estimated buildout of 30 to 50 years and a future estimated value north of $1 billion takes long-range vision. Chmelik and Sitkin handled the legal end of things as the Port purchased the property from Georgia-Pacific, hammered out a cleanup plan with the state Department of Ecology, and worked with the city to craft the master plan that included infrastructure for the WWU branch campus as an anchor.
Sometimes they had to get creative, especially when it came to covering costs. Chmelik helped negotiate a unique 50 percent reimbursement insurance policy (co-purchased by Georgia-Pacific) from AIG that would pay about half the $100 million environmental cleanup cost. The cost-cap insurance policy was customized in 2005 with language stipulating that AIG would put the money owed for the project in a trust account if the insurance company’s financial rating ever dropped below a certain level.
“We’re paid paranoids,” Chmelik notes. Having structured the policy that way, they were one of only about five AIG customers in the world, Chmelik says, who got a call from the insurance corporation when the financial crisis hit, saying, “Don’t worry, you guys; no matter what, you’re covered.”
While Chmelik worked on the technical, cleanup and financing arrangements, Sitkin was handling the legal details of land use, development regulations and “city stuff.” The Department of Ecology pitched in with a $35 million grant.
“As a Western Washington University political science major, I was drawn to this area of the law [because of] the interplay of public policy and law,” Sitkin says.
The team has had to stay flexible as the project vision—and the economy—has changed. Some of the plans for mixed-commercial use shifted toward marine trades: ship repair, boat building, etc. “Bellingham is a great area. It has a long history of the fishing industry and trade support for boating,” notes Sitkin, who values the family lifestyle of the 65,000-person town where his son’s football practice “is only a five-minute drive from my office.”
“This is a legacy project that will enable the cleanup and redevelopment of the former Georgia-Pacific site and provide future community access to the waterfront for generations,” he says.
Adds Chmelik, “Everyone realized cooperation was key. We all wanted to keep away what you see in pictures of Detroit—windows missing, things falling down, nobody doing anything.”