Plume Frazzled

Although the streets in Memorial Bend are named after operas, the small, quiet subdivision in west Houston doesn’t normally serve as a setting for mystery and theatrics.

But the trucks and drilling rigs that appeared unannounced on Tosca Street one day last October, blocking driveways and sidewalks, served notice to residents that something unusual was underfoot in their neighborhood. The drillers were from Geraghty & Miller, an Austin environmental firm, and they were in Memorial Bend to define the extent of an underground plume of toxic chemicals that has spread beneath the subdivision from nearby Town & Country Village Shopping Center.

As residents have since been assured, the subsurface contamination appears to pose no immediate danger to their health. But the potential cleanup of the pollution does threaten property values in their neighborhood, as well as a pending $45 million deal to demolish and rebuild Town & Country Village. And, as might be expected when environmental law intersects with the savings-and-loan bailout, there’s a possibility that taxpayers could wind up bearing the financial burden of the cleanup, which is estimated to take 15 to 20 years and cost millions of dollars.

About 50 homeowners from the subdivision assembled at Pines Presbyterian Church on January 25 to chew over those issues with Dan Moody Jr. Moody’s father developed Town & Country Village 28 years ago, and the son is leading a joint venture to redevelop his father’s project. The refurbished center, Moody told Memorial Bend residents, would comprise a million square feet of retail space and would bring a dozen new tenants, including several restaurants, a bank, a bookstore and a Randall’s supermarket open 24 hours a day.

Moody, head of Moody-Rambin Interests, and his backer, American National Life Insurance Co. of Galveston, had bought the northern half of the property when the redevelopment project was announced at the end of August. He had expected to complete a deal for the rest of the center by mid-October with Temple-Inland Properties of Dallas, which manages Town & Country Village for its current owner, Guaranty Federal Bank of Dallas.

But the property, which once belonged to a defunct savings and loan, can only be sold with the approval of the Federal Deposit Insurance Corporation, and the FDIC, Moody complained, wasn’t giving him the time of day. Moody told the homeowners his tenants and lenders were getting anxious. He implored them to write the FDIC and urge it to get on with the deal, which would improve their property values.

Standing before a poster that showed the toxic plume advancing three blocks deep into the neighborhood, Moody belittled the nitpicking environmental laws that he said were stalling his deal, several homeowners said. The chemicals, believed to have originated from a dry cleaner, were safely contained underground, and did not threaten anyone’s health, Moody said.

After he spoke, engineer Jeffrey Henke of Geraghty & Miller explained that the primary chemical in the plume is a common, non-biodegradable dry-cleaning solvent called perchloroethylene. Because the solvent is heavy and extremely carcinogenic, it would have to be removed before it sank into the deeper levels of the water table.

But there was a problem. The solvent had penetrated deeper layers of the water table than some 40 previous drillings had indicated. Geraghty & Miller was going to have to drill ten more monitoring wells to determine the spread of the pollution.

According to one witness, Moody said to Henke, “Are you telling me this academic exercise is going to drag out even longer? We’ve spent $400,000 and you don’t have an answer yet?” With that, Moody gave a withering look to Temple-Inland vice president Britt Lemmons and stormed out of the room. (Moody failed to return repeated calls from the Press since the meeting.)

The president of the Memorial Bend Civic Association, Fred Marks, characterized Moody’s behavior as a prepared piece of theater. “He was on his soapbox and kind of spreading half-truths,” he says of the developer. Marks doesn’t believe that residents have been given the full story from Moody or the current owners of the center.

“There are no health dangers,” Marks says, “but there is this disclosure thing.”

The “disclosure thing” requires property owners to disclose contamination to prospective buyers. Since the homeowners don’t know exactly where the plume extends, the marketability of many homes may be in doubt.

One Realtor who attended the meeting characterizes Moody’s presentation as a “snow job.”

“Most of the people were taken in by the theatrics and their lack of knowledge,” the Realtor says. “They have no idea how this will affect their real estate. It will taint the neighborhood. Environmentally it wouldn’t affect anybody’s health, but there is a small network of Realtors, and the rumors will get around and the next thing you know you can’t give away a house in Memorial Bend, and somebody in my opinion, is going to have to pay for that.”

Who that somebody might be is likely to be the subject of dispute. When homeowners asked Jeff Henke who was paying for his company’s environmental studies and the proposed cleanup, Henke pointed to Lemmons of Temple-Inland, Guaranty Federal’s property manager.

But the payment ultimately may come from the taxpayers. Under the agreement in which Guaranty Federal Bank bought the property, the FDIC indemnified the bank for environmental liabilities, including “conditions … which violate any applicable federal, state or local law or regulation for environmental protection.” The agreement states that the environmental indemnification “shall survive the termination of this Agreement,” which seems to indicate that the indemnification might be transferable, and Moody wouldn’t be responsible for paying for the cleanup, either. Such agreements were a standard part of the savings and loan bailout, in which the federal government subsidizes solvent institutions that acquire the money-losing properties of defunct S&Ls.

Neither Lemmons nor Moody would discuss the details of paying for the cleanup, which evidently is the sticking point in their negotiations. In an interview with the Press in December Moody said that funds for the cleanup were in escrow, but he refused to discuss how much money there was or where it came from. FDIC spokesman Jim Weaver in Dallas said, “There are certain indemnifications under an assistance agreement between the FDIC and Guaranty Federal. Those I will not discuss. I will not discuss anything on the approval process.”

Asked why the FDIC was delaying the deal, Weaver said, “We have made a request back down the line on certain questions,” but he wouldn’t be more specific.

But there is another wrinkle. Under federal environmental law, responsibility for the cleanup of a site can be passed back to whoever owned the property when the contamination occurred, if the owner was aware of the it. Moody says the dry-cleaning shop, which is now being operated properly by new management, was part of a strip center that was not developed by his father.

The elder Moody developed the rambling collection of small stores scattered on gently curving streets in 1967. The 60-acre tract, not to be confused with the much larger Town & Country Mall to the north, is bounded on the south by Memorial Drive and the Memorial Bend subdivision, and on the west by the Sam Houston Tollway. The elder Moody sold the center in 1985 to Sullivan Development of Dallas. When Sullivan went under in the oil bust, the property reverted to Sullivan’s lender, Guaranty Federal Savings. When that S&L went under, the Federal Deposit Insurance Corporation took control. Guaranty Federal Bank took over the property after litigation over the title in 1991. Under due diligence laws, it performed an environmental survey and found the contamination.

According to correspondence in the files of the Texas Natural Resource Conservation Commission, the state told property manager Temple-Inland to take corrective action in October 1992. A year later, the TNRCC threatened Temple-Inland with fines of up to $10,000 a day if it did not submit a cleanup plan. Almost two years later, August 29, 1994, Temple-Inland’s Lemmons responded to the TNRCC’s threat by promising that Geraghty & Miller had been hired to evaluate and clean up the site. Perhaps coincidentally, this was the same day Moody announced his deal to redevelop Town & Country Village.

The plans that Moody published that day included a dozen new shops and restaurants, but didn’t include one building that apparently will have to be added: a remediation plant that will quietly pump water from the toxic plume through a series of underground pipes and force it through a carbon filter. It could require a 20-year lease, and it’s possible the U.S. government may be one of the signatories.