CT Construction Digest Monday August 24, 2020

Amazon’s growing CT distribution footprint set to top 4 million square feet

Joe Cooper any Connecticut towns and cities, including Hartford and East Hartford, in recent years were among hundreds of applicants that tried to lure e-commerce giant Amazon to build its second headquarters in the state. But despite recruitment efforts from former Gov. Dannel P. Malloy and predecessor Gov. Ned Lamont, the state was not named on a short list of cities the internet retailer was considering for its $2.5 billion headquarters before northern Virginia was named the victor in the Amazon “HQ2” sweepstakes. However, as Amazon continues its domination as the world’s largest retailer, the Seattle-based company has made major investments across the Northeast, including in Connecticut, where it launched several distribution sites this year. An analysis of the e-commerce juggernaut’s presence in Connecticut shows that it currently occupies more than 3 million square feet in Windsor, North Haven, Cromwell, Stratford, Wallingford, Bristol, Orange and at Bradley International Airport in Windsor Locks. It also plans to occupy another 1.1 million square feet at facilities in Windsor, Wallingford and Danbury in the next year. Already employing thousands of workers in Connecticut, area real estate brokers say the company is eyeing additional locations in the eastern and western regions of the state as the coronavirus pandemic has accelerated the e-commerce boom. Meanwhile, Amazon, which did not respond to requests for comment, is reportedly in talks with America’s largest mall owner to convert former or current J.C. Penney and Sears stores into distribution hubs to deliver packages. Brokers say the deal could make sense for both Amazon and mall operator Simon Property Group as the e-commerce landscape shifts and many brick-and-mortar stores close their doors for good. “I think to take over these malls is a great use of those buildings,” said Nicholas Morizio, Hartford president for property broker Colliers International. “That’s a great need.”Amazon, recently announcing the debut of its new 403,000-square-foot, large-item fulfillment center in Cromwell, said it’s invested more than $2.1 billion in Connecticut over the last decade in real estate, cloud infrastructure and compensation for 8,500 full- and part-time employees. The company also estimated that its investments have contributed at least $600 million to the state’s economy during that period. Brick-and-mortar retail impact Connecticut has steadily become a major landing spot for several new Amazon fulfillment and delivery stations because it’s centrally located in New England and has significantly cheaper rent prices compared to the nearby New York and Boston markets, according to brokers and economic development officials. Amazon recently said its growing presence helps speed up delivery times for both customers and the more than 17,500 independent authors and small- and medium-size businesses in Connecticut that sell on the company’s website. But some have expressed concern that Amazon’s growing presence in the state, in addition to the continuing growth of online shopping, could stifle brick-and-mortar retail activity. Others, however, believe those fears are misguided. Timothy Phelan, president of the Connecticut Retail Merchants Association, said he welcomes Amazon’s growing presence in the state because it helps generate a significant amount of tax revenue and creates thousands of jobs with wages starting at $15 an hour. In 2013, Phelan urged state lawmakers to force Amazon to begin collecting Connecticut’s 6.35% sales tax with the hope of generating approximately $15 million a year in additional sales taxes. It’s not exactly clear how much Amazon generates in Connecticut tax revenue annually, but the state collected about $250 million in online retail sales tax revenue in fiscal 2020, according to the Department of Revenue Services. “We feel as long as the field is level, and everybody plays by the same set of rules, we just allow the market to dictate,” he said. “The fact that Amazon is growing in Connecticut just heightens the importance of every retailer having an e-commerce site themselves.” Amazon’s store at Norwalk’s SoNo Collection mall and its pursuit of other vacant mall space nationally, Phelan said, is encouraging because it shows the company believes consumers still value an in-person shopping experience. He added that increased competition from Amazon will also pressure local retailers to innovate their sales strategies. “I’m confident we have enough retailers in Connecticut that will give consumers enough choice to compete,” Phelan said. “Consumers have many choices, and that’s the kind of mix we want to see.” Recent growth Two of Amazon’s latest projects in Connecticut marked major milestones for the town’s of Cromwell and Windsor.Jim Burke, Windsor’s economic development director, said Amazon will become the town’s largest employer with about 2,700 employees after it debuts its second $230-million fulfillment center on former tobacco farmland on Kennedy Road in the fourth quarter of 2021. Amazon first broke into Connecticut in 2015 with the launch of its 1.2 million-square-foot fulfillment center on Old Iron Ore Road. Today, Burke said the site employs more than 1,700 full- and part-time workers. The town’s largest employers, he said, include The Hartford Financial Services Group and Voya Financial, which currently employ about 2,000 and 1,500 workers, respectively. In Cromwell, Amazon in recent weeks debuted what officials are calling the first large-scale development in the northern tier of the town.\ Town officials had been hoping a major tenant would occupy the 120 County Line Dr. facility that Indiana developer Scannell Properties — which is also constructing Amazon’s new Windsor facility — had been marketing for more than a year before Amazon committed to the property this past winter. The so-called “speculative’’ development is rarely seen these days in Greater Hartford’s commercial-industrial market since the 2008 financial crisis triggered the Great Recession. Stuart Popper, Cromwell’s director of planning and development, said he believes the 36-acre Amazon operation could attract additional industrial developments to the area. “Everyone was going, ‘this is either a brilliant move or a disaster,’ ” Popper said of Scannell building the facility without a tenant dedicated to the project. “It looks like a brilliant move now.”

Facing scrutiny over rate increases, power outages, Eversource quietly files $500M smart-meter plan

Matt Pillion tility giant Eversource has been in the hot seat this past month, first for issuing unexpectedly high electric bills in July, and soon after, for its slower-than-desired response to an 800,000-customer power outage caused by Tropical Storm Isaias. That would draw criticism, regulator probes and negative press in a normal year, but frustration levels seemed to boil over, as the events all took place against the backdrop of an economy battered by COVID-19, with an anxious population that’s spending far more time at home. Perhaps due to its sudden public relations emergency, Eversource hasn’t sought to draw much attention to an approximately $500-million plan it filed with state regulators on July 31 — days before Isaias struck the state — to install 1.2 million smart meters across Connecticut. The proposal, if approved by the Public Utilities Regulatory Authority (PURA), would further increase consumer and business electricity rates — by about $214 million over the first five years. But it would also have some potential consumer benefits, including improving Eversource’s response to future wide-scale power outages, enabling greater adoption of variable “time-of-use” electricity pricing, paving the way for growth of electric vehicles and renewable power sources like solar and wind, and reducing overall energy usage and peak demand. The plan’s awkward timing was pure happenstance. PURA, which is now investigating the reasons behind Eversource’s increased July rates and preparation for the recent storm, had requested months ago that the Boston/Hartford-based utility and United Illuminating submit the so-called “advanced metering infrastructure” (AMI) proposals by July 31, as part of its ongoing analysis of infrastructure investments that will be needed to create a more modern electric grid. PURA is slated to decide by year’s end on what sort of smart-meter investments — if any — to permit utilities to make. Eversource’s plan is by far the larger of the two proposals, as United Illuminating previously invested in smart meters and also has a smaller electric territory in the state. Utilities are permitted to earn a margin on such investments of just over 7%, which means Eversource could net tens of millions of dollars if its plan is approved.Marissa Gillett, PURA’s chairman, who has spearheaded the agency’s grid-modernization review since Gov. Ned Lamont hired her last year, said smart electricity meters located in homes and commercial buildings can be a foundational technology that ultimately benefits ratepayers, utilities and the environment. But Gillett said she’s cognizant of the timing of the Eversource proposal, which, even if PURA determines is worthwhile, would increase rates in a state already known for having some of the most expensive electricity prices in the country. “I would say at this point that we will definitely be paying a lot of attention to the price tag,” Gillett said. “Ratepayers are looking out at the system now and they know they’ve spent hundreds of millions of dollars on grid hardening and they’re concerned they haven’t gotten the return on their investment for how the utility has deployed it.” To put the proposed smart-meter investment in context, Eversource has spent a nearly identical amount ($442.5 million) on storm response and cleanup over 28 major storms since 2012, according to data PURA provided to HBJ. Still, Gillett isn’t backing off of her push to explore the best pathways to a futuristic grid. If anything, the recent storm proved that efforts to modernize infrastructure must be accelerated, she argued. Eversource’s pitch Eversource’s 85-page proposal estimates the new smart meters would increase annual bills for the typical residential ratepayer in Connecticut by less than $2 in the first year, escalating from there, to about $137 per year in year five. Other rate classes, such as those that include small- and medium-sized businesses and manufacturers, would see varying impacts on their bills by the fifth year, ranging from an extra half-cent per kilowatt hour to just over one cent, depending on their rate category. Over the 20-year life of the meters, Eversource says the benefits produced would exceed the costs, albeit slightly, breaking even by the 17th year. In a statement, Eversource spokesman Mitch Gross said the high-tech meters “would allow for real-time information regarding customer energy use, as well as rate options where customers could shift their electric usage to off-peak times to help save money on their electric bill.”\ Eversource said that many of the potential benefits, such as reductions in carbon dioxide emissions, are difficult to quantify financially and are therefore not captured in its cost-benefit analysis. Helping with outages Smart electric meters could also improve Eversource’s ability to respond to future storms and outages by giving it the ability to automatically detect where the power is out — without needing customers to call — and more efficiently allocating trucks and repair crews to where they are needed most. Asked if smart meters would have led to fewer outages or a faster recovery from Isaias, Gross said extensive tree damage caused by the storm’s high winds were to blame for the situation. However, Eversource’s own proposal, as well as other smart-meter experts, claim the technology could provide real benefits, including more accurate planning for outages and restoring power more quickly and efficiently when infrastructure is damaged. Eversource’s analysis includes $83.5 million in benefits over a 20-year period related to outage restoration and customer reliability, including an improved ability to coordinate mutual aid storm response crews and automate the typically labor intensive process of identifying the remaining pockets of so-called “nested” outages in the final days of a storm-recovery effort. While each storm is unique, Eversource estimates that smart meters could reduce outage durations by about 12%. AMI has a mixed record PURA’s review of utilities’ smart-meter proposals will come following regulators rejecting large meter deployments in other states in recent years, including Massachusetts, Virginia, New Mexico and Kentucky. In those states, regulators determined that the investments wouldn’t produce sufficient benefits for ratepayers. For example, Massachusetts utility commissioners in 2018 rejected a proposed smart-meter rollout by three utilities, including Eversource, citing that many of the benefits of automated meter reading had already been realized in the state, as well as potential complications related to how third-party energy suppliers would play into the program, according to Greentech Media. And in Virginia, Dominion Energy (which owns Conncticut’s Millstone Power Station nuclear plant), has seen its meter plans stymied, as regulators there rejected three proposals in the past two years, according to The Virginia Mercury, which reported that officials there called the utility’s benefit projections “overoptimistic and flawed.” Indeed, while there were 98 million smart meters deployed across the country as of the end of last year, according to data published by the Edison Electric Institute, most utilities don’t use the meter technology to its fullest potential, researchers with the American Council for an Energy-Efficient Economy (ACEEE), concluded in a recent report. “This is due in part to organizational barriers including silos and workforce challenges, data access and sharing issues, and difficulties communicating the benefits and costs of AMI to key stakeholders,” the ACEEE report said.Jess Melanson, chief operating officer of Rhode Island-based Utilidata, which makes software that interacts with smart meters and counts leading meter manufacturers among its clientele, said he is hoping PURA learns from such mistakes and mandates clear directives up front for what Connecticut’s utilities must do with their smart meters. For example, he’d like to see clear targets and metrics related to transitioning away from fossil fuels and towards renewable energy. “If you’re going to spend hundreds of millions of dollars on grid-edge computing in 2020, you need to ask it to do more,” Melanson said. Melanson hopes the recent storm and resulting anger at Eversource won’t dim Connecticut’s prospects for leveraging smart meters to their fullest potential over the next few decades. “I worry more that, in a rush to solve today’s problem, which is ‘I didn’t know whose power was out,’ that we’ll make a giant investment that doesn’t stand the test of time,” he said.

Wallingford business owner gets prison for IRS scheme

Michelle Tuccitto Sullo he owner of a Wallingford business was sentenced Wednesday to a year in prison for trying to fool IRS agents who were investigating his company’s finances. Donald Cariati Jr., 45, of Meriden, had entered a guilty plea in February to one count of obstructing or impeding the due administration of Internal Revenue laws. U.S. District Judge Michael P. Shea on Wednesday ordered Cariati to serve 12 months and one day of imprisonment, to be followed by one year of supervised release. Shea also ordered Cariati to pay a $95,000 fine, and make restitution of $1,077,049. Cariati has already paid $1 million toward his tax obligation. Cariati owns and operates Cariati Developers Inc. at 70 North Plains Industrial Rd., Wallingford. The company provides various services, such as snow removal, excavation, paving, and home construction. According to the U.S. Attorney’s office, from 2013 to 2017, Cariati paid several employees with company checks, but mischaracterized them as independent contractors or subcontractors to avoid withholding or paying over taxes to the IRS. Prosecutors said Cariati and his company failed to issue 1099 forms to these “subcontractors,” and informed some people they were being paid off the books. Therefore, their pay wasn’t reported to the IRS. The IRS launched an audit of the company in 2015. Prosecutors claimed Cariati tried to cover his tracks, such as through fraudulent invoices which aimed to prove to investigators that the people who were paid were in fact subcontractors. Additionally, the company in 2014 paid for products for Cariati’s cigarette boat. During the audit, Cariati caused his accountant to provide the IRS with a phony invoice aimed at making it appear that it was a business expense rather than a personal one, according to the government. Cariati’s defense attorney, Trent Alan LaLima of the firm Santos & LaLima in Hartford, had asked for his client to get a period of home confinement, citing the dangers of the coronavirus to the prison population, and his client’s acceptance of responsibility and lack of a criminal record. “Mr. Cariati’s conduct is forcing his company to now overpay taxes, a deserved punishment,” LaLima wrote, in a pre-sentencing memorandum. “This Court should consider how his conduct has caused his company financial losses in considering the deterrent effect on him personally, and on other potential offenders in the future. He has taken responsibility for his actions (and) expressed his disappointment in himself.” Assistant U.S. Attorney Jennifer Laraia had asked the judge to impose a sentence within the calculated guidelines of 24 to 30 months, citing the amount of loss to the IRS and Cariati’s “deceptive” conduct during the audit. Cariati is currently free on bond and must report to the federal Bureau of Prisons in 90 days.

$18 million: The price tag to revitalize Ansonia, mayor says

Michael P. Mayko ANSONIA — Mayor David Cassetti and U.S. Sen. Richard Blumenthal stood on the concrete bridge leading to the former Ansonia Copper and Brass site and looked at the sprawling 60-acre complex of vacant, rusted metal hulks that once churned out products 24/7.

“Once we get these buildings down, we’ll have a blank canvas,” Cassetti told the senator. “A developer can paint whatever picture he wants and submit it to the city for approval.” Cassetti has big plans for the site and sees the old plant’s destruction as the beginning of an upturn for Ansonia. But there’s an $18 million wall standing between the city and Cassetti’s vision of prosperity. It will cost an estimated $8 million to tear down the remaining structures. Another $1.1 million is needed for the U.S. Department of Transportation to design a 28-foot-wide, 1,500-foot-long road to run through a nearby wooded section behind North and South Westwood roads to empty onto Route 8 heading to Seymour. It would take another $9 million to pay for the road’s construction, replacement of the bridge over the Naugatuck River leading from the parking lot to the factory buildings and extension of the Riverwalk to Seymour. “Once we do that, trucks can avoid the city streets and are only minutes away from Waterbury and connecting to (Interstate) 84,” Cassetti said. “We will need to talk to Burns (Construction) about purchasing some land and we’ll require fill to build up the road,” the mayor said. “But I’m ready to go to Philadelphia (the regional office of the U.S. Department of Commerce and the Economic Development Administration) or Washington to make our case. This is critical not only to Ansonia but to the entire Naugatuck Valley.” During Cassetti’s Aug. 18 pitch, Blumenthal liked what he heard and vowed to enlist the rest of Connecticut’s congressional delegation in finding funding. “Our delegation will be four square, fully passionate and completely behind these efforts,” he said. “This is ground zero for restoring bipartisan cooperation on the local, state and federal level. ... We’re going to pummel any opponents to funding in Washington. We’re going to be a nuisance.” Both U.S. Sen. Chris Murphy, who has visited the site in the past, and U.S. Rep. Rosa DeLauro said they are on board. Remediating brownfield sites — areas contaminated by industrial or commercial use — can be a way to give an economic boost to cities and towns, Murphy said. “Brownfield redevelopment is essential to unlocking untold community benefits for the Naugatuck River Valley and beyond,” the senator said. “Cleaning up and reinvesting in these properties increases the local tax base, creates jobs and takes development pressures off undeveloped open space.” DeLauro said she helped secure $1 million for in 2015 to build what is now Farrel Boulevard and Ansonia’s grant application for this access road project is a similarly smart targeted investment. “They open up considerable amounts of develop-able land at a very low cost,” she said. DeLauro said she will support “any efforts to revitalize the site and restore its place as an economic driver in this community.” ‘An economic driver’ That’s exactly what the 60-acre complex was less than a half century ago. The area along Riverside Drive to Main Street and North Main Street was booming with more than 10,000 workers employed at Anaconda American Brass, the forerunner to Ansonia Copper and Brass; Farrel, which has moved to the Fountain Lake Commerce Park and Teledyne, whose buildings now house small businesses. Those factories ran almost 24/7 with up to three shifts a day and at least one on weekends and holidays. The workers who traveled daily to the jobs cashed their checks downtown, purchased food at Fulton Market and Glick’s Delicatessen and shopped at Spector Furniture, Lewis Jewelers, Seccombe’s Men’s Shop and B&L clothing. But trade deals, cheaper imports and soaring union wages eventually whittled away orders and jobs, historians said. Farrel consolidated its complex — which once stretched from Ansonia to Derby — into its new operation on Fountain Lake. Teledyne left and Ansonia Copper and Brass turned off its furnaces in 2013. Looking at the Naugatuck River during his visit, Blumenthal said he remembered a time when it was crusted green with algae and black with oil slicks. “We were told it could never be restored,” he said. “Now look at it.” He said he believes federal help could do the same for the former brass site. “Not only do the people of the Valley deserve our help, but all of Connecticut will benefit from the rejuvenation and recharging of this property,” Blumenthal said. “What I always loved about the Valley is its feeling of family. Here, town boundaries mean little.” State Department of Labor statistics show Ansonia as one of the most distressed municipalities in the state because of its loss of factory jobs over the years, said Sheila O’Malley, the city’s economic development director. The city’s 5.9 percent unemployment rate in March soared to just under 16 percent during the COVID-19 shutdowns. The median household income is $53,540 compared with the state’s $76,106 and nation’s $61,397. She said she believes the Ansonia Copper and Brass site could hold 500,000 square feet of workspace easily generating 1,800 full time jobs and at least 225 construction jobs during its developmental phase. Blumenthal said he believes the $10 million for the demolition and road design can be found on the federal level. “Infrastructure is going to be at the very top of priorities no matter who is elected president,” Blumenthal said. “It’s the key to rebuilding America and restoring jobs. One million (dollars) for the road and $8 million for the demolition seems perfectly feasible and doable.” Money, he said, might be available from the Departments of Transportation, Housing and Urban Development and Defense and from the Environmental Protection Agency. “We need to be creative,” he said. “We need to think big.” A start on funding Over the past several years, O’Malley has obtained millions in funding to prepare the site for demolition. The EPA provided $500,000 for brownfield abatement and demolition of 30,000 square feet and nearly $2 million for an emergency cleanup. Now O’Malley told Blumenthal there is no evidence of toxic chemicals migrating from the site. The state Department of Economic and Community Development provided another $200,000 to assess ground-level contamination on seven acres and another $200,000, most of which was used for a Municipal Development Plan. This year, Ansonia received $176,000 from the EPA/Naugatuck Valley Council of Governments for further remediation. Just last month, Gov. Ned Lamont and State Rep. Kara Rochelle, D-Ansonia, announced the state bonded $500,000 to demolish the adjacent defunct SHW Casting site which had two roof collapses in recent years. A Master Development Plan for the Copper and Brass site should be completed by early next month, O’Malley said. “That will give us a road map to what we can do,” she said, showing where all the utilities are, point out the deficiencies in the bridge, provide redevelopment scenarios, state plans and expected costs and include site plans for redevelopment. O’Malley is awaiting the U.S. Department of Transportation’s decision next month on the $1.1 million being sought to plan and design the road. Her application predicts that phase would take 15 months and construction would take 18 months with a hoped-for November 2024 completion. “No one has a parcel like that that is contiguously located in a central area and adjacent to the downtown restaurants,” O’Malley said.