Dan Acton
Ohio Real Estate Investors Association
Senate Bill 113 Opponent Testimony
Senate Health and Human Services Committee
June 17, 2015
Chairwoman Jones, Vice Chairwoman Lehner and Ranking Member Tavares, thank you for the opportunity to share the concerns of the Ohio Real Estate Investors’ Association (OREIA). My name is Dan Acton and I am the Government Affairs Coordinatorfor OREIA. OREIA represents 20 local chapters across Ohio whose 1,500 members consist of small to mid-size real estate investors and housing providers who collectively own tens of thousands of single family homes and thousands of multifamily units as well. Members own and manage property professionally or use the investment properties as a secondary source of income.
As the bill is written today, our association opposes Senate Bill 113; however, on behalf of the membership I would like to share some concerns we have for Senate Bill 113, with the goal of making constructive suggestions that could improve the bill. As outlined above many investors operate their properties on thin profit margins that must account for emergencies and unexpected repairs. However, meth labs are not in the typical norm of repairs and as the bill is currently drafted does not allow for owners to perform their own repairs. It must also be stated that our members are committed to providing the clean and affordable housing for our tenants as a cornerstone of our business practices. Our concerns are in a few major categories: cost, remediation methodology, irremediable properties, disclosure and timelines.
Issue 1. Cost
The proposed new costs to landlords can be expensive. Because no two meth labs are alike, the cost of cleanup varies. The Institute for Intergovernmental Research estimated that the average cost of cleanup can range from $5,000 - $150,000.
The following may impact the cost:
- Size
- Property Accessibility
- Contractor Rates
- Amount of Debris
- Presence of Asbestos
- Contamination Level
- Pre- and Post-remediation Sampling
- Inclusion of Refurbishment Costs
In Oregon, the average cost of cleanup is $6,500/1,000 ft. of property with an additional cost of an up-front assessment of $1,400.
Senate Bill 113 creates a tremendous shift in public policy. While this was at one time a more rural issue than urban and done on a larger scale, the simplicity of manufacturing this poison has made it hard to detect. As a consequence, the activity is moving into urban areas. Under the bill, landlords are to pay for the remediation of the property. Examination of existing law may be a valuable exercise in this matter. In looking at current law, ORC 3745.13 (A) (starting at line 256) holds (emphasis added):
“When emergency action is required to protect the public health or safety or the environment, any person responsible for causing or allowing an unauthorized spill, release, or discharge of material into or upon the environment or responsible for the operation of an illegal methamphetamine manufacturing laboratory that has caused contamination of the environment is liable to the municipal corporation, county, township, countywide emergency management agency established under section 5502.26 of the Revised Code, regional authority for emergency management established under section 5502.27 of the Revised Code, or emergency management program established by a political subdivision under section 5502.271 of the Revised Code, having territorial jurisdiction, or responsibility for emergency management activities in the location of the spill, release, discharge, or contamination, for the necessary and reasonable, additional or extraordinary costs it incurs in investigating, mitigating, minimizing, removing, or abating the spill, release, discharge, or contamination, in the course of its emergency action, but, to the extent criteria and methods for response actions prescribed under 40 C.F.R. 300, as amended, may be applied to the type of material involved and the conditions of the spill, release, discharge, or contamination, that person is liable for those costs only if the political subdivision, countywide agency, or regional authority employed those criteria and methods in its emergency action.”
As OREIA reads the law, the language provided above shows that the political subdivisions identified therein already have a right of action to recover costs for all aspects of the operation of an illegal methamphetamine laboratory, including “emergency management activities in the location of the spill, release, discharge, or contamination, for the necessary and reasonable, additional or extraordinary costs it incurs in investigating, mitigating, minimizing, removing, or abating the spill, release, discharge, or contamination, in the course of its emergency action”.
With the passage of this bill and the creation of a separate cause of action for the property owner under ORC 3744.15 political subdivisions are punting their rights and responsibilities to landlords to seek recovery of damages and perform the remediation for these illegal activities. In essence landlords are becoming de facto collection agents and public health workers for local governments in these criminal matters. Additionally, OREIA questions which cause of action takes precedence with the court to seek repayment, the political subdivision’s as it exists in ORC 3745.13 or the property owner’s that is proposed in ORC 3744.15?
Again, there is often an assumption that landlords have ready cash reserves to meet all emergencies. For many REIA organizations, this is not necessarily true for its members. Property upkeep is usually on a strict budget and when a large cost emerges that is unforeseen, this often results in discomfiture to other tenants for a delay in renting other property until the costs are recouped. We believe that ORC 3745.13 already has a plan for remediation in place and this should be followed. However, in the spirit of compromise to the desired public policy goal we offer a series of solutions.
Suggestion 1, Crime Victims Compensation Fund: No one wants to pay for the misdeeds of others and landlords are no different. If it is the public policy goal of the General Assembly to place the burden of remediation on the property owners we believe there are ways to mitigate the costs previously outlined. The cause of action to recover damages from the meth cook is appreciated, but the reality is that it is unreasonable to expect that any funds will be received from these court proceedings. The belief of gaining anything other than a moral victory in court would not begin to cover the thousands of dollars in remediation costs. From the simple, easily obtainable and relatively inexpensive ingredients the “shake and bake” process uses to create small batches/single doses of meth, thousands in remediation costs occur.
In these scenarios property owners are crime victims. As one possible avenue for them to recoup the costs is to specifically make changes to the bill to allow property owners victimized by meth lab operators to seek clean-up costs through the Ohio Attorney General’s Crime Victims Compensations Fund. Knowing the costs of remediation are not standard and are variable with each crime scene, based on examples from other states we believe that at a minimum the smallest remediation cost is $5,000. In current law, as we understand the program, ORC 2743.51, property owners may be eligible to participate in this program. Please see Divisions (E), (L), (T) and (U) (included below)
(E) "Economic loss" means economic detriment consisting only of allowable expense, work loss, funeral expense, unemployment benefits loss, replacement services loss, cost of crime scene cleanup, and cost of evidence replacement. If criminally injurious conduct causes death, economic loss includes a dependent's economic loss and a dependent's replacement services loss. Noneconomic detriment is not economic loss; however, economic loss may be caused by pain and suffering or physical impairment.
(L) "Victim" means a person who suffers personal injury or death as a result of any of the following:
(1) Criminally injurious conduct;
(2) The good faith effort of any person to prevent criminally injurious conduct;
(3) The good faith effort of any person to apprehend a person suspected of engaging in criminally injurious conduct.
(T) "Cost of crime scene cleanup" means any of the following:
(1) The replacement cost for items of clothing removed from a victim in order to make an assessment of possible physical harm or to treat physical harm;
(2) Reasonable and necessary costs of cleaning the scene and repairing, for the purpose of personal security, property damaged at the scene where the criminally injurious conduct occurred, not to exceed seven hundred fifty dollars in the aggregate per claim.
(U) "Cost of evidence replacement" means costs for replacement of property confiscated for evidentiary purposes related to the criminally injurious conduct, not to exceed seven hundred fifty dollars in the aggregate per claim.
OREIA believes our members can participate in these funds, but we seek clarification that property owners can participate in the Victims Compensation Fund. If we are permitted to participate, we would request clarifying language that specifically allows for victims of illegal meth labs to qualify.
Published in the FY 2011 Annual Report of the Attorney General’s Office Crime Victim Section it states:
“Chapter 2743 of the Ohio Revised Code governs the compensation program, which allows applicants to be reimbursed up to $50,000 for economic losses they incur as a result of a violent crime. Economic losses that can be recovered are:
Medical and related expenses
Funeral and burial expenses (up to $7,500)
Dependents’ economic losses resulting from the death of a victim
Counseling expenses for family members of victims of domestic violence, sexual assault, homicide, or a crime that has resulted in a severe and permanent incapacitating injury such as paraplegia (up to $2,500 per family member)
Crime scene cleanup expenses (up to $750)
Compensation for property held as evidence (up to $750)”
If it is determined that property owners can apply for these funds, we believe that increases in certain allocations described above should be made, specifically crime scene cleanup, property held as evidence and loss of rent. These funds could be a significant source for property owners to utilize to perform the remediation and make up for losses. In FY 2014 there were 3,170 requests for compensation in this fund and it paid out on average $2,401 per claim.
Suggestion 2, Voluntary Action Program (VAP)
According to the Ohio Environmental Protection Agency, “(t)hrough the Voluntary Action Program (VAP), businesses and property owners have a way to investigate possible environmental contamination due to hazardous substances, clean up the property, and receive a covenant not to sue (CNS) from the State of Ohio promising that no more cleanup is needed. VAP maximizes resources and expertise in the private sector by using qualified, experienced professionals such as engineers and scientists certified by Ohio EPA as certified professionals (CP)”(OEPA website). OREIA would ask the sponsors to consider seeking clarification and, if necessary, statutory changes to allow property owners to participate in this program. All research and publications point to major property remediation, but we believe that since illegal meth labs currently fall under ORC 3745 that it would be logical to assume that properties affected by meth would qualify. We request definitive confirmation of our ability to participate.
Suggestion 3.Pollution Legal Liability (PLL) insurance
It is our understanding that the Ohio EPA will offer Pollution Legal Liability (PLL) insurance under the new VAP EIP. PLL environmental insurance can be used to:
• replace an escrow for the unexpected cost of remediation, which would insure against:
• the chance of discovering new contamination;
• third party lawsuits/claims; and/or
• the environmental legacy of the operation.
• fill liability gaps created by contaminant exclusions not covered under the VAP (asbestos, lead paint);
• provide protection from costs that could destabilize your business or municipal budget due to unexpected cleanup;
• provide a tool to establish financial stability for estimated clean-up costs; and/or
• address liability concerns and costs for Natural Resource Damage Assessments (NRDA) that are not covered under the VAP.
If the requested research for item 2 shows property owners cannot participate in VAP, we believe more discussion may be warranted on the Pollution Legal Liability. How does it work? Can meth residue be added to the list of contaminant exclusions not covered by VAP, but covered under PLL?
Suggestion 4. Create a Methamphetamine Cleanup Fund
As of March 2013, 25 states require or recommend former meth labs to be cleaned to standards. Many states approach their laws differently, however, a number of states have requirements similar to those sought in Ohio, but they have taken the extra steps of adding provisions to their laws that create a cleanup fund or revolving account for remediation to be accomplished. Here is a sampling of the research we found:
Illinois: The Methamphetamine Law Enforcement Fund makes available funds for reimbursement to local law enforcement for the costs of securing and cleaning up former meth sites and facilities.
Kentucky: Property owner has to hire a certified contractor to demolish or clean up. Once contaminated property has been decontaminated in accordance with standard, the cabinet shall make available to owners of contaminated property who lease or rent the inhabitable property information about federal income tax deductions or credits available to compensate for damage done to the property in commission of a crime, including methamphetamine production done by someone other than the owner.
Missouri: Missouri created the Clandestine Lab Collection Station Program to address the burgeoning problem of meth labs. While the CDLCS Program is not mandatory, it is available to all law enforcement and other officials involved with the seizure of meth and other clandestine labs.
The department of natural resources may provide the resources and personnel to assist in the cleanup and disposal of the hazardous substances including, but not limited to chemicals intended for use in or resulting from the manufacture or production of controlled substances.
The department of natural resources recover the costs of such cleanup and disposal.
There is hereby created in the state treasury the “Controlled Substances Cleanup Fund”, which shall contain any funds designated for controlled substances cleanup, including, but not limited to, funds derived from private gifts and grants as well as federal and state grants, payments and appropriations.
Minnesota: The authority shall establish a methamphetamine laboratory cleanup revolving account in the public facility authority fund to provide loans to counties and cities to remediate clandestine lab sites. The account must be credited with repayments.
OREIA would request that a similar fund be created modeling Missouri and Minnesota statutes. Ohio’s fund could be permitted to receive federal sources and utilizing the legal authority in 3745.13 granted to political subdivisions the funds sought from criminals could be used by governments to repay the revolving account as in Minnesota statute. We further suggest that the sponsors confirm through LSC the provision in Kentucky law (KRS 224.1.410 (11)) that that there are federal income tax deductions or credits available to compensate for damage done to the property in commission of a crime, including methamphetamine production done by someone other than the owner. Also, this could be added to the notification that property owners receive from the Board of Health under 3744.18(B)
Suggestions 5, Recovery of seized assets
Under the bill, in ORC 3745.13 if officers request that a legal officer or counsel bring a civil action (…) the legal officer or counsel may pursue forfeiture proceedings against the responsible person under Chapter 2981. In reviewing Ohio’s current Forfeiture Law (R.C. Chapter 2981) money “from the sale of contraband or an instrumentality forfeited under the law must be applied in the following order:
- To pay costs incurred in the seizure, storage, maintenance, security, and sale of the property and in the forfeiture proceeding;
- To any restitution ordered to the victim of the offense or to any recovery ordered for the person harmed;
- To pay the balance due on any security interest preserved under the Forfeiture Law;
- The remaining amounts to the law enforcement trust fund of the prosecutor and a specified fund supporting the law enforcement agency that substantially conducted the investigation (in accordance with a written internal control policy adopted by the law enforcement agency).”
Senate Bill 113 makes no changes to the Forfeiture Law. Under the current law, if a meth lab is found on the property and is directed to be remediated as under the bill and the lab “cook” had property that was seized under the Forfeiture Law, the property owner should be made whole after the costs to secure, maintain, etc., the seized assets are paid to the seizing agency.
OREIA recommends a change in the Forfeiture Law for incidents of meth labs only to reflect that the bill would allow landlords to become “first in line” to allow access to seized assets of offending tenants. These incomes would be used to assist landlords in the remediation of the property without expectation of repayment to a political subdivision.
Issue 2. Remediation Methods
As stated many property owners get into the business of property investment because of a knowledge and skill of home repair and renovation and can perform many tasks themselves saving money to rehab a property after they take possession or to make repairs as needed during ownership. These “do-it-yourselfers” are the heart and soul of this industry and their ability to perform this type of work raises their thin profit margins. Senate Bill 113 presumes a requirement that all work must be done by those holding a “methamphetamine remediation contractor certificate” issued by the Director of Health. However, in Michigan, while there is no state law governing meth lab clean-up protocols, there is currently a signed Memorandum of Understanding in place between agencies regarding how to properly deal with meth labs. The Michigan Department of Community Health – Cleanup of Clandestine Drug Laboratory Guidance, item 4.1states
“Property owners may perform some or all of the decontamination tasks under limited circumstances. However, property owners are not likely to have completed HAZWOPER safety training. In most cases, the property owner or representatives of the property owner should not perform decontamination tasks where: