Bay Harbor

How It Happened Twenty Years Ago: An Industrial Wasteland Becomes a $1 Billion Resort

Sept. 14, 2014

For most of the 20th century, the behemoth cement plant south of Petoskey was an economic driver that offered well-paying jobs for generations of workers.

After the plant closed in 1980, the property sat idle for years and went into decay, coughing up powdery kiln dust and oozing leachate into the bay.

Many saw the parcel’s development potential with its five miles of shoreline on Little Traverse Bay, beautiful views and easy access to Petoskey.

But what would a developer do about that cement plant and those millions of tons of cement kiln dust laying around in piles?

Proposals came and went until 1994, when luxury community developer David Johnson stepped up to reclaim the former Penn-Dixie property.

Johnson wanted to build a super-luxury resort with a town center, conference facilities, marina, equestrian center, and a golf course that would be open to the public.

Two decades later, here is the story of how that vision became the $1 billion development, as told by the people who made it happen.

A PROJECT IN SEARCH OF A PROPERTY

DAVID JOHNSON 

Chairman of Victor International Corporation I thought about it for years. We mapped every piece of shoreline between Cleveland and Sturgeon Bay, Wisc. that was over a mile on the Great Lakes. And then went to work on every piece of property. We wanted a master plan resort community that had boating and golf – on the waterfront.

TIM PETROSKY

CMS Energy spokesman We got into it because we saw an opportunity, back in ’93, ’94, to take this abandoned piece of property and restore it to a productive piece of land. And so that’s when we formed the partnership with Bay Harbor.

MAX PUTTERS

Emmett County planning and zoning director 1972-2005 The planning commission at that time, they were pretty interested in entertaining plans that would keep that property together, as opposed to having it parceled off in a lot of little 10-acre, five-acre, 20-acres parcels, whatever, little developments. So the concept looked pretty favorable.

And being on the shore like that, reclaiming the former cement plant, I think that was of interest to a lot of people here.

JOHNSON
I went to the county and township meetings every month, once a month, for over five years.

So the process was that Bay Harbor was approved for originally 5,500 units and finally 3,800 on 800 acres, and I downsized it to 800 units, and nobody could believe it.

And then we created the parks, and the public nature trails, which became rails-for-trails connecting Charlevoix and Petoskey, and conservation easements and worked with the conservancy. So there was never anything adversarial.

Resort Township had done a public survey, and they didn’t believe, after three attempts, in the "˜60s, "˜70s, and "˜80s to develop the property, nobody had any real credibility, and they didn’t believe anybody was ever going to tear the cement plant down.

SOMEONE WHO COULD MAKE THINGS HAPPEN

PUTTERS

By that time there had been several efforts at doing something with it and David came through pretty positive, like he could do it.

He had this concept of how to develop it and he hired really top people all the way down the line, engineers, architects. And it is interesting how in many ways that original plan is not that dissimilar from what the final plan was.

When they came to a meeting, they had attorneys and architects and engineers and managers "¦ they did a really great job of presenting the project and answering all the questions.

DENNY BRYA

Bay Harbor general manager To be honest with you, I didn’t really know what to expect. I remember the day I interviewed [for a construction management job] and I was given a map that was six feet long and there was basically nothing here at the time.

I rolled the map out on my bed at the hotel and said, "˜Oh, my gosh,’ I mean, the place was just a huge undertaking; a huge project.

So every once in a while I have to pinch myself to remember what it was like when I used to drive in here because basically when I started there was nothing here except demolition stuff.

JOHNSON

The good parts of the property had been cherry picked and sold off in the "˜80s and so our original development plan was to do what’s now called the Preserve, the far western end, which was pretty much virgin land, first, and come back and do the cement plant later.

And we realized that to have both credibility with the government and credibility in the community, we needed to put the money in up front to tear the cement plant down and make a visible sign that, you know, "˜Here we are, and we’re going to do everything we say we’re going to do.’ So while it was huge front-end money, it really became kind of the signature of the place, of where we were blowing something up every few days to tear out the cement plant, do all the reclamation work.

BYRA 

I think that the project was obviously looked favorably upon, because I remember hearing stories about people in Resort Township who wouldn’t wash their car because all of the CKD or the kiln dust used to blow all over their cars all the time. So I think the project was welcomed at the time.

I think the size was appropriate as well. I mean, going with 800 units. People went to the planning commission and other avenues before that. There were other developers in here that were proposing like 5,000-plus units. I think that was a different kind of ballgame or a different league.

GAIL GRUENWALD,

Tip of the Mitt Watershed Council executive director There were definitely some people who did not like it, and they were folks who just really weren’t sure about the impact of that large of a development on a small town. You know, there were folks who had bumper stickers.

It wasn’t 100 percent positive, I would have to say. There were also folks who were concerned about the leachate, which had been identified prior to Bay Harbor being proposed, and folks who were very skeptical that in fact what the [state department of environmental quality would have] to say in terms of the impact of the leachate as well as the source of the leachate.

So there were folks concerned about that.

I think in terms of the land use plan and the approach to the planning commission in Emmet County – all that went very smoothly. But there were folks who definitely had concerns about the impact on the community.

WORLD’S LARGEST RECLAMATION PROJECT UNDERWAY

Demolition began with a bang on July 12, 1994, when, with Johnson, William McCormick Jr., chairman of CMS Energy Corp. and Gov. John Engler on hand, Petoskey celebrated as dynamite brought down one of the cement plant smoke stacks.

Two months later the kiln dust piles had been covered and seeded, and were on their way to becoming fairways.

Hundreds of workers put in 12-hour shifts, striving to build a town almost overnight.

PUTTERS

For me it was a really interesting project.

There aren’t many people in my profession who can see a new town being built. And that’s really what it was, like a new town. And it was self-contained, because it wasn’t breaking up any existing neighborhoods. It wasn’t sitting in the middle of existing thoroughfares going here and there. It was pretty well by itself, with US-31 on one side, the bay on the other.

BYRA

I remember back in the day we had Jeeps and stuff and you could barely get through here on those, and just the exposed CKD [cement kiln dust] and all the debris that was left.

I must admit, when I first got here it was kind of intimidating to drive through and see it. Really, to think of what it is today and that vision, of, you know, we’re going to take this thing, this moonscape, and turn it into a beautiful resort.

PUTTERS

It was a lot of work. A lot of zoning. Meetings. In fact it was the impetus for the planned unit development regulations that ended up in our zoning ordinance.

We didn’t want to look at it like we were going to zone every little acre, like here’s a business, there’s an institution, here’s a house and there’s an apartment, whatever. So we put it under the planned unit development, which kind of gave them the freedom to arrange these different uses, call it mixed-use, if you will, without having to rezone each and every little parcel.

We call it the planned unit development proposal, which can be applied if it is believed and determined that a better plan would result by doing that. And I think it surely has. It gave some bargaining chips to community, like, we’d like to have a bike path, and a few other amenities.

JOHNSON 

The challenge, by far, was to figure out how to reclaim the site and develop the site and do it all at one time.

At that point, nobody wanted the kiln dust.

There’d been a plan to haul the kiln dust and fill the shale quarry up with it, but when you move it around it blows around like talcum powder on people’s houses, which it had been doing for a hundred years, and nobody in Resort Township wanted that to happen anymore.

So they wanted the kiln dust to be kept on site.

It was all collected and put underneath the golf course. Reclamation laws at that point said it had to be covered with four inches of overburden. We covered it with 12 inches of rock and then overburden, and mined out the harbor, which was already an 80-foot-deep quarry, and used that rock to reclaim and create the golf course.

So you basically had five miles of development, all under construction at one time, which was unheard of in the state of Michigan, for any kind of development that’s over a 100 miles away from any metropolitan population base.

A TOWN EMERGES OUT OF THE DUST

PETROSKY

This development has to be considered a success, almost universally. It took a site that was described as a moonscape, fairly accurately. The contaminants on site were open to the environment, freely flowing around in the air and leachate running to the lake.

Since that time it’s been transformed, literally, into a world-class resort that draws tourists and residents from Michigan, around the country, and around the world.

If there is a lesson, it’s a lesson that you can take a barren, unproductive piece of property and turn it back into a productive piece of property that benefits not only Bay Harbor, but also pretty much a large chunk of Northern Michigan.

JOHNSON

What my expertise has always been is creating momentum. We are not Miami or Naples or Las Vegas or Phoenix, Ariz., so we don’t have the population demand.

So even at 800 [units], what I did was create 30 different complete neighborhoods, with 30 different product types, so that there would be $250,000 condos, $500,000 cottages, and multi-million dollar houses on the water "¦ a different product for different markets.

So somebody could say, "˜Look, I want a turn-key condo that looks at Lake Michigan.’ Somebody else could say, "˜I want a little cottage on the golf course.’ And somebody else could say, "˜I want a house like the houses next to the Grand Hotel on Mackinac, on the peninsula.’ And that worked. Because that was different. There were 29 of something. And when 10 were sold, everybody realized the rest were going to sell. If it was 500 condos all the same, there wouldn’t have been any action.

PUTTERS

To see five miles of new town go up, I felt privileged to be a part of it. We didn’t relax our scrutiny of what was going on. I think everybody was glad to see something that did fit our environment and economy. And it did keep the property together as a unit.

PETROSKY

Literally every time I drive through the site I am absolutely amazed at the transformation"¦When you’re up here all the time, you kind of have a tendency to forget, and I try to make sure I don’t forget what it was. It’s a phenomenal transformation.

THE TROUBLE WITH THOSE KILN DUST PILES

PERRY CLARK

Petoskey News Review reporter and editor 1984-1999 I think it was 1988. Me and a couple of my colleagues had gone to the local watering hole, the Mitchell Street Pub, for a drink. It probably was Friday afternoon or something.

We were talking and this guy came up to talk to one of the reporters, Shelly. [We] just sort of ignored it and went on talking, and after a few minutes she tapped me on the shoulder and said, "˜Perry, you should listen to this. This is something you might want to check out.’

GRUENWALD

It goes way back before 1994. It was when one of the first developers proposed Three Fires Pointe and the Petoskey News Review reporter, Perry Clark, discovered the leachate. And the DEQ said, "˜Well, we don’t think it’s coming from the kiln dust. It must be some other problem.’ And so that was the start of the concern amongst folks. We had a public forum on it, there were 300 people who came and had concerns. I mean, there were quite a few folks who were very concerned about not only the leachate but the proposed plan.

And that proposed development died and in fact that wasn’t even the first one, there was one before that. Everybody looked at the undertaking and just didn’t want to take it on, in terms of the development, because it required so much restoration and such an investment.

CLARK

The gentleman, his name was Mike Guisinger, said he’d been walking down the shoreline by the old cement plant searching for Petoskey stones. And he saw this dark liquid in pools all along the shoreline. And that really did perk up my interest, because I had read some environmental reports that had been done for the developer Lawrence LoPatin, who was trying to develop the site.

One of the reports noted a brown fluid running away from the kiln dust piles, the kiln dust being the leftover material from cement production.

I thought, "˜Hmm, I wonder if it could be related to that.’ So I asked the guy, "˜Could you take me down and show me?’ And we set up a time and he took me down there and sure enough there was all this stuff, in pools along the shoreline there.

GRUENWALD 

Many people were very concerned about not only the capabilities of the potential developers, but also this discovered leachate that the DEQ determined was not coming from the kiln dust.

They said, "˜It can’t be. Kiln dust is inert. We don’t know what it’s all about, but it’s not that.’ And then when David Johnson came forward and proposed Bay Harbor, the remediation that was put into place was still somewhat based on this notion that it couldn’t be the kiln dust and that it’s not a huge issue.

And you know, at that point in time there were folks who were skeptical even then, so when that remediation did fail, the follow-up just a few years ago was much more robust and very expensive and landed in the lap of CMS, at that point in time, not the developer.

Concern about the kiln dust returned in 2004, when the remediation system installed a decade earlier failed and allowed leachate to drain into Little Traverse Bay.

Monitoring of the bay led to health alerts warning swimmers to stay out of the water. Because of the way the development deal was structured, CMS Land Company, a subsidiary of CMS Energy, was responsible for remediation, even though they didn’t cause the contamination and were bought out of the development in 2002.

BYRA

It was a frustrating experience, only because I’d been here at the beginning and actually saw leachate running into the bay, uncontested, uncontrolled, unmonitored.

And nobody cared at the time. And then once Bay Harbor was here, some people acted like we were a manufacturing plant and we intentionally flipped the valve.

At the time, obviously things were put in place, working with the different agencies and so forth, that everybody felt collectively would work.

I remember when I started here they measured certain contaminants in parts per million, then it went to parts per billion and then it went to parts per trillion. Not only did the thinking change, but the technology changed to maybe better understand what was happening here.

I certainly praised both David Johnson, for what he did here, as well as CMS Energy for stepping up and taking care of all this. I think it’s at around $250 million now or something, for basically a problem that none of them created.

In fact, I think everybody did their best to try to fix the problem. I think there was definitely misperception in the community as to what that all meant.

PETROSKY

In 2002 we as a company decided to divest our interest in non-utility assets, and Bay Harbor fell into that category. So we divested ourselves of our asset at Bay Harbor to focus on core utility operations; what we really know well.

But as part of that negotiation we held on to certain environmental responsibilities, which turned out to be this work over the past eight years.

JOHNSON

Look, there were years where it was not fun; it was not fun at all. Even though we didn’t have the liability, I pledged to the community that I would stick with it through the environmental crisis. I went to every meeting, every situation.

People were saying the lake was contaminated. The lake was purer than any body of water was ever. There was never ever any contamination in Bay Harbor Lake. Or in the water. I mean, Oprah Winfrey brushed her teeth with baking soda which has a pH of 10, and that’s higher than what we had.

So now it has the most unbelievable, state of the art environmental situation. CMS has been heroic in what they’ve done. Both for all of Northern Michigan, but as far as being admirable, stepping up and going beyond. They’ve exceeded everybody’s expectations.

PETROSKY

We signed an agreement with the DEQ in 2012. That lays out the perimeters on which we’ll operate, and the remedies in place were approved that will protect Little Traverse Bay.

We will be running our remedies and operating our remedies into the future. We don’t have an exact date on when they will be able to be shut down. At some point, the cement kiln dust piles that were left behind by the former cement factory will run out of contaminates.

But we just can’t put an exact date on that "¦ I’m proud that I work for a company that chose to step up and take care of this environmental situation, as opposed to litigate to try to avoid any cost at all.

GRUENWALD

I would suppose that CMS and David Johnson would be the people to ask this question, "˜Was it worth it to you?’ because of what they really ended up having to do.

I mean CMS spent millions and millions of dollars after they thought everything was settled and handled. And because of the covenant not to sue that they signed with Bay Harbor, that created some problems. So, it’s very complicated.

I think that when developers look for brownfield redevelopment, they’re looking at not only the cost to them right now, but the future cost to them potentially, and that’s really what this particular site brought to mind.

They thought they had it handled, and then they find out later that there’s huge costs for remediation correction. So it’s not over when it’s over I guess is the lesson there, and I think developers are pretty brave to take it on. And I also think it’s essential for the state of Michigan to look at these brownfields as potential, too.

JOHNSON

I’m sure CMS would say the environmental [remediation] was a costly and painful lesson. I don’t think anybody, any place would go forward without brownfield protection. But what I would say is that it is a global lesson that more is not better. That the right product done the right way, very low density, preserving all the natural features. It is an extraordinary example of government and private sector working in harmony to create a noble result.

WHAT THE PROJECT MEANT FOR PETOSKEY

PUTTERS

I was concerned about walling off Lake Michigan. If you look at Resort Township, that was their whole frontage on Little Traverse Bay, you know, five miles. The township is six miles wide. Depending on how the plan finally evolved, we had some real concerns there.

But David Johnson was responsive to those fears, you know, they weren’t just mine. He was responsive and provided a bike path, land for the bike path that went from one end to the other. He made it possible for the county and township to purchase two parks, right on Little Traverse Bay. One is East Park and one is West Park, and they are connected by the bike path, so they function as really quite a large park.

That was done quite willingly by David Johnson and Bay Harbor Company. And as it evolved, they are beautiful parks right now.

Bay Harbor was essentially annexed by the City of Petoskey in a deal struck as the development was approved. It was a great deal for Petoskey, which gained property tax revenue, and arguably an even better deal for Resort Township, which would win a share of Bay Harbor property taxes without having to provide services.

JOHNSON

It’s effectively a village that doesn’t have the advantage of its own taxation, pays huge taxes to the City of Petoskey, because of a 425 agreement that was passed with the previous developer that we got stuck with, when he was going to get local and state funds, and that was the method of payback.

We didn’t get the benefit of the government money and got stuck with the taxation.

BYRA

I mean, [the tax agreement is] definitely still talked about, and Bay Harbor is 55 percent of Petoskey’s tax base. The city offers basically a phenomenal public safety department.

Other than that, the residents pay for all of their own guards, the residents pay for all of their road replacements, road plowing, that sort of thing. There’s not a lot of burden on the city to offer services here.

PUTTERS

It’s going to be interesting to see what happens after 50 years, when the terms are up. Will [the tax agreement] be reinstated? It’s interesting. It sounded like a long time when they did it. But the clock is ticking, and here we are 20 years down the road already.

CLARK

I don’t think you’ll find any people who would say Bay Harbor is not an improvement over the abandoned cement plant. There are some people who might say they don’t like all of the extra people and stuff coming to the area. They’d like it to be a little more undeveloped. I don’t know if that’s a reasonable expectation.

But Bay Harbor certainly has changed things. Driving past Bay Harbor [versus driving] past an abandoned cement plant. It’s a tremendous improvement.

JOHNSON

It’s clearly been a great success. And the most expensive lot in northern Michigan pre-Bay Harbor was a hundred and fifty grand. Lots now sell for $2 million.

From a product success standpoint, it’s world renowned now, won all kinds of awards. We pioneered the neighborhood electric vehicle. We’ve got the Guinness Book record for longest electric car parade.

We continue to create new products with the Village being open to the general public. We have 20,000 people come to the July 3rd fireworks. We do things for the general public – the antique car and boat shows, the ice carving festivals, art festivals – to be a seamless part of Northern Michigan.

And we’re now going to build a major 400-seat performing arts center, all with private money, that will service greater northern Michigan. I’m not done until that’s built. We’re very excited about that.

BYRA

I think it was definitely a turning point in the city’s and the region’s development. I think that this is one aspect that is a crown jewel, if you will. I mean, it’s really a beautiful piece of this community. It brings a lot of jobs, of course. It’s created tons of jobs.

Wonderful people come to this area, people from all different backgrounds, all different upbringings, all different countries and states. I think it’s definitely made a huge impact on the area. And I think it’s been wonderful controlled growth, too.

JOHNSON

I was smart enough to figure out with very smart consultants from the Urban Land Institute that the world changed after 9/11 and that people would do things with their family 10 years earlier instead of waiting until their retirement age and doing it without their kids.

We switched and completely became focused on a generational family community, which now other people are following in other parts of the United States. But what’s really happened is all of a sudden we have 30- and 40-years-olds move in with kids that live here full time, from New York, from Texas.

We have people from 24 states. I never dreamed we would get so many people from Texas coming to spend their summers in Northern Michigan. We figured we’d get a lot from Florida. But we didn’t figure California, Texas, and Arizona.

We knew that there was a long history from the greater Midwest. We’ve also stuck with it and managed the brand through economic crisis and everything else without foreclosures and economic impact.

BYRA

Sometimes I have to remind myself and people in the area have to remind themselves of what it was and what it is. It’s come a long way. Like I said, I drive in here every day and I forget what it used to look like some days, until you go back and start looking at pictures or you start reminiscing.

It’s definitely made a complete positive impact, not only to the region, but I would say to the state. I think it should be an apple in everyone’s eye.

Interviews have been condensed and edited for clarity.