The latest highly controversial proposal for the redevelopment of the former Philadelphia State Hospital officially died on May 22 when the city's industrial development agency opted out of an agreement to purchase the 153-acre property from the state.

After June 30, the state's Department of Public Welfare will re-assume security and maintenance responsibilities for the former psychiatric institution, commonly known as Byberry, on the west side of Roosevelt Boulevard at Southampton Road.

Under the terms of the agreement, signed in December 1999, the Philadelphia Industrial Development Corporation, a quasi-city agency, had held development rights and been responsible for the upkeep of the site since March 2000. By June 30, PIDC will have spent about $400,000 on security and maintenance.

Noreen Schanfelter, a PIDC spokeswoman, explained that the agency's leadership, including president Peter Longstreth, recognized that the current deal was going nowhere.

One prominent local community group, the Somerton Civic Association, repeatedly expressed its opposition to the project, which would have created several office buildings and 6,200 parking spaces.

Also, City Councilman Brian O'Neill (R-10th dist.) refused to introduce the necessary legislation for the project in light of community opposition.

"Probably the overriding issue was the complexity of the deal," Schanfelter said. "We've always had a good relationship with that community. We had not had a meeting of the minds with the community and elected officials (in Somerton). We didn't want to imperil our relationship with the community."

THEY'RE STILL INTERESTED

PIDC is hoping to get another shot at developing the site under a different framework and with community support.

"If the state would make the land available to us in the future, we'd be interested," Schanfelter said. "We still think the site is a great site."

O'Neill applauded the move by PIDC to withdrawal from the agreement of sale, although it came later than it should have, he said.

"We're happy they've done it. We asked them to do it more than a year ago," he said. "That deal was never going anywhere. It's a good first step to have a fresh process. Now I think the state can take a fresh look at it."

According to a spokeswoman for the state's Department of General Services, which negotiated the agreement, the ground is still subject to state legislation which created the bidding process that resulted in the agreement of sale.

"We're going to have to assess the situation and figure out what we can do," said Samantha Elliott, a DGS spokeswoman. "With the legislation, we have to have sealed bidding, an auction or an RFP (request for proposals)."

The state will continue to seek to sell the ground, as it has with its so-called "surplus property."

"The property will remain surplus," Elliott said.

PIDC wasn't the only developer to lose rights to the Byberry property. Under the agreement, PIDC was to sell 40 acres to U.S. One Associates -- a partnership including prominent Philadelphia area developer Mark Mendelson -- for $1, as well as 22 acres to Community Sports Partners, headed by former Republican mayoral candidate Sam Katz, also for $1.

Shortly after the agreement surfaced publicly in December 1999, Katz and representatives from U.S. One Associates defended the land giveaway, explaining that it would cost more to rectify environmental problems with the site than the open ground would be worth on the free market.

BUCKING THE TREND

There are more than 30 dilapidated, asbestos-filled, former hospital buildings on the property, which has been vacant since the last patients were released or transferred on June 21, 1990, as ordered by then-Gov. Robert P. Casey following years of allegations of mistreatment of patients at the facility.

Mary Jane Hazell, president of the Somerton Civic Association, was a leading critic of the land for $1 deals.

"I don't like them giving any ground away," she said, "even though they might be bringing money into the area. I do believe they should get low-interest loans, but nobody should get land for a dollar."

Ironically, days after PIDC notified the state about its withdrawal from the agreement of sale, City Controller Jonathan Saidel dropped a bombshell on the city's development agency with the release of his findings during an audit of the city's Department of Commerce.

The commerce department, under director Jim Cuorato, does not officially oversee PIDC, but it approves all city and state funding filtered to the agency.

Saidel claimed that during the audit period, fiscal 1998 and 1999, the commerce department acted with "a startling lack of proper procedures to protect taxpayers' interests in the methods used by that department and the Philadelphia Industrial Development Corporation in transacting real estate sales for the city."

AUDIT IS BLISTERING

Saidel sampled nine real estate transactions during the two-year period ending June 30, 1999.

He found that the transactions "were executed without proper documentation, that laws to safeguard the public's money were being ignored, that fees and commissions (collected by PIDC from the commerce department) were not justified, and that money due the city from these transactions was not being remitted to the city on a timely basis."

Saidel is not permitted to directly audit PIDC, which is controlled by a 15-member board of representatives from the administration of Mayor John Street and from the private business sector.

But based on his audit of city funds fed to the agency through the commerce department, the controller concluded that "in the last few years, (PIDC) has not only been an arm of the Commerce Department, but it has become the Commerce Department itself."

"In the last few years, PIDC has been used to circumvent the checks and balances" in place with the commerce department.

Saidel accused the city of giving preferential treatment to Richard Rueda, former chairman of the Philadelphia Planning Commission and PIDC ex-officio board member, when it purchased his trucking facility, Trans Freight Systems Inc., in Southwest Philadelphia for $7.5 million, two years after selling him the same ground for $1.8 million.

During the two years, Rueda obtained $3.3 million in low-interest loans from the city and state to make improvements to the property.

GETTING SOME BUSINESS DONE

Cuorato, a Northeast resident who took over the commerce department after the period subjected to the audit, defended the deal, saying the city sought to retain 100 jobs provided by the trucking firm when it offered Rueda the ground in the first place.

Later, the city repurchased the facility because of a desperate need for a viable location to house equipment from the Department of Streets' sanitation division.

"With all due respect to the city controller, we did not agree with the conclusions of that audit," Cuorato said.

Cuorato added that his office will review the practices and procedures of PIDC. Specifically, he will address the accusation that the agency did not obtain the proper up-to-date appraisals of property it bought and sold.

"I'm going to undertake a complete review of the way the land is bought and sold at PIDC," Cuorato said. "We'll make sure the appropriate checks and balances are in place. I will have the final sign-off on that."

Although alarmed by the audit report, O'Neill and Hazell say they maintain confidence in PIDC with respect to Byberry.

"It certainly raises some questions," the councilman said. "It puts the city and PIDC in a very bad light in terms of that property in Southwest Philadelphia. The entire commerce department was sort of being run out of PIDC in the Rendell administration. I think now they've gone back to a more traditional approach."

Hazell points to the Byberry West industrial park at Roosevelt Boulevard and Hornig Road as a local success story.

"My feelings with PIDC have been very positive, extremely positive," the civic leader said. "Anything that went up in Byberry West went up with the community's blessing."