It was just after 3 in the morning on June 20, 2007, when a mammoth orange glow lit up several blocks of rickety Kensington rowhouses. The first residents to realize that the abandoned factory at H Street and Westmoreland was ablaze scurried in nightclothes down their steps, thumping their fists against plaster walls, bellowing, "Fire! Fire!" to stir their neighbors.

The flames in the city-owned building leaped so high and wide that Ivette Olivera woke up from the sweltering heat that turned her bedroom into an oven.

Glass panes cracked, then shattered. Loud explosions shook the asphalt when cars and vans erupted into splintered shards of fiery metal.

"Cars blew up like someone had put a grenade in them. It was like the movies," Olivera said.

Amazingly, no one died in the 7-alarm blaze, but the fire in the long-vacant horse blanket factory spread to 19 homes, destroying seven of them, along with nine cars.

Neighbors remember one of the nearly 200 firefighters, Lt. Robert P. Neary, because, soot-covered and defeated, he shook their hands after more than four hours of dousing flames, and apologized for being unable to save their homes.

Almost five years later, on April 9, Neary battled yet another blaze in an empty, crumbling Kensington factory. This time, one of the old walls collapsed onto the roof of an adjacent store, burying four firefighters under tons of debris. Two were rescued. But the last two pulled from the rubble, Neary, who at 60 was set to retire from the force, and firefighter Daniel Sweeney, the young son of a retired fire captain, were dead.

There are an estimated 2,800 abandoned, crumbling manufacturing plants that loom over Philadelphia's neighborhoods. Those who live under the factories' dark shadows fear that the next fire could snatch more lives and turn more homes to ash.

Some hulking warehouses are owned by absentee, elusive landlords who skip out on their property tax bills and ignore city code violations while their properties rot like corpses.

But on H Street, the villain had a familiar face - the city of Philadelphia, which owns at least 300 more empty factories, according to data compiled by Econsult.

The city's ineptitude and malfeasance in dealing with the old horse blanket factory stretched for years -- before, during and after the H Street blaze. Neighbors complained to the city about the nuisance building to no avail. Violations piled up. Nothing was done. The blaze took down a city block, yet the city's Department of Licenses & Inspections told the homeowners that they were responsible to demolish their burned-out shells .

"Criminal is the word that comes to mind, but it's the city," said Jamie Moffett, a documentary filmmaker who has a studio near the fire site.

The Philadelphia Authority for Industrial Development (PAID), a city agency that issues tax-exempt debt for industrial and commercial development, had been listed as the owner of the H Street property since 1973.

Squatters and drug addicts used the factory's hidden unlit corners to smoke crack, shoot up heroin and nod off. Records show that L&I made attempts to secure the sprawling three-story building, but neighbors said it was not effectively sealed.

Between May 2006 and March 6, 2007, three months before the blaze, L&I cited the building three times for being a fire hazard, yet the agency took no court action against PAID.

In separate interviews with the Daily News, at least eight neighbors said that smaller fires routinely broke out in the abandoned factory before the inferno and that the fire department extinguished them. John MacDonald, president of Impact Services Corp., - which had been working with the city to convert the factory into housing for the homeless and elderly - told the Daily News after the blaze that the building had been on fire three or four months earlier and had openings for people to creep inside.

Yet, other than on that June night in 2007, fire department officials said they have no record of being dispatched to the site dating back to 1998.

"Well, we have record of it in our memories," said Shane Claiborne, 36, a longtime neighborhood activist and a founder of The Simple Way, a Christian community services group, whose home was destroyed in the blaze. "There is an amnesia in the city to forget things they don't want to remember in places they think they can ignore."

Poisoned garden?

After the fire, neighbors begged the city to allow them to turn the land, now owned by Public Property, into a community garden and park. As they waited almost five years for an answer, people came from all over to use the empty site for illegal dumping and an open-air drug bazaar.

Earlier this month, the Pennsylvania Horticultural Society told the Daily News that it was set to plant grass and trees at the site and install a wooden fence around the perimeter.

A Horticultural Society official said the agency had long been aware of the lot, but only recently was able to find money to make improvements.

"Of course," said City Councilman Bill Green, who earlier this year introduced legislation that would create a board to help communities reclaim vacant, city-owned lots. "You guys started doing a story, and the administration decided to apply some resources to it."

Though residents are relieved that the lot is finally getting some attention from the city, they worry that the soil is contaminated with lead and other hazards.

No one knows what kinds of chemicals seeped into the ground when the factory burned -- or, for that matter, during the early and mid 20th-Century, when environmental regulations were practically non-existent.

The state Department of Environmental Protection recommends that former factory sites be tested for contaminants before they're redeveloped, according to EPA spokeswoman Lynda Rebarchak. The H street lot has not been tested for pollutants, according to Mark McDonald, Mayor Nutter's spokesman.

"The way the city handled this is shameful," said Claiborne of the Simple Way. "If the fire had been downtown, the mayor, the deputy mayor would have been all over it. But because it's here, it's like it didn't happen. When it's a liability, no one wants to own it. When it's an asset, everyone wants to own it.

"If this dirt is contaminated, we expect the city to take responsibility for toxic land that's the result of their negligence."

Blankets to crackheads

During the 1900s, the factory made everything from slipcovers to handbags. PAID became the property owner in 1973 when Ayres-Philadelphia manufactured horse blankets there.

"We were listed as the owner but we had no control over it," said John Grady, now president of the Philadelphia Industrial Development Corporation, which manages PAID.

Ayres operated the building, acquired a loan and PAID "became the conduit to get tax-exempt financing," Grady said. "But Ayres went out of business [in the 1980s] and stopped paying the loan."

The bank sold the loan to a group headed by George Joly, who was listed in the 1970s as vice president of Ayres. Joly was tax delinquent, but PAID officials couldn't find him, Grady said.

Over the years, Joly leased the factory to various businesses, but since about 2000, it sat vacant. The building was first put up for sheriff's sale in May 2006, but it was postponed five times, though it's unclear why.

"The building was dangerous. Crackheads were rigging up electrical wiring. They were using candles. We could see lights flickering in there," said Olivera, who lived a half block away. "We knew it was a disaster waiting to happen. People even stopped using the sidewalk because things were falling off the building."

Squatters used kerosene heaters. Fires broke out so often that neighbors called the last one, "The Big One," said Elba Iris Santiago, who lost her home in the blaze.

Santiago, Olivera and several neighbors called or went down to former City Councilman Rick Mariano's office numerous times to complain.

"I'd say Elba came down or called at least every two or three months for several years," said Carmen Sousa, who used to be Mariano's constituent services representative and referred the complaints to the appropriate agencies. "I myself knew there were four or five fires there. I saw the homeless and drug addicts go in and out all the time."

Some L&I violations sent to PAID warned that it had five days to comply, yet no action was taken, just subsequent inspections and violations.

After the blaze, then-L&I Commissioner Robert Solvibile said L&I workers had visited the site at least twice in the previous 13 months to "clean and seal" it. The most recent complaint had been lodged by City Councilman Dan Savage's office less than a month earlier. L&I workers visited the site and referred it to the city's Law Department to arrange a court hearing.

In the meantime, the property was rescheduled for sheriff's sale for the sixth time - June 20, 2007.

Like a bomb

Elba Santiago woke up that morning around 3 a.m. to use the bathroom. "I saw a big orange glow through my window. I woke up my husband. 'The factory's on fire. The factory's on fire,' I yelled. I was hysterical."

Rosemary Acevedo, 48, said her husband burned his fingers when he opened the door of his truck to drive it to safety. Flames leapt toward their houses.

"It was like a bomb had hit the area. I could feel the heat from the fire as I ran out of my house," said Donna Galson, who had lived on H Street for 19 years, raising her three sons in the shadow of the hulking, vacant factory.

The fire was ruled arson, caused by an open flame. Firefighters rescued a man from the second floor of the factory and treated him at the scene. He scurried away before he could be interviewed. No arrests were made.

One firefighter and one resident were injured. Several neighbors distinctly remembered firefighter Neary.

"He was a real nice guy. He was the one who saved our lives," said Pedro Mejias, who lost his home in the fire. "He loved that job. I'll never forget him."

Neighbors lost all their belongings -- photos, furniture, keepsakes. "Pretty much everything was gone," Claiborne said. "It was a total loss."

To add to the pain and insult, L&I held neighbors responsible. The day after the fire, L&I sent violation notices to owners of the fire-charred homes ordering them to "IMMEDIATELY" demolish them. If they failed to comply, the city would tear down the homes and they "will be billed for all costs incurred, including an administrative fee," the notice read.

L&I demolished the homes and sent each of the homeowners a $10,000 bill. No one paid. "It didn't have to happen this way. We were victims, yet wet we were given fines for demolition," Claiborne said. "It was devastating. "

Galson, 51, said her house survived the fire, but the property was uninhabitable, and looters stole what remained. She ultimately sold her house for $26,000 to the Simple Way, and received about $18,000 from her insurance company.

Galson said she used the money to buy a house in Port Richmond. "I didn't want to be near any factories or abandoned warehouses," she said. "Even now, every time I hear a fire engine, I get panicky."

Acevedo also made sure her next home in Northeast Philly was not near a factory. "Every time I hear fire trucks, I think my house is on fire again."

Claiborne raised money through the Simple Way and built a garden where the houses had once stood. But across the street where the factory stood, dirt on a lot bigger than a football field blew all over the neighborhood. Drug dealers looking for a short-cut, drove across. Addicts discarded their needles. Others dumped paint, mattresses and trash.

Claiborne and other neighbors paid $5,000 out of pocket to have the garbage hauled away. They have since picked up the trash themselves. To stop cars from whizzing through, they placed discarded tires around the perimeter and started to paint them in bright pastels.

"The city gives us tickets if there's trash outside our door, but they leave us with a lot they own filled with trash," said Miguel Diaz, who has lived in the neighborhood for 20 years.

In February, L&I sent a violation notice to the Department of Public Property, deeming the lot "unsafe" because weeds, grass and vines throughout the lot posed a fire threat.

Under L&I's three-strikes system, the agency is supposed to follow up a month after the first violation to see if property owners have taken action. If they haven't, another violation is issued, and another inspection follows 30 days later. Ultimately, the property owner can be hauled to court for ignoring violations.

But L&I did no follow up.

"We're not taking another arm of the government to court," said L&I spokeswoman Maura Kennedy. "We've made them aware of the issues on this property so they can take action to remedy it."

Councilman Green said inaction makes no sense. "If we ignore our own violations, how can we expect our citizens to respect the system?" he asked.

Dirt under the rug

On a recent day, Miguel Diaz scooped up a handful of dirt from the lot. "See. It has crystals in it. We don't know what it is. It could be making us sick," he said.

Experts say if lead paint was present in the factory when it burned, it could be in the ground. So, too, could chemicals and dyes that were used on handbags and horse blankets. Certain metals from old factories could easily attach themselves to plant life.

Bob Grossman, senior director of the Pennsylvania Horticultural Society's Philadelphia Green project -- which is in charge of the improvements being made to the lot -- said the agency is spreading top soil over the site and planting grass and trees.

"With the new soil," he said, "it should be OK. The [old soil] won't be blowing around."

Philadelphia Green had been aware of the site for quite some time, Grossman said, but couldn't afford the $15,000 or so that was needed to make improvements to the site.

That changed recently, he said, when Philadelphia Green noticed the lot "getting so much attention" from neighbors and outside agencies. Philadelphia Green was able to "make some adjustments" in its contract to find money to work on the lot, Grossman said.

Last week, bulldozers and piles of dirt sat on the lot.

"That's the fundamental policy of city government when it comes to vacant land," said Councilman Green. "When the wheel gets squeaky, then we'll address it."

As Claiborne puts it: "It's like sweeping dirt under the rug. It's better than what we had for five years, but this is not the end of the story."

It's Our Money staff writer Juliana Reyes contributed to this report.

Contact Barbara Laker at 215-854-5933 or or follow on Twitter @barbaralaker.