RELATED STORIES:

• Boat Haven tenants upset with higher leases
• Port labor costs questioned
• Jetty repair shouldn’t impact Boat Fest next year

Port Townsend Boat Haven tenants who work in the marine trades voiced their displeasure at a tenfold increase in lease rates, from 6 cents to 64 cents per square foot at an emotional two-hour meeting Oct. 11.

Port of Port Townsend executive director Sam Gibboney told more than 120 people attending the meeting that the lease increases are necessary to avoid catastrophic failure of port infrastructure and the Boat Haven from shutting down.

Several people in the marine trades, including members of the Port Townsend Marine Trades Association (PTMTA), also said the port had not communicated clearly to the trades about the issue.

THE PROBLEM: COST

The problem, port administrators say, is that the port’s aging assets would cost roughly $60 million to replace over the next 20 years, and that port revenue is not sufficient to pay for it all.

Greg Englin, director of operations and business development for the port, said the port’s aging assets are probably worth less than $45 million, but that it would cost about $60 million to replace them.

The port has $37 million of capital demands in the next 10 years, Englin said, including $20 million for capital and $17 million for yard operating costs.

“These are not wish list projects,” Gibboney said.

“This infrastructure is getting toward the end of its serviceable life, and we will need to replace it. They are mission critical,” Gibboney said. She cited the Boat Haven’s aging commercial basin breakwater as an example. The port applied a “band-aid” to the commercial breakwater to extend its service life this year, but were it to fail, it would be “catastrophic,” Gibboney said.

As the Boat Haven has 11 acres of usable space, the $37 million works out to a lease rate of 64 cents per square foot, Gibboney said.

“And that is the price that we need for every square foot of usable property in the Boat Haven to just cover our operating costs and capital costs over the next 10 years,” Gibboney said.

FEWER DOLLARS

Grants could help fund some of that, but “I will tell you that in this environment … the amount of federal and state dollars available for infrastructure projects such as building a breakwater, ballasting the yard, has diminished dramatically over the last 40 years, but particularly over the last 10 years,” Gibboney said.

“So the funding sources that built the infrastructure that we are using are simply not there or they’re not there in the amounts that we’ve relied on in the past decades,” Gibboney said.

Gibboney said she realized higher lease rates would create tension, but said it was necessary for the viability of the port.

“I want to be clear here that I really do hear what’s being said and appreciate that we all want more business,” Gibboney said.

“And I also need to be very clear about the position that this organization is in, and that we are trying to figure out how we are going to pay for a breakwater and to pay for a stormwater system and to pay for a jetty fix out in the commercial basin, all of which could shut this organization down.”

Gibboney said the port has cut costs to the tune of about $1 million.

“I want to be very clear about the impact that capital projects are having on this organization. We’re trying to manage those and to keep the lights on and the businesses operating at the same time,” Gibboney said.

The port has more work to do, she said, and more focus would be shifted to marketing, but it couldn’t all be done at the same time.

“We barely have the bonding capacity to do the Point Hudson jetty. If our bids come in high, we may not be able to even borrow the money to build it. And if we build it, we have no revenues to go toward paying that bond back. We have been having to focus the attention of the organization on some really critical issues,” she said.

Gibboney said the port wants to see the yard full and said part of the reason why it is not full now is because boats had to be moved for the stormwater construction work.

“We have a very limited staff to be able to address projects that are huge for an organization our size,” Gibboney said.

‘TRAIN WRECK’

Port Commissioner Brad Clinefelter said he first ran for port commissioner because he thought the previous port administration’s actions constituted “a train wreck.”

And now, “I know a lot of you folks right now are looking at us, [thinking] ‘Oh God, it’s a train wreck.’ We are turning things around, but it’s taking time,” Clinefelter said.

He said the port’s goal is to preserve its maritime heritage and keep its facilities economically sustainable.

“That’s a pretty delicate balancing act, and that’s what we’re working our best to achieve,” Clinefelter said.

Clinefelter said the dollar amounts the port is working with are only preliminary working figures that would likely be revised when better information is available.

“The numbers they’ve come up with here … is just the first shot at it,” Clinefelter said.

“There’s so much needed and so little capital available to deal with even the largest ticket items here. They’re basically scrambling to try and put a program together, and that’s what this represents. This does not represent cramming it down everybody’s throat here. I guarantee you that. These guys aren’t here to run anybody out of business. That I am absolutely sure of. They just need an opportunity to do their jobs, and if there’s an issue or a problem with any kind of lease negotiation, their doors are open,” Clinefelter said.

“These huge numbers that they’re throwing out – $30 million, $40 million, pie-in-the-sky kind of numbers – in this 10-year figure is just the first shot at it, because a lot of these items in the 10-year figure, they’re going to move out to the 20-year [or] the 30-year, because a lot of these capital structures and pieces of machinery and whatnot that keep this port running aren’t necessarily going to all die in 10 years, OK? They’re going to be still going 20 years from now,” Clinefelter said.

Commissioner Stephen Tucker said tenants need to understand where the port stands financially. When the 300-ton Travelift mobile boat hoist was first purchased, Tucker said, lease rates were set low, at about 5 or 6 cents per square foot, to attract haulout customers.

The low promotional rates worked, he said, but “what didn’t stay the same were the costs that it takes to run the port. Just a spare tire for that 300-ton Travelift is, what, $65,000? It’s amazing. The Travelift is, what, 20 years old now and it’s not going to last forever. And so I think that the whole exercise that we’ve gone through now is to try to put these figures up so you can understand that we’re kind of an order-of-magnitude low [in lease rates].

“We were at 5, 6, 7 cents. Carrying costs, in reality, are like 10 times that. Here’s the point, though: The point is not that we’re trying to get it all at once. The problem is that we need it all at once. These are front-loaded issues. We need this money sooner than later and we can’t get it sooner than later … everyone to a person agrees that the rates need to go up. I haven’t had a single person argue with that,” Tucker said.

Tucker said details of individual leases could be negotiated, “but realize that the days of the introductory rate are over.”

Tucker said details on leases could be negotiated in ways that do not result in the port receiving less revenue.

“If we don’t get more revenue, there’s not going to be a boatyard to work in, so this will all be for nothing,” Tucker said.

To improve communication, Commissioner Peter Hanke proposed that five PTMTA representatives should meet with the port commission on a monthly basis.

Gibboney said port funding would not come just from tenants, but is looking to increase revenue across all lines of business. The Boat Haven needs more tenants and a higher density of tenants. Another possible source of income could be the industrial development district, which she said the commission is likely to consider next year.