November 12, 2004
Port Acquisition of Georgia Pacific Property
Commonly Asked Questions
Has the Port already decided to acquire the Georgia Pacific property?
The Port just concluded its due-diligence period on November 2nd.
During that time, the Port inspected the property, reviewed new and
existing data and assessed the economic feasibility of acquiring the
property. The final decision to move forward with the acquisition will
be made on or about December 14th. Between now and then the
Port is seeking community input in public meetings on Nov. 16 and Dec.
3. The Port also must secure an essential interlocal agreement with the
City of Bellingham and will need to conclude discussions with GP on the final terms and conditions of the transaction.
Why does the Port need an agreement with the City?
Redevelopment
specialists who studied this site said it would take a full community
effort to transform a large heavy industrial site into a thriving
mixed-use waterfront. Other communities in the nation who have been
successful with projects like this have done so through innovative
development approaches. We need to clean the property to a
higher-than-industrial standard, provide infrastructure (roads, water
and sewer) and parks and, most importantly create predictability for
developers. This means determining zoning, permitting and master
planning ahead of time so developers know what to expect.
The
Port will undertake site clean up costs and the City is being asked to
commit to covering the infrastructure and parks costs. The Interlocal
Agreement defines those commitments by the Port and the City as well as
commits the two agencies to jointly fund a site master planning
process, an effort to seek grants and a marketing plan for the site.
The
Port will recoup its costs through future property sales and the City
will recoup its costs through future new tax revenue generated from the
site.
What happens if the Port does not complete the acquisition?
Georgia
Pacific will likely pursue a clean up of the upland property to
industrial standards and seek private purchasers who would consider
acquiring it as industrially zoned property.
The Port would
still have to consider whether or not it would move forward with its
pending condemnation action on the treatment lagoon to convert it to a
marina.
What would the Port do with the property?
The
Port’s intent would be to work with the City and community to create a
development plan for mixed use, which would include residential,
commercial, and office uses. The Port would give property to the City
for parks and open space, public access to the water and rights of ways
for roads and utilities. The Port would do an environmental clean up
that exceeds industrial standards making the property safe for these
types of uses. The Port would sell the developable property to the
private sector and institutional users such as Western Washington University.
How would the development plan be undertaken?
The
Port and City would jointly undertake a public process in 2005 to
create this development plan through a series of community-wide forums.
The basic concept would be consistent with the findings and
recommendations of the Waterfront Futures Group. That process would
also require changes to local land use plans, such as zoning, to allow
these new uses. After the plan is developed, infrastructure and public
access would be constructed anticipating early development by private
or institutional buyers.
How will the clean up be done?
The
clean up by the Port will include early-action items to remove or treat
upland “hot spots,” control and protect groundwater, remove the most
contaminated marine sediments and install further caps on
non-threatening marine contaminants at a depth where they will not be
disturbed. Clean up will be phased with the development plan and
undertaken after permits are secured. All of those permits and clean up
approaches will involve additional agency and community review.
How long will the clean up take?
Clean
up will start as soon as engineering design plans are completed and
permits obtained. It will be phased and initial clean up will likely
start in 1 to 3 years. Some property that does not need clean up will
be available to develop earlier such as the historic agriculture
building on Roeder Avenue.
How much will the clean up cost?
The
Port consultants and staff have reviewed over 100 technical documents
and reviewed over 1 million pages of reports and data. Then the Port
approached independent insurance companies and asked them to review the
reports, confirm our estimate of clean up costs, and provide us with a
quote to insure that those costs were dependable. They confirmed that
the clean up for the main GP campus to a higher standard than
industrial is $13 million. The clean up of the marine sediments in the
waterways is estimated to be $16.5 million. There are other liable
parties for the waterway and the Port will seek contributions from them
as well towards that clean up cost.
The Port’s share under
this agreement for the clean up of the two existing municipal
waterfront landfills (Cornwall and Roeder) and two county woodwaste
landfills previously operated by Georgia Pacific (Airport and Hill Top)
is estimated to be $5.8 million. Additionally the City of Bellingham
and other liable parties appear to have an obligation of approximately
$6.3 million for the municipal landfills.
In
the early consideration of this project, the county landfills were not
included. As part of our continuing discussions with Georgia Pacific
they have been included so there will result a comprehensive clean up
of all the liabilities. In exchange, the Port has insisted that Georgia
Pacific pay an insurance premium that protects the community from
potential clean up cost overruns.
The total clean up (in
2004 dollars) for these properties and the Whatcom Waterway is $41.5
million, if you include the City’s and other liable parties estimated
$6.3 million share for the municipal landfills. It is $35.2 million,
without including the City’s portion.
What protection does the Environmental Insurance give us and what does it cost?
The
Port is negotiating an insurance policy that will insure the cost of
the clean up of these properties at $41.5 million. It will provide
insurance coverage above that amount to a maximum of $80 million. The
insurance company is basing its premium to buy the coverage on a cost
that will not exceed $41.5 million. Georgia Pacific will be paying the
basic $4 million premium for this insurance. There will be additional
fees to secure the policy and those are still being negotiated with the
insurance company.
How will the Port pay for the clean up?
The
Port will use the proceeds from the sale of the property over 20 years
along with 50% matching grants from the State to fund the clean up. The
State is forecasting an availability of funds that can only be used for
clean up opportunities such as this.
The Port also is
seeking Federal grants. It will likely require an initial borrowing to
undertake the initial clean up and then the Port will be able to retire
the debt with property sales over several years.
The
property, when rezoned, has been appraised at $30.7 million, exclusive
of the marina site, and after subtracting acreage for roads, parks and
public access. Of course its ultimate value will be determined as it
sells over the next two decades. The Port Commission may consider using
its existing authorized tax levy to back stop the loan and pay for
debt payments until sales revenues can take over. In that case, the
levy rate may go up from the current $.38 per $1,000 of assessed value
to $.45 per $1,000, which is an increase of about $7 per year for every
$100,000 of assessed value on a home.
Fortunately, the Port
Commission decided nearly a decade ago to reduce its reliance on
property taxes by requiring that most of the Port’s operations be self
sufficient through user fees and rents. Years ago, the Commission
decided to reserve the additional allowed levy for projects of
significant community merit.
What about all of the existing buildings?
The
Port has analyzed 100 buildings and structures on the site and believes
that 19 of them have re-adaptive use potential because of their
historical character or adaptive reuse. This includes many of the tall
brick buildings on the site. The Port reviewed this with a team of
architects, structural engineers and historical building preservation
experts to understand the costs and benefits. With the right federal
historic tax credits in place, there may be an opportunity for an
historic mill village concept.
The terms of the original
agreement, required the Port to undertake all of the demolition at its
own cost including demolishing the tissue mill plant when it ceased to
operate. Under new, renegotiated terms Georgia Pacific will be
responsible for all demolition of existing buildings and structures
except for those 19 that the Port wants to further consider for
re-adaptive use. The estimate cost savings to the Port for not having
to do the demolition is approximately $6.5 million.
What would the redeveloped property be worth to the community in the future?
When
redeveloped, the main GP campus site alone will have an assessed value
of $750,000,000 to $1 billion, which would generate $9 million to $12
million each year in new local property taxes to our City, County,
State and schools. That doesn’t include all of the additional revenues
from sales tax and utility tax, nor the municipal revenues associated
with the development of the rest of the property and marina.
The
Port would acquire the property with an intent to sell it in more
manageably sized parcels, which means a lot of indirect value will be
accrued to local businesses such as contractors, suppliers, architects,
engineers, banks and real estate professionals. The Port does not
intend to sell the new Downtown Marina.
In addition to
economic value, the site can conceivably absorb future housing and
relieving stress on our local neighborhoods and the urban fringe.
And, most significantly, there is great community value in creating new opportunities for people to access the waterfront.
What about the Lagoon conversion to a Marina?
The
Port plans to convert the existing treatment lagoon to a “state of the
art, green” marina and to restore that part of our Bay to salt water
tidal influence, creating 28 acres of new fish habitat. The treatment
lagoon contains some of the worst contamination on the waterfront. The
plan is to haul it all upland, by barge and rail, to an existing
out-of-county landfill permitted to receive hazardous material. The
estimated cost of cleaning up the lagoon is $23.5 million.
The
new Downtown Marina will accommodate 350 to 450 boats. The estimated
cost to build the marina facilities including floats, docks, gatehouse,
parking, comfort facilities and boater amenities is $16 million to $18
million.
The Port will pursue State funding for the lagoon
clean up and creation of new salt-water habitat in and around the
marina. The Port’s current moorage rate fee structure will be able to
pay for the improvements and the clean up costs not covered by grants.
Even with those expenses, the forecast shows we will still keep our
moorage rates below the average rate in Puget
Sound. This is possible because we can afford to pay non-grant-funded
cleanup costs since we are not paying for the construction of a marine
breakwater. The Port has built and rebuilt its other marina facilities
in Squalicum and Blaine using this fee-based approach and has been
successful in keeping moorage rates in that lower half of rates around
the Sound.
What about visitor moorage?
The
Port’s preliminary plans call for about 1,200 feet of visitor moorage
to be built at the head of the Whatcom Waterway as close to Old Town
and Downtown as possible. This will require building additional
bulkheads and building visitor docks in the Whatcom Waterway, which
will cost approximately $10.4 million. We will be seeking grants
through our national Portfields certification to help fund that cost.
In addition, there will substantial visitor moorage space in the new
marina, which will be paid for through guest moorage fees.
What about the current Mill operation?
The
Port and GP have agreed to general terms that would allow the mill
operation to continue as long as it is economically feasible for GP to
continue to make its products in Bellingham.
The initial revenue to the Port will be $350,000 per year. The detailed
terms and conditions of this lease are still being discussed.
In the end, what will GP be providing to the community?
Since
the initial property proposal was announced in June, GP has agreed to
provide additional work and funding for this transaction. In addition
to transferring ownership of its Whatcom County land to the Port, GP
also agreed to: undertake the demolition of all buildings identified by
the Port as needing removal (only 19 structures will remain), purchase
an environmental insurance product that will protect the community and
lease back of the facilities it needs to keep the mill operational as
long as possible.
What liabilities is the Port incurring?
The
Port is incurring the cost to clean up the property. The Port’s risk
will be capped through the insurance. The Port and GP are still working
out the details of this issue in a Purchase and Sale Agreement. Those
details will be forthcoming as soon as they are completed.
How can I find out more?
Call the Port at 360-676-2500 or visit our website at www.portofbellingham.com
You can email the Port about this project at:
