Council reverses move to sell SMIC parcel to Harmon

 

Tom Tougas and Councilman Dale Butts speak briefly outside City Hall after the vote. Heidi Zemach

Tom Tougas and Councilman Dale Butts speak briefly outside City Hall after the vote. Heidi Zemach

In a rare turnaround, the Seward City Council this week reversed a unanimous decision, made at the July 14th meeting, to direct administration to begin negotiating the sale of a city parcel leased by Larry Harmon, at Seward Marine Industrial Center (SMIC) to Harmon, so he could build four boat-storage warehouses there in partnership with another influential local businessman, Tom Tougas. The decision came as a blow to some in local business community who had hoped to begin buying parcels and develop at SMIC before more Outside businesses arrive.

Local entrepreneurs, including Larry Harmon, owner of Harmon Construction, and Tom Tougas, who owns Major Marine Tours and the Hertz Rentals franchise, say the sale would have jump-started SMIC’s economic development, but argue that it’s not worth the cost to private businesses to develop a significant property there unless they own the land.

SMIC has seen few leases, and little business development over the past 25 years, although it was, in fact, the city’s intention. The city has not installed infrastructure such as paving, water, sewer or electric to its leased properties, so their uses are also limited, and many parcels are overgrown with alders.

The council reversed its decision to move forward with negotiating a sale at the regular council meeting Tuesday night, July 14th. Councilwoman Marianna Keil, who had voted on the prevailing side during that meeting filed for Reconsideration on July 15th.

“Since uplands development at SMIC may need a revenue bond, leasing property may be the only mechanism to fund repayment,” she wrote to the clerk as her reason for reconsidering. Tuesday, she said she was actually wanting more information.

Council members who had earlier voted favor of the sale, told administration they were grateful to having just evening received a laydown from the administration, providing additional information about what the prospective sale might mean for city’s coffers. Their direction to sell calls into question the concept outlined in the Municipal Land Use Plan, enacted in 1996, through the Planning and Zoning Commission, which states that the city properties should be retained to be leased out, said City Manager Jim Hunt and his assistant Ron Long. Selling the vacant land, located along Jellison Avenue, to Harmon would set a precedent might could bring about legal challenges from other businesses, some of whom have recently expressed interest, since the previous council meeting, Hunt said.

In the one and a half page and a half laydown, a list of bullet points argued that selling the property would mean an overall reduction of lease and tax revenues coming into the city general fund. It said it would be prudent to request sealed bids for the sale of properties to encourage competition, rather than to take the first offer that comes along.

“It may be that other operators (CIRI? Vigor? Shell?) might be interested in purchasing the land if they were aware that the City was now selling off the SMIC properties,” it further states.

Other points were that the city would lose control over the land’s future use, and the chance to sell a single, contiguous land owner to operate a major industry or business may be compromised if parcels were sold piecemeal. The laydown also suggested that a warehouse business like Harmon’s might preferably be located in a less central SMIC area, along its borders. Properties leased for more than 30 years are able to obtain bank financing at rates comparable to privately-owned properties, it added. And the lease option provides a perpetual income stream to generations of Seward residents, rather than a one-time sale. Administration also suggested that the now low appraised value of the parcels might increase along with SMIC improvement and development.

site plan for SMIC, Seward Ship's Drydock in blue at lower right

File photo: site plan for SMIC, Seward Ship’s Drydock in blue at lower right



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Due to a new protective breakwater soon to be constructed with more than $21 million in state money, along with projects to dredge, and expand the boat harbor, interest from Outside business to create marine-related support businesses there has greatly increased. They realize the growing demand for an Alaska ice-free port to access global transportation through the Arctic Ocean, and proposed Shell oil development. They have seen years of steady lobbying efforts by city officials, their lobbyists and city representatives, and Seward Ship’s Drydock’s long-term lease at SMIC was recently transferred to Vigor Marine Industrial, a top U.S. shipbuilder and repair company, that only recently began operating in Alaska.

Harmon Construction has operated in Seward for three decades, and the company’s imprint can be seen across the area, from providing stable local employment, to creating many of the buildings and infrastructure. Harmon did the recent sidewalk repairs and ADA curb cuts downtown. It built the new SMIC wash-down pad and is completing the electric department’s warehouse. It built the Waterfront Pavilion, city sand shed, Seward Mariner’s Memorial, Iditaride harbor ticket building, CIRI’s Fox Island guest lodges (former and current), and much more. Harmon regularly installs Seward’s murals, provides high school scholarships, and contributes in-kind work or money to many charitable causes.

Tom Tougas’ influence in business and local charitable contributions also are extensive. He expanded the marine cruise tour fleet that brings so many visitors to Seward,  and still runs Major Marine Tours. He built the employee housing for the tour ship employees, and was part of the group who constructed several summer hotels for tourists and for seasonal workers on Exit Glacier road including the Windsong Lodge and the Resurrection Roadhouse, now owned by CIRI, and also the original lodge on Fox Island. He runs Hertz Rentals, and for several years has taught entrepreneurship classes geared for local business people.

As Harmon had left the Tuesday night meeting before its late-night end, Tougas had final say on what he felt was a snub to the entire local business community, and to their hopes that the city would not overlook them, and turn over vacant city land at SMIC land to private enterprise for sale and development.

Tougas, and the late Stan Stevens of Valdez, had asked the city to sell the very same parcel at SMIC to them 15 years earlier, and were denied for the same reason—that the city was awaiting a master plan, he said, but no plan has come forth.

“I’m really embarrassed. This (laydown) should have at least been given to Larry out of respect,” he said. “By the time this became public, there was no opportunity for any public to comment on it. And for this document to come forward as a laydown, to convince the city not to follow through, and to have no opportunities for the public to comment really bothers me.” Saying that the city administration, or someone in administration had “mugged” the potential sale, Tougas rebutted several points made by administration.

“The document laydown is very one-sided. It uses the same reasons that SMIC has been drawing alders for the last 25 years,” he said. “It starts out saying that in 1996 we made a decision. We can’t make a decision since?” Waving the laydown in the air, he continued: “It says we have to study this so we can give a preference to CIRI, Vigor and Shell–to outside vendors! We had a responsible vendor who has invested 30 years in Seward, and he’s told no, because we have to do another Master Plan?”

Furthermore, Harmon had followed the correct process in formally requesting the property, he said, but none of the other interested parties mentioned had done so. As for the argument that selling city property at SMIC contradicts the Municipal Land Use Plan, he pointed to the Communications North property at 204 Nash Road, a marine support services business that the city had sold to Pat Mars, “…and it’s the only really good building at SMIC because he owned the property,” he said.

At the previous meeting July 14th, the vote to move forward on the sale had been unanimous, although council members were somewhat tentative until Councilwoman Christy Terry emphasized that any sale proposal would come back to them for a final vote. Administration had mentioned that it might be best to wait for the new SMIC Master Plan, a multi-phase project currently being researched and developed as part of a $10 million state-funded grant by the Alaska Industrial Development and Export Authority, AIDEA. That point was raised again numerous times at Monday night’s July 28th meeting.

It’s unclear how long the master plan process might take, and SCN’s calls to ARCADIS, the company coordinating the process, on the plans’ timeline, have not yet been answered. But the planner’s “Scope of Work” outlined in a March 11, 2014  letter to AIDEA shows five extensive phases including meeting in Seward with AIDA and the city project leadership to formulate a business case; communication with stakeholders’ management and public outreach meetings; conceptual design options; a financial feasibility analysis and development plan; and development of a final report, giving the impression that it might take  a few years.

Councilwoman Terry asked whether, by the same reasoning that they had given Harmon, the city also should deny new leases while the Master Plan process for developing SMIC is underway. It’s not a good idea to impose a moratorium, Long replied. “It’s an urban myth that SMIC leases are only 20-years,” he added. Rather, the city should ask applicants how long they’d like to lease property there for, he said, adding that the city had created a 99-year lease for the Alaska Railroad.

(Full disclosure: Reporter Heidi Zemach worked for Tougas’ son Paul when he owned Seward City News, and her teenage daughter works for Major Marine, and has worked at Hertz Rentals )

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  1. Pingback: Arcadis News – 31 Jul 2014 | Finance

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