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Financial hurdles separate Nichols, Navy
The clock continues to tick but Nichols Brothers Boat Builders and the Navy appear no closer to striking a deal that would allow the Freeland shipyard to set up shop in Oak Harbor.
Last month, elected city officials and county business leaders proposed paying for a study that could soothe Navy concerns with Island County Council of Governments’ funds. It has since become clear that state law restricts how the money can be spent and a study is not among the allowed uses.
For some proponents of the project, the news was both disappointing and frustrating. The proposal has the potential to do a lot of good for North Whidbey’s economy but making it happen is proving painfully difficult.
“It’s like mating elephants; it takes 18 months and makes a lot of noise,” said Ron Nelson, executive director for the Island County Economic Development Council.
The Freeland boatbuilder is interested in expanding its existing operations to the Seaplane Base. The company needs the extra space so it can help build modular sections of a 144-car state ferry in 2012.
If successful, Nichols Brothers CEO John Collins believes the facility would lead to about 100 new jobs for the company. It’s believed those jobs would bring in between $2 million and $4 million in salaries per year.
The prospect alone has business and economy boosters like Nelson drooling for the proposal to become a reality, especially in the midst of a recession. But a host of hurdles stand in the way.
Before the Navy gives the OK, it wants a feasibility study performed that will make clear any show stoppers, such as insufficient infrastructure or yet-to-be identified roadblocks at the state level.
According to Nelson, it’s expected to cost from $34,000 to $61,000. Further studies, including an environmental analysis – $80,000 – and an environmental impact study – $183,000 – may also be required later on.
The problem is no one wants to pay for them. The Navy doesn’t want to fund them because it can only expect to recover from $10,000 to $30,000 in lease revenue per year, which makes for a potentially poor return on investment.
Nichols Brothers doesn’t want to pay for it either because there’s no guarantee the shipbuilder will get the spot, even it does fund the studies. Once complete, the Navy is required to lease the property to the highest bidder.
Collins said he’s not willing to risk investing in a property that could be swooped up by a competitor. The investment should be the financial burden of whomever occupies the space, he said.
“I feel that’s the responsibility of the lessor,” Collins said.
Compounding the issue of finances is time. Nichols Brothers is under the gun as work on the ferry could begin as soon as next March and each of the studies will take time to complete.
The feasibility and environmental analysis may only take about three months, which is within the shipbuilder’s window. However, an environmental impact statement will take much longer, though just how much longer is unclear.
Unknown is whether congressional intervention can expedite the process. Nelson said federal lawmakers may be able to speed up the process, but just how that would be done he could not say.
The shipbuilder has gotten support from lawmakers before. Just this month, Nichols was announced the recipient of a $519,761 federal grant to help purchase a 25-ton and a 40-ton mobile crane. Collins said they will replace two existing cranes, and will no doubt make the shipyard more productive.
The grant comes from the U.S. Department of Transportation’s Maritime Administrations Assistance to Small Shipyards program. U.S. Rep. Rick Larsen is the ranking member of the Coast Guard and Maritime Transportation Subcommittee, which oversees the program.
Collins declined to “draw a line in the sand” for the Navy, saying he understands they have a process to go through and that it takes time. But, that can only go on for so long, he said.
“I have to be realistic from a business standpoint,” Collins said. “At some point we have to make a decision.”
Neither Nelson nor Oak Harbor Mayor Jim Slowik, a strong supporter of the project, are ready to give up just yet. Both believe that if the feasibility study can get funded, it may pave the way for the other studies.
And according to Slowik, the study may not cost as much as projected. Hiring a retired engineer, for example, could drastically lower the price. He said he’s looking into the possibility. If successful, he has hopes it could be funded through a partnership with the city, the economic development council, and Nichols Brothers.
Slowik recently had a promising meeting with Whidbey Island Naval Air Station Commanding Officer Capt. Jay Johnston and Navy Region Northwest Commander Rear Adm. Douglass Biesel.
According to Slowik, the meeting made two things clear: the project has the support of Navy brass but with time constraints the way they are, that’s not enough to guarantee a future for Nichols Brothers in Oak Harbor.
“We have the admiral of the region on board, we have the skipper of the base on board, it’s just a matter of can we get through the process,” Slowik said.