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Port takes hard look at SEED’s cost
Saying it could financially cripple the port, Bozeman wants 30 days to decide whether to proceed.
At a four-hour meeting outlining the Port of Bremerton’s next three years Tuesday, Chief Financial Officer Becky Swanson shared some sobering facts about how much money it will take to grow the Sustainable Energy and Economic Development (SEED) project.
“The full construction costs (of the incubator building) keep rising and we need to address where we are financially,” Swanson said, addressing the port’s commissioners and most of its managerial staff.
Since the 2009 budget was adopted, Swanson said the port’s financial situation “has changed,” and significantly affected the amount of funds available.
With a conservative estimate of the total cost of SEED’s first building hovering just under $9.5 million, Swanson said the port is facing a $4.3 million shortfall after a $2.5 million federal Economic Development Administration grant and the required matching funds from the port — already accounted for in the budget — are subtracted.
“We need to find some funds out there to finish the project,” she continued, adding she believed the cost of the project was even higher — by $2 million — because of the need to build a manufacturing building as well.
“If you live in my world, the cost is $11.48 million,” she said, explaining that start-up companies based in the incubator building would still need a place to manufacture their products.
Since the port is paying a company to identify ways to cut costs through value engineering, Swanson said the costs may go down; however, they are just as likely to go up, as well.
And once construction is completed, she estimated the port would pay $404,000 a year just to operate the building.
“SEED has high potential, but we need to know we can carry it out with the port’s money,” she said. “I support the SEED concept, but only if it is the right size and makes economic sense.”
In summary, Swanson said there is “no definable source of funds to support completion of the SEED construction and operational costs,” including:
• no source of funds (grants) for the final cost of constructing the incubator building;
• no source of funds to service debt on bonds required to match the EDA grant;
• no source of funds for the upstairs build-out;
• no source of funds for the cost of value engineering ($57,000); and,
• no source of funds for the necessary redesign.
“There is no question (SEED) would put this company in financial jeopardy,” said Chief Executive Officer Cary Bozeman. “I need another 30 days, then I will bring back a recommendation of whether we go forward (with the project).”
Commissioner Larry Stokes said the port should stop investing in SEED now.
“I have spent 30 years dealing in failed business (as the former owner of Stokes Auction), and in my opinion, SEED will not work,” Stokes said.
Commissioner Bill Mahan disagreed, and said that to a certain extent, the port created the current problems by putting the project on hold last year.
“When we put the project on ‘pause,’ a $1-million grant (we were first in line for) went out the window,” Mahan said. “I don’t think we’ve been as aggressive as we could have been to capture funds.”
He called the $400,000 operating costs a “red herring.”
“The port will not have to pay the $400,000 operating costs. The reality boils down to whether or not you can finance the construction of the building,” Mahan said.