Sitka’s Sawmill Cove Industrial Park is “burning cash.”
That’s the phrase city finance director Jay Sweeney used to describe the situation to the park’s board of directors at their monthly meeting this week (11-21-11).
Over the past four months, the park has spent about $90,000 on operations, but only taken in $40,000 in rents and other revenues.
That’s an average monthly deficit of $12,500 that Sweeney says the park can’t sustain much beyond a year or 18 months, when its cash reserves run dry.
Sawmill Cove director Garry White says the board is concerned about the negative cash flow. Nevertheless, its mission is economic development and job growth. White says that if these things were factored in to the balance sheet, it would tell a different story.
“If you look at the enterprise fund by itself, it’s not in good shape. But if you look at the overall benefits that the park brings to the community and other enterprise funds, it’s a winning situation. We’re bringing in property taxes, and raw fish tax, and sales tax, and all those other things that benefit other enterprise funds.”
Since the creation of the park following the closure of the APC mill, the Sawmill Cove board has taken several steps that it believes benefit the community, at the expense of its own bottom line. Some of the most potentially lucrative lease properties have been sold off to Silver Bay Seafoods, True Alaska Bottling, The Boat Company, and the Northern Southeast Regional Aquaculture Association.
Long-time board member Charles Horan observed, “We’re in the business of putting ourselves out of business.”
The main culprit in the park’s cash flow problem is one of its largest remaining assets, the former Alaska Pulp Corporation administration building. White says it costs $150,000 a year to maintain.
“That’s something that we’re looking at in the future, how we minimize that cash flow drag. Do we mothball the building, do we enter into a long-term lease with someone to take over that building. That’s the kind of thing we’re hoping to do to minimize that cash flow [drag].”
The city has spent over $3-million to put new siding and a roof on the building. The money came from federal grants which prohibit the sale of the structure for twenty years. Except for a recording studio, Bike and Hike, and municipal records storage, the admin building is vacant. White suggests that there’s no magic bullet.
“You know the city still has to insure the park, has to heat those buildings to protect those assets – it’s a real cost that’s out there that we’re kind of stuck with. Our goal is to maximize revenues to offset those costs. That’s what we’re trying to do.”
In the near term, the Blue Lake Hydro project may put the park on more solid footing before its reserves run out. White says the contractor will likely lease much of the remaining vacant land – and possibly office space in the admin building – during expansion of the dam and the construction of a new turbine. But that will mean only two years of relief.
Neither is bulk water expected to provide much help. True Alaska Bottling paid $75,000 last February to preserve its option to sell bulk water from Blue Lake; it is expected to pay the same amount this coming February.
While that is a nice shot in the arm, finance director Sweeney observed that spread out over 12 months, it only covers about half the monthly deficit.
In other business at its monthly meeting this week, the Sawmill Cove Board approved renting indoor space to the Harbor Department for storage of its two guard shacks.
The structures will occupy 100 square feet in the former Boat Company building, at $.50 per foot.
Harbormaster Stan Eliason told the board that he had planned to store the shacks under the O’Connell Bridge, but that someone had broken out the windows during Alaska Day festivities.
Greg Reynolds, with the Sitka Community Development Corporation, told the board that his organization was developing a Building Materials Reuse Center. Reynolds said that the SCDC had exhausted its search for private commercial property for the project, and was now considering Sawmill Cove. The board responded that they would welcome a proposal.
And finally, board chair Grant Miller passed the gavel to Aaron Wilkinson. Wilkinson has been on the board for about six months, and in Sitka for a year, as the branch manager of First National Bank Alaska. Wilkinson’s term will be for one year.