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The Gristle

Plan A.5

Wednesday, February 26, 2014

PLAN A.5: In a packed public meeting last week, the Port of Bellingham Commission approved an exclusive negotiating agreement (ENA) that would allow staff up to 120 days to draw up business terms and development agreements with Harcourt Developments from Dublin, Ireland, for the first development parcel of the Bellingham Waterfront District.

The 10.8-acre development parcel is critically sited adjacent to Old Town and the downtown core, and includes the Granary Building, potentially allowing these areas to be more tightly integrated and setting the tone and scale for future development of the district. The parcel is also at the nexus of road and infrastructure development planned and budgeted by Bellingham Public Works for construction in 2015, potentially promising a quick return on that public investment.

Port of Bellingham Executive Director Rob Fix said Harcourt principals have pledged to bring forth a development concept for the 10.8-acre parcel that is in alignment with the Waterfront District plan adopted by the port and city in December. The expectation of many observers is that, after four months of negotiation, port staff will report that dialogue with Harcourt should continue.

Harcourt Developments was one of four proposals received in July 2013 seeking to be the master developer for the 10.8-acre parcel. A major international developer, the firm’s largest and most notable project is the redevelopment of the Titanic Quarter, a former shipyard in Belfast, Northern Ireland. Less successful was the firm’s $1 billion Sullivan Square mixed-use high-rise project for Las Vegas, Nevada, a joint venture that tripped up in the financial collapse of 2007 and dissolved into a series of lawsuits.

We wrote last week of the proliferation of executive instruments that transfer deliberation and oversight away from elected legislative bodies and their open public processes to administration and staff, where agreements are negotiated in the dark. Nowhere is this more evident than in the negotiating agreement port commissioners approved last week that essentially authorizes the commission (and public) to be pressed aside while port staff negotiates in private with Harcourt. Thus, the ENA locks the public out of details of a project that has been fraught throughout with a lack of transparency and responsiveness to public opinion.

At the very essence of public concern is widespread apprehension that the port staff is really not up to the task of negotiating in private with a sophisticated international entity like Harcourt. No one on staff has experience negotiating a real estate transaction of this scale. The port has apparently prepared no independent financial analysis for the proposed public/private partnership, an analysis that should include a valuation of the property. Economic analysis would indicate both the bonding capacity and potential public liability for the project.

To understand why the port has dodged such a financial analysis, one must understand from the outset the agency planned to sell, worst-case lease, the 137-acre site of the former Georgia-Pacific mill. Through that sale, the agency would recoup costs for environmental cleanup and—potentially—finance the construction of a new marina.

Harcourt’s offer of a partnership with the port is a game-changer of a magnitude the agency has not readily admitted. The company’s remote status as an international developer based out of Ireland promises an added layer of unusual complexity to the offer.

In June of 2012, the port commission hired the Seattle consulting firm Heartland LLC for an initial phase of research and marketing to attract a potential developer for the initial 10.8-acre property, in anticipation that firm might submit a master development proposal for the entire waterfront district. Last February, the commission increased the expenditure to Heartland to a total of $285,000. In return, the company produced a marketing brochure, a request for proposal (RFP) for the “sale or lease” of those initial acres.

The port didn’t get much for its quarter of a million dollars, with the RFP drawing submittals from just four firms, none of which expressed an interest in the sale or lease of the property, proposing instead varying joint partnerships. One firm withdrew almost immediately. The paucity of proposals were non-responsive to the port’s goals to sell or lease the property; and one must wonder how many proposals the agency might’ve received had they expressed at the outset an interest in a joint partnership, where the public would continue to shoulder the cost and liability. Dozens?

Heartland itself is ripe for a potential conflict of interest, providing similar work and searching for similar proposals (from a limited universe of master developers) for the City of Everett’s stalled riverfront redevelopment. The arsenal of cheap, knowledgable, loyal and durable consultants—the constellation of local development and entrepreneurial business interests organized under the Bellingham Public Development Authority (BPDA)—was rejected out of hand by port staff and now teeters on the brink of dissolving.

The financial environment in which the RFP was originally submitted was hardscrabble, with the global real estate market still reeling from collapse and development and investment firms still litigating and recovering from that collapse. The property—a shuttered, contaminated industrial brownfield—is hardly unique on the American landscape and is of interest only to a particular (and quite finite) set of developers, each looking for sweetheart agreements that would shoulder most of the financial risk on to the public.

Undoubtedly, Harcourt has the resources to tie up port staff and the property for much longer than 120 days, and commissioners offered no policy guidance for next steps beyond that period. Maybe they should spend the time drafting Plan B.

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Holiday Festival of the Arts

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