Deck chairs on the Titanic

Wednesday, January 7, 2009

DECK CHAIRS ON THE TITANIC: Amid raging speculation she was an alternate for a cabinet position in Barack Obama’s administration, Gov. Chris Gregoire cancelled a press conference this week and mysteriously disappeared… only to reappear a few hours later in Iraq, where she was reportedly visiting National Guard troops along with fellow governors from New Jersey and Texas. (“I made it clear early on I would not accept an appointment,” Gregoire said of the rumor she was being considered for a post in the Oval Office). Also mysteriously AWOL but less likely to turn up later is a big piece of the state budget, a yawning chasm that keeps growing each time it is analyzed by state budget managers—now it could loom as large as $7 billion.

As the governor furiously cuts costs, Bellingham Mayor Dan Pike last week learned one of the items trimmed from her proposed budget was a $5 million state grant allocated to help defray costs on a project to move the BNSF Railway that currently carves through the middle of the old Georgia-Pacific mill site on the city’s central waterfront nearer to the bluffs at the perimeter of the site.

The city snared the ticklish agreement with Burlington-Northern to move the rail line in November, just days before Port of Bellingham commissioners fired off their angry letter declaring the days of cooperation between the agency and the city on the central waterfront were over.

“It may be the port’s ‘thermonuclear letter’ moved the agreement off the governor’s funding priorities list, because the agreement with BNSF and then the letter happened almost on top of one another,” Pike speculated. He said he was working with Sen. Mary-­Margaret Haugen, influential chair of the senate’s Transportation Committee, to get project funding restored. “It’s taken a year and a tremendous amount of staff effort to get this agreement,” he said.

The abrupt loss of funding for the $12 million project puts in jeopardy other financing opportunities as well, including $7 million in federal funding pledged by Congressman Rick Larsen, Pike explained.

“I have confidence we can get this back on track and get the funding restored,” Pike said. “It’s a project that will improve freight mobility though our area by about 40 percent, at a time of rising fuel prices and concerns about global warming. It has statewide significance,” he noted.

Yet the mayor may be similarly rocked by news circulating among insiders at the state Dept. of Ecology that, in order to stem the budget deficit, the governor is considering tossing MTCA dollars into the gaping hole of the state’s general fund for environmental projects. Bellingham’s central waterfront was once a lead candidate for cleanup dollars from the state’s Model Toxics Control Act, approved by voters in 1998 as an initiative to replace the defunded federal Superfund program. The Act raises funds from petroleum company operations and applies them to clean up contaminated sites around the state.

The news—little more than an ugly rumor at this point—could place that piece of waterfront financing on footing just as precarious as the continued financial uncertainty of American International Group, one of the largest insurers in the industry and holder of more than $20 million in cost-overrun guarantees for cleanup of the Georgia-Pacific mill site. AIG was among the first to topple toward bankruptcy and then be bailed out by the federal government last fall after derivative-based guarantees it sold on complex mortgage-related securities left the company with huge losses. While it initially appeared the Port of Bellingham’s down payment was secured by the bailout, AIG’s future remains unstable.

“Subprime mortgages continue to haunt AIG,” the trade publication Insurance Journal reported in December. “AIG is also contending with more familiar insurance losses. For its third quarter, AIG posted its largest-ever quarterly loss—$24.47 billion—as the damage from the manmade catastrophe of write-downs was exacerbated by damage from natural catastrophes.”

More gloomy news for the waterfront also arrived in December, just as port officials began to prepare their bid to offer Bellingham as home port for NOAA’s Pacific Marine Operations Center. Bellingham was a lovely candidate to host National Oceanic and Atmospheric Administration ships and offices after the Port of Seattle curtly declined to renew their 20-year lease and repair the docks of the agency’s aging marine center on Lake Union. But guess what? In the 11th month, Seattle offered to renew the lease and repair the docks.

NOAA has been in Seattle for decades, and the agency employs nearly 1,000 at its science and research branch. That arm of the agency isn’t planning on going anywhere, and isn’t part of the lease solicitation, but that—and superior shipyard capacity—may eclipse Bellingham’s chances to easily secure the federal agency as an anchor tenant on the central waterfront.

When 2008 began, city and port officials expressed optimism that their planning for the redevelopment of 220 waterfront acres could be completed by the end of the year. By year’s end, relationships had strained, then relaxed—at least publicly; but do those tensions hint at hidden bergs below the surface of chilly waters? Was the port’s bluff and bluster an indicator of an agency running short of both options and optimism? And how will that agency fare in an election year, when two of three port commission positions come up for grabs?