April 7, 2004 – The Port Authority board voted on Wednesday to put the lease of one of its Crown Bay area properties out to bid.
The derelict former Caribbean Steel building, which sits directly opposite the entrance to the new Crown Bay retail development and cruise ship complex, has been vacant for nearly 10 years. It was the subject of lengthy and heated discussion at the VIPA board's last meeting. (See "VIPA board undecided on what to do about eyesore".)
At that Feb. 25 meeting, Darlan Brin, VIPA executive director, presented a report from GMAC Commercial Holding Capital Markets Corp., the authority's investment banking firm, on whether VIPA should finance and develop an office complex at the site for lease to the U.S. Customs and Border Protection Service.
The report posed two other options: leasing the land to a private developer who would assume the responsibilities and risks of constructing, financing and managing the development; or contracting with a developer to provide "turnkey" services — that is, to develop the site on behalf of the authority for a fixed fee.
Motions at that meeting to redevelop the property for lease and to go with the turnkey option both failed.
Brin argued on Wednesday for leasing the property to a private developer, stating that VIPA had received an "unsolicited bid" for the project.
He said VIPA has "higher priority" projects which need to go forward, which they cannot do if the authority is financing and developing the Caribbean Steel property.
"For example," Brin said, "the containerport on St. Croix has to be reconstructed to accommodate a crane; the Crown Bay pier has to be extended; there are projects on St. John. This is not a wish list; these are needed projects."
Board member Leslie Milliner asked Pamela Richards, who as Tourism commissioner chairs the board, who the unsolicited bidder was. She replied: "That is irrelevant."
After some discussion, it was decided to make the information available to board. Brin left the room and returned with copies of a document which he distributed to the members, but not to news media representatives present. The letterhead on the document read SMW Real Estate.
Brin suggested that requests for proposals be advertised. He said the area would need rezoning, which could take months, but the RFPs could go out in the meantime.
Attorney General Iver Stridiron, who serves on the board, disagreed with Brin. He said the Crown Bay area has great economic potential. "There's a Property and Procurement task force assessing the area now," he said. "They are looking to relocate companies not compatible with the retail complex," he said, stressing the value of the property.
The coming development "will impact all the surrounding areas," Stridiron added. "We have to figure out how to maximize that access."
He continued: "There is no better tenant than the federal government. Once the federal government takes it with a 20- to 30-year lease, any bank will give you money. We can do it ourselves. If we don't do this, we become a sub-tenant, while the developer collects the rent."
Board member James Rogers, a former St. Croix educator, reminded his colleagues of advice they had received at a Finance Committee meeting earlier in the morning. "Remember, the auditors said to be cautious with our cash flow," he said.
Rogers said he would vote for the authority developing the property, contingent on the results of a cash-flow analysis.
Public Works Commissioner Wayne Callwood, also a board member, strongly backed Brin. "We can't afford to do it," he said. "Let the private entity take the risk."
If Crown Bay had been developed privately, "we'd be sitting pretty right now," he said. "Instead, we're at our wits' end, trying to survive."
Callwood referred to a Port Authority agreement for two major cruise lines to expand the Crown Bay dock and develop an adjacent shopping center which Gov. Charles W. Turnbull canceled two years ago. (See the St. Thomas Source report "Turnbull halts cruise lines-Crown Bay deal".) After that, VIPA decided to carry out the project itself, floating bonds to fund the venture.
Callwood called redevelopment of the Caribbean Steel property "a big risk. We have no business doing that. Maybe we should get in the hotel business. Where will it end?"
Richards disagreed with Callwood. "That is not a fair comment," she said. "Crown Bay is doing well and on schedule."
"Callwood is correct," board member Robert O 'Connor said. "We have $25 million tied up in bonds now that could have gone for other projects. We're not losing control of the property. We can use those dollars for other projects. We get the rent, and we are at no risk."
Planning and Natural Resources Commissioner Dean Plaskett, also a board member, agreed with O'Connor. "I had to halt the dredging of Enighed Pond because of the stench," he pointed out. "Who assumes the risk? Who is to pay if I have to stop the work? There could be unexploded ordnance in the Crown Bay area, or chemicals in the ground. I agree to put it out to bid and let some other entity assume the risk."
The board voted 5-3 in favor of seeking bids on a lease to develop, build and maintain the Caribbean Steel property. Voting for the measure were Callwood, O 'Connor, Milliner, Plaskett, and Hector Peguero. Voting against were Richards, Rogers and Stridiron.
Operating losses down, revenues up
The board meeting, scheduled for 10 a.m., started two hours late, following the Finance Committee meeting with PricewaterhouseCoopers representatives which brought some encouraging economic news. According to the draft audited financial statement presented, operating losses decreased from $8.7 million in fiscal year 2002 to $6.2 million in FY 2003.
The decrease in losses was mainly attributable to an increase of aviation revenues and a 4 percent decrease in operating expenses in FY 2003 that resulted from a management initiative to reduce overtime and management benefits, the report said. Also, VIPA filled vacant positions selectively during the period.
There was no significant increase in passenger traffic, the report said. But VIPA had increased landing and passenger fees by 25 percent on Feb . 1 of last year, then rescinded them effective Oct. 1; all of the resulting additional revenues came in FY 2003.
Operating revenues increased 4 percent, or $1.6 million, in FY2003, with a gain of 11 percent, or $2 million, the aviation division but a 3 per cent, or $400,000, decrease in the marine division, the report said. Total operating expenses, excluding depreciation, dropped about $1.9 million, or 6 percent, to $28.8 million.
As a result of major repairs carried out in FY 2002, maintenance and repair costs dropped by 25 percent in FY 2003.
Updates on other projects
VIPA projects manager Dale Gregory told the board that the design phase of the St. Thomas waterfront apron project, in the works since 2001, has been negotiated with Yssis Group for $173,594. The waterfront stretch involved is from the U.S. Coast Guard dock to the area across from the Green House Restaurant, he said.
Gregory later explained that the figure is about 8 to 10 percent of the first phase of the project, which is expected to have a total cost of about $6. He declined to estimate when the project would get under way.
In January 2003, Brin said the waterfront project would be funded and developed in stages and should ultimately cost between $4 million and $5 million. He said the Public Finance Authority had set aside $2.5 million in bonds for the undertaking and that th
e balance would be funded through marine projects and port fees.
Gregory also provided a status report on other VIPA projects:
– The north side of the expanded Crown Bay dock on St. Thomas is in operation. The south side is under construction.
– The Henry E. Rohlsen Airport control tower on St. Croix should be ready for the Federal Aviation Administration to take over before May 1.
– Dredging of Enighed Pond for the Cruz Bay commercial port on St. John is completed and methods of minimizing the odor from the pond are being implemented. Work on the project is 60 percent complete; road surface problems remain, but they are not major.
– Work on the new $1.6 million reconfigured pre-clearance area at Cyril E. King Airport on St. Thomas expected to eliminate bottlenecks at peak check-in times is about 80 percent complete. It was scheduled to be completed by last Christmas. (See "December eyed for airport screening upgrades".)
Brin expressed concern about the CEK project. "It's not operating on time, it isn't moving well. I've expressed my displeasure to the contractor," he said.
Work on moving the air-conditioning unit from the second floor to the first is taking extra time, Gregory said, but he said the screening area should be able to accommodate the coming Easter weekend traffic.
All board members were present for the meeting.
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