Harbor faces gap in funding

May have to take on debt for repairs

Finishing the harbor’s restoration project might put an already cash-strapped agency deeper into the hole.

Crescent City harbor commissioners last week expressed concern over how they will cover a seven-figure gap in funding for the inner boat basin rebuilding project.

The harbor’s engineers pegged the cost of the project, which repairs damages from the 2006 tsunami, at $32.8 million, leaving a $3.4 million shortfall that the harbor would have to cover, Harbormaster Richard Young said.

Based on contractors’ early interests, however, the harbor expects a highly competitive bidding environment, which could drive down the cost of the project, Young said.

California Emergency Management Agency (Cal EMA) will fund 75 percent of the project ($24.6 million if the actual cost equals the estimate), and the state Community Development Block Grant program (CDBG) will provide $4.8 million for the project.

Officials from CDBG have told the harbor district that they can solicit bids, but they must have their financing in order before they can award the contract, Young said.

The harbor has been having discussions with potential lenders in case the harbor has to take on debt for the project. Either way, they are committed to keeping the project on schedule and accepting bids in January, Young said.

“I don’t think the alternative of not doing the project is a viable alternative,” Young said. “This community needs a harbor. It’s a vital part of the future of the local economy.”

Young suggested that the extra red tape that has surfaced from the CDBG could be related to sticker shock. The estimated cost of the project increased more than $10 million, from $22 million to $32.8 million, when the Coastal Commission required the project be designed to sustain a 50-year tsunami event. The increase seemed even steeper to officials with CDBG, who based their initial grant award on Cal EMA’s early estimate of $13 million for the project.

Young and the commissioners said that Cal EMA’s first estimate was overly conservative, and the harbor knew that the project would be at least $22 million even at that stage in the game.

Given the increase in the cost of the project, CDBG officials are now requiring that the project be reviewed by their Economic Development Advisory Committee to see if the harbor can remain viable if they have to take on substantial debt, Young said.

“We’re viable, but we’re going to have to take on some severe cost-cutting measures if we take on a high amount of debt, but we can do it,” Young said in a phone interview.

Even though the regulations imposed by the Coastal Commission boosted the project’s cost by millions of dollars and might require the harbor to take on debt, Young said it’s the most cost-effective in the long term and creates a safer and stronger harbor.

“It’s a little bit higher hurdle to get over, but at the same time it’s the right thing to do for the future of the harbor,” Young said.

Taking on debt is the most likely option since the project currently doesn’t have any frills, fat or extras. The harbor is looking at taking on $1.5 million to $5 million in debt, depending on how high the bids come in, Young said.

For the $4.8 million CDBG grant, the harbor partnered with the county since the harbor is ineligible to be the grant applicant, Young said.

“A lot of this is speculation, so we need to not get overly concerned,” Young said. “We need to get it out to bid, and then we can go from there.”

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