Final Report of the Chestertown Port Committee. Provided to the Chestertown Town Council March 21, 2011

Transcription

1 Final Report of the Chestertown Port Committee Provided to the Chestertown Town Council March 21,

2 Outline of Presentation Background and Property Description Rationale for the Port Project The Consequences of Doing Nothing The Vision & Key Elements of the Plan Estimated Capital Costs and Appraisal Economic Impact Analysis Operating Cash Flow Real Estate Tax Consequences Financing Approach Three Important Questions Management and Governance Near-term Steps and Schedule Bottom Line 2

3 Background The Town Council, under the lead of Gibson Anthony, formed a broadly-based Port Study Group (PSG) in July 2010 to: - Explore and analyze how to enhance long-term public access to Chestertown s working waterfront. Early-on the marina property became available for purchase and the PSG focused on that opportunity. The PSG s findings and recommended next steps were submitted to the Town Council in early September The Chestertown Port Committee (CPC) was formed to carry out the proposed work within 6 months. CPC reported to a public meeting of the Town in February 2011 to gather citizen s input to aid the Town Council in making its decision. 3

4 Study Participants Walt Adams Gibson Anthony Don Cantor* Alex Castro Diane Daniels Jim Gatto Adam Goodheart Michael Hardesty Bill Ingersoll Kevin Kimble Bill Landon Dave MacIntire Al Massoni Davy McCall Andy McCown Nancy McQuire Drew McMullen Ruth Menefee John Moag Bob Parks Libby Patnovic John Seidel Liz Smith Carter Stanton Ray Tarrach Matt Tobriner* Johan Trumpy Bernadette Van Pelt *Co-chairs 4

5 Important PSG Observations Chestertown s reason for being was to be a colonial port. The port has an amazing and rich recorded history worthy of being preserved. This property is our last remaining public gateway to the Chester River and the River is our connection to the past. In the absence of a purchase by the town it is probable that the entire marina property will be privatized and/or commercialized. There are enormous pressures to develop waterfront properties to their highest and best use. - That is typically high density residential units with water access amenities. 5

6 Aerial View 6

7 Current Site Plan Parcels 1, 2 & 3 are available for purchase acres Restaurant is not included. 7

8 Existing Buildings Marina Office and Store Metal Shop Building 8

9 Restaurant and Docks South Dock Fish Whistle & Parking Lot 9

10 Rationale for Public Ownership Promote economic development and tourism. Preserve the Port of Chestertown s last public access to/from the Chester River. Secure and enhance an invaluable cultural and historic resource for future generations. 10

11 Consequences of Doing Nothing The approved seven lots on Front Street could be sold and built on with individual town homes. All or part of the property could become part of a homeowners association and used as a private marina/club facility. The slips could be separately sold as boat condominiums. The 7 lots could be sold and the parking lot and restaurant slips combined with the restaurant; the residual property suffers demolition by neglect. No one has threatened these outcomes, but they are logical possibilities. The CPC believes the status quo is not an option. 11

12 The Impacts of Privatization Elimination of the last vestiges of our port and public gateway to the Chester River. Lost opportunity for enhanced educational and recreational programs. Lost opportunity for preserving the port s historic and cultural values. Lost opportunity for increasing economic activity within Chestertown. 12

13 More Privatization Impacts No Sultana Down-Rigging weekend. Negative effect on Tea-Party & other major event attendance/revenue. No transient slips available. No seasonal slip rentals. No ramp or travel lift for launching and hauling boats. No fuel and boat repair for local and visiting boaters. Chestertown would no longer be a prime destination for visiting boaters. 13

14 Long-term Vision of the Port Imagine a Chestertown Port with: A first class marina offering great service with up to 92 berths Facilities for non-profit educational and recreational programs Space for historic and cultural teaching and displays Space for vendors, galleries, fish market, etc. A wooden boat building shop Open park space and parking Part of an extended waterfront board-walk/trail A public bathroom A working demonstration of green building methods, materials and practices Such a port would truly be a regional attraction and a destination for boaters, land visitors, and students. It would bring commerce, jobs, and recreational opportunities to the community. 14

15 Key Elements of the Port Plan Evolve the port in three phases to its use as a municipal facility over 4 to 5 years Maintain it as a working marina but add other public-use features, facilities, and amenities. Finance by State and Federal grants and bonds, serviced by its own cash flow. Avoid using tax revenues to cover operating deficits. Make purchase and operate as is in Phase 1. 15

16 Key Elements (Continued) Replace, upgrade, and expand water-based facilities to 92 positions in Phase 2. Add and upgrade land-based facilities and amenities for public use in Phase 3. Comply with storm water management and other historic/environmental/critical area/zoning/building code regulations. Use green design features and integrate with other waterfront initiatives through walking trails. 16

17 Estimated Capital Costs Phase I: Purchase; Approximately $2 M. - Appraisal for as is condition Phase II: Water-based improvements; $1.6 to $1.9 M. - Engineering - Bulkheads, demolition - Floating and fixed docks for expanded marina - Utilities and fuel supply - Dredging and disposal Phase III: Land-based improvements; $1.2 to $1.5 M. - Large building with office, shop, store, fish market & vendor space, showers, public meeting facility, historic displays - Wooden boat shop and a small pavilion - Storm water management, parking, landscaping with picnic area, ADA compliant - Public restrooms/viewing structure - Public boardwalk and trails 17

18 Appraisal Background In November 2010 the Town engaged The Greenlee Group, Inc., Real Estate Appraisers and Consultants of Easton MD to appraise the as-is value of three parcels of land, in various configurations: - The Chestertown Marina property - The Williams property - The Delmarva property Bob Greenlee was the lead appraiser. 18

19 Appraisal Background Marina parcel (1.204 acres) - 55 useable slips, docks, piers, bulk heads, travel lift, ramp, marina office, metal shed, storage shed William parcel (0.235 acres) - warehouse/shop Delmarva parcel (0.620 acres) - unimproved shared parking lot with deed restrictions. Total area is acres. Purchased for $2.260 M in three separate transactions. 19

20 Key Factors in the Appraisal Marina water-based structures are in poor condition and some land areas may need environmental work. The Delmarva Power parcel must remain as a shared parking lot and its use has been restricted by MDE. The Chestertown Planning Commission has approved the use of 37% of the land area (0.759 acres) along S. Front Street as a seven-lot residential landominium. It is unrecorded. The property as is has not been put to its highest and best use. All parcels are zoned as Commercial Marine with Critical Area (IDA) and Historic District overlays. 20

21 Economic Impact Analysis The CPC used the Boating Economic Impact Model developed by the Recreational Marine Research Center at Michigan St. Univ. to assess marina impacts. - Sponsored by AMI,GLC, USCG, NMMA For an expanded marina of 92 positions the model estimates that the marina would provide: - total direct and secondary sales of $1.4 M - labor income of $0.45 M - value-added income of $0.76 M - 22 direct and indirect jobs This does not include future opportunity income derived from non-boating tourism, which could be comparable in scope. 21

22 Operating Income and Expenses Used past 3 years of actual results from current operations and hired Coastal Property Management Inc. to project NOI for 92 berth marina, using conservative assumptions: - Revenue = $430K to $480K - Expenses and mgmt. fees = $265K - Net Oper. Income (NOI) = $165K to $215K The Adjusted Net Income for 2010 was $133,400. This excludes the service/sales income and expenses of Landon Marine, Inc. and all one-time professional fees. 22

23 Key Assumptions of Income Analysis 75 seasonal slips (35, 40, and 50 feet long), plus 17 alongside berths for transients; total is 92 $85 per foot of slip growing to $100 over 3 years for seasonal renters Season from April 1 to October 31 75% occupancy for seasonal renters 50% and 15% occupancy respectively on weekends and weekdays, growing to 65% and $2.25 and $1.75 per foot for transients Fuel nets $.55 per gallon; land storage as in

24 Real EstateTax Consequences As of the three properties (land and improvements) are assessed at $1,763,200 which produce real estate tax revenues for the State, Kent Co., and Chestertown of $1975., $18,020., and $6524. respectively using current tax rates. The total is $26,519. Chestertown would lose tax revenue of $6524 if the Town purchased the property. If the landomium were to be developed, leading to the demolition of current improvements and the addition of 7 homes assessed at $375,000 each, then approximately $33,200 of additional real estate tax revenue would be generated, of which Chestertown s share would be about $8200. This potential added tax revenue would also be lost. 24

25 Financing Plan Have the town use its existing short term credit facility to make purchase in the next 3 to 6 months. Pay off this bridge financing using proceeds from a long-term municipal bond issued by the Maryland DHCD (or equivalent). Over time seek grants from MD and Federal Agencies to pay down this debt and finance water and land-based facility upgrades as funds permit. - Possibilities include: DNR, DBED, USDA, SHA, NPS, DHCD and a MD legislative bond bill. Limit total borrowing to no more than what can be serviced by the marina s demonstrated net income. 25

26 CDA Annual Loan Payments Annual Average Loan Payment Loan Amount Loan Duration/Interest Rate* 30 Years/4.95% 20 Years/4.40% 10 Years/3.35% $2 Million $125K $145K $217K $3 Million $188K $218K $327K $4 Million $250K $291K $435K $5 Million $313K $364K $545K *Interest rates based CDA rates as of December 2010 and are subject to change. 26

27 ANNUAL LOAN PAYMENT AND NET INCOME Loan Amount, $ Million Net income can service a 30 year loan of $2.6 to $3.4 M 27

28 Three Important Questions 1) How can a town make a financial success of the Port if a private developer can t? - In today s market a developer seeks a return on investment of at least 12% to 15%. The town replaces the project s profit motive with a break-even motive in order to achieve broader quality-of-life and economic benefits. - The town has access to federal and state grants not available to private developers. For example: DNR, USDA, DBED, DHCD, SHA - A town has access to lower cost financing through the issuance of municipal tax-free bonds. 28

29 2) What if the NOI projections and grants don t materialize? - Sell 7 landominium lots; appraised at $840,000* for all seven. - Possibly sell ~7700 sq. ft. of land surrounding $16* per sq. ft. to restaurant; estimated value of $120, Retain and lease out the downsized, non-working marina with 55 slips and access to shared parking lot; appraised at $960,000* less $120, Use limited grant funds to upgrade this residual marina parcel for a public park and amenities, plus a connecting waterfront trail. Defer major water and land-based improvement projects. - Retain shared public parking lot; appraised at $266,600*. - Retain control and continue public access to the River, while waiting for better times. * Values taken from Appraisal Report 29

30 3) What Is the net exposure of the Town in the prior scenario? Sell the condo lots and land for $960K less 5% commission. Net Cash is $912K. Assume demolition costs are covered by scrap and equipment sale. Pay down the $2 M purchase loan to $1,088,000. Annual P&I on residual 30 year@4.95% CDA loan is $68,000. Lease the down-sized marina for 5% of its value ($960K-$120K), generating annual income of $42,000. The Town s real estate tax revenue on the sold lots (with improvements at $375K each) and land is $13,300. Net exposure=$68000-$42,000-$13,300=$12,700 per year. The Town would end up owning the parking lot and residual marina (valued at $1.1 M) for an annual carrying cost of $12,700 (1.14%). 30

31 Recommended Governance Create a Port Commission to oversee the operation of the Chestertown Port, reporting through the Town Manager to the Mayor and Town Council. - Initially develop and annually update the detailed operations and pricing policies of the Port. - Coordinate the Port s management with the Town Manager and the Management Services provider. - Make recommendations to the Town Council regarding operating budgets, capital improvements and management arrangements. - Coordinate marketing of the Port with Kent County Tourism. 31

32 Recommended Management Enter a Management Services Agreement with an independent contractor to: 1) Collect rents and revenues and pay expenses. 2) Enter contracts with seasonal slip holders. 3) Deal with complaints and inquiries and report to the owner. 4) Employ, supervise, and discharge agents, employees,subcontractors and handle their compensation, payroll taxes, unemployment insurance, workmen s compensation, etc. 5) Provide administrative services, including maintaining financial records and reporting, managing insurance issues, and preparing operating and capital budgets. 6) Market and promote the entire facility and act as the owner s agent for the land facilities. 7) Coordinate with a contractor who will operate the marine service business and perform day-to-day operations, or directly carry out these functions.* * Landon Marine Services now carries out many of the above services admirably. 32

33 Other Chesapeake Bay Municipal Marine Facilities Cambridge Vienna Nanticoke Cedar Hill Pokomoke City Rock Hall North East Harve de Grace Leonardtown Many were driven by the same economic forces at work in Chestertown. Many were partially financed by public funds, prior to the recession. 33

34 CPC Recommended Next Steps Review the Appraisal Report and the Final Report of the CPC. Consider the feedback from the public information meeting held on Decide on whether to make an offer to purchase and develop specific terms and conditions. If yes: - Draft a contract of sale and negotiate with the owner. - Obtain a bridge loan and long-term financing. - Begin applying for public grants. - Establish governance structure and operating agreement. 34

35 Phase 1 Schedule Complete and present CPC Report Prepare data for public forum Make purchase decision Planning Finance Draft Agreement of Sale Negotiate Agreement of Sale Obtain Bridge Loan Commitment Develop and sign Operating Agreement Create and approve governance charter Settle on purchase/begin operations Process and close on CDA municipal bond Apply for USDA(RBEG) grant Apply for DNR (LWCF) grant Weeks After

36 Phase 2 Schedule Perform engineering and marine design Develop Project Management Plan Planning Financing Construction Apply for DNR(BIG and WIG) grants Develop bid package and select contractor Undertake permit and licensing processes Perform environmental compliance work Dredge and install new marine facilities Months after

37 Phase 3 Schedule Select architect and site planner Develop site plan/ arch. designs/ budgets Develop Project Management Plan Planning Financing Construction Apply for DBED, SHA, DHCD (CLP) grants Develop bid packages and select contractors Obtain approvals and permits Construct all land-based facilities Demolish old buildings and grade site Install parking lots, parks, trails, landscaping Months after

38 Bottom Line In my view, our effort to gain control of the marina is a lynch pin to our economic future and specifically of our downtown. We have a unique opportunity now to purchase the marina. If we are unsuccessful, I fear the marina will ultimately be privatized and we will see the elimination of public access to the Chester River, the elimination of job opportunities, and the permanent loss of this cultural and economic resource. Margo Bailey to the Director of DBED This is something we can do if we set our minds to it. It will be a valuable legacy to future generations. 38