The Wrangell Port Commission voted to renew three boat yard leases Thursday after a long discussion about possible changes to those leases.
The lease issue started last month with a request by Jenkins Welding & Aluminum Fabrication to renew its boat yard lease for another five years. The port commission approved it and sent it to the borough assembly for final approval. But the borough assembly sent it back to the port commission, because the commission is in the process of reviewing rates for other harbor department services. Some assembly members thought the commission might want to hold off on renewing leases until all rates could be looked at.
The commission renewed the leases without making changes. But first, commissioners and business owners had a long discussion about boat yard lease lots.
Commissioner John Martin called the lease rates charged for businesses operating out of the city-owned Marine Service Center “artificially low.”
“A 5,000 square foot lot at 8 cents [per square foot] is $400 a month,” Martin said. “You can’t rent an apartment for $400 a month. I’m also looking at a travel lift that has 15 years left on it that has to be replaced.”
He said rate increases will be needed to help plan for the future of the boat yard.
Harbormaster Greg Meissner agreed.
“If we’re not careful, what we could inadvertently do to the boat yard is the same thing cities all over Alaska have done for 50 years,” Meissner said. “And that is, not bill or create enough funds to replace and maintain things properly.”
Meissner added that changing lease rates in a fair way could be challenging because businesses in the boat yard started their leases at different times, and not all lease holders are paying the same rates.
Commission Chair Clay Hammer emphasized the fact that the lease holders bring business to the boat yard and invest money in improving city-owned land.
“Maybe we’re only leasing that spot for $400 a month. But what’s our return on that, as far as the other things it brings into the yard? I think the return that we’re getting far exceeds the $400 that we’re charging for that,” Hammer said.
Hammer added it takes about seven years to establish a business, so he thinks lease holders should have a relatively flat lease payment until they really start to make a profit.
Chuck Jenkins of Jenkins Welding & Aluminum Fabrication and Don Sorric of Superior Marine Services both hold leases in the boat yard and were at the meeting.
Jenkins and Sorric did not voice opposition to rate increases, but they said they were not happy about the uncertainty surrounding the future of their leases. They said they would want to know about rate increases well ahead of time, as well as the reasoning behind the increases.
Meissner suggested determining the actual property value of the lease lots in the boat yard and using that as a basis for rates.
Sorric also took issue with the five-year duration of the boat yard leases. He asked for a 50-year lease, and said it is common in other shipyards.
“There are all kinds of reasons for that. Number one is incentive for permanent improvements,” Sorric said. “I’m looking at $160,000 to pave my two buildings. Paving my two buildings holds all kinds of advantages, but those advantages have to come with a return on investment.”
He said he wants his business to be sustainable.
Jenkins said he would also be interested in a longer lease. He and Sorric said they still want to invest more in structural improvements to their lease lots, but that is hard to do when they are unsure of the future of their leases.
The meeting ended with commissioners agreeing to review lease rates and lease duration after they tackle changes to harbor and port rates.