SPECIAL JOINT MEETING PORT OF OLYMPIA COMMISSION & TUMWATER CITY COUNCIL MINUTES OF MEETING September 11, 2012 Page 1 of 8

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1 September 11, 2012 Page 1 of 8 CONVENE: PRESENT: 5:32 p.m. Mayor Pete Kmet, Councilmembers Joan Cathey, Ed Hildreth, Judith Hoefling, Nicole Hill, Neil McClanahan, Tom Oliva, and Betsy Spath. Port Commissioners George Barner, Jr., Jeff Davis, and Bill McGregor. City Staff: City Administrator John Doan, City Attorney Karen Kirkpatrick, Public Works Director Jay Eaton, and Recording Secretary Valerie Gow. Port Staff: Executive Director Ed Galligan, Finance Director Jeff Smith, Airport Director Rudy Rudolph, Communications Manager Kathleen White, Senior Manager Business Development Mike Reid, Director of Environmental Program Alex Smith, and Real Estate Operations Manager C larita Mattox. Others: Brewery Project Manager Michael Matthias, Jackie Barrett Sharar, and Clydia Cuykendall. OPENING REMARKS: TUMWATER MAYOR, PETE KMET: PORT OF OLYMPIA COMMISSION PRESIDENT, JEFF DAVIS: Mayor Kmet welcomed everyone to the meeting. Everyone provided selfintroductions. Mayor Kmet acknowledged that it has been some time since the last joint meeting. The City and the Port have mutual interests in property located in Tumwater. The meeting is an opportunity to provide an update and exchange ideas for the next step in the relationship. Commission President Jeff Davis said the Port recognizes its relationship with Tumwater and the assets that both entities share in the area. Earlier in the day, a very productive session by the Commission identified next steps over the next 12 years in the Port s strategic planning process. The City of Tumwater is part of the vision as the Port moves forward. The joint meeting is the first step of a good relationship. PLEDGE OF ALLEGIANCE AND MOMENT OF SILENCE: Mayor Kmet acknowledged the 11 th anniversary of the attacks on the United States. Three hundred forty-three firefighters and paramedics lost their lives in the attacks, 23 New York City police officers lost their lives, 37 Port Authority officers lost their lives, and 55 Pentagon employees lost their lives. Since then thousands of U.S. troops have lost their lives or have been severely injured over the last 11 years fighting two wars. Mayor Kmet led the pledge of allegiance. Everyone in attendance observed a moment of silence in memory of those who lost their lives on 9/11. OVERVIEW OF PORT OF OLYMPIA STRATEGIC PLAN: Commission President Davis introduced the presentations. Executive Director Galligan commented on the close working relationship with City Administrator Doan and City staff. There has been tremendous progress in working on a variety of projects to accomplish with the City. The presentations will cover some plans for the Tumwater area that will require a close working relationship with the City in upgrading and increasing the competitiveness of Port property to create more jobs, more income to the City, and increasing vibrancy of the area. Finance Director Jeff Smith provided an overview of the Port.

2 September 11, 2012 Page 2 of 8 Ports are municipal corporations organized as a special purpose district in Washington State. Ports are the only public agency whose primary mission is to promote economic development in partnership with private business and other governmental entities. Today s ports build and operate shipping terminals, marinas, airports, railroads, industrial sites, parks, and recreational facilities. The Port of Olympia has a shipping terminal, airport, industrial properties, marina, and the Boatworks. The Port also sponsors a Foreign Trade Zone (FTZ). The establishment of ports began in the early 1900s. In 1911, many states were facing the problem of private ownership of the waterfront enabling a monopoly by a few parties to charge prices for access to the waterfront. Th e Washington State Legislature addressed the issue and created law allowing citizens to establish ports within counties. Washington Public Ports Districts were initially authorized to provide marine shipping facilities, rail, and water transfer facilities. Since then, additional authorities were granted to build and operate airports in 1941, establish industrial development districts in 1955, develop trade centers in 1967, and develop economic development programs and promote tourism in the 1980s. Many port laws have been in place since 1911 with the most important provision remaining where ports are governed by federal and state laws. Executive Director Galligan added that ports within the state are the only ports in the nation that have elected commissions. Throughout the United States, port commissions are appointed by an elected body, the governor, or a combination of county, city, and state authorities. This is the only state where citizens elect the governing body of ports. Director Smith reported the governing body can include either a threemember commission or a five-member commission. Thurston County has a three-member Port District representing specific districts in the county. Port commissions establish long-term strategies, create policies, guide development and growth, are responsible for operations of the port, establish the annual budget, approve tax levies, and hire professional staff. Commissioner Barner represents District 1, Commissioner McGregor represents District 2, and Commissioner Davis represents District 3. Ports can levy a tax of up to $.45 per $1,000 of assessed valuation. Ports can issue general obligation and revenue bonds to encourage growth and build facilities and create jobs in industries within the port district. Ports also have the power of eminent domain to acquire real property when needed. The source of funds for ports include service and rental fees, hangar rental and airport landing fees, fees for toll bridges, tax levy, bonds, and grants. Director Smith presented an aerial view of the Port s properties in Tumwater. The Port has two lines of business in Tumwater of the regional airport and the New Market Industrial Campus. The airport is a general aviation airport with limited airport-related activities. The port s primary use of the property is for real estate tenants ranging from limited fixed base operations to restaurants and light manufacturing. Within the New Market Industrial Campus, the Port leases property to tenants for office, retail, commercial, and other light industrial activities. Of the 800 acres, approximately 35% is leased and approximately 60% is available for development. There is significant opportunity for the Port and the City to work together. Within the New Market Industrial Campus, there are 2,200 direct jobs on

3 September 11, 2012 Page 3 of 8 OVERVIEW OF PORT OF OLYMPIA STRATEGIC PLAN: Port properties. Personal income attributed to those jobs total $69 million in New Market Industrial Campus and $8.6 million at the airport. State and local taxes generated from New Market properties are $19.8 million and $2.1 million from the airport. The Port receives leasehold tax in lieu of property tax from tenants. The state remits the City s share of the property tax to the City. In looking forward, the Port is appreciative of the work by the City to assist the Washington State Employees Credit Union develop on Port property in Tumwater. The Port looks forward to working together to encourage more development. The Port is requesting the City s support as the Port seeks to clean up the waterways and dredge the shipping channel. Councilmember Oliva commented on the importance of working together to attract the kinds of industries the City would like to locate in the area. Director Smith said the Port is interested in receiving input on ways to attract specific industries. Councilmember Oliva suggested pursuing additional discussions but noted the area is located next to the freeway and the Port and the City should take advantage of that proximity to attract visit ors and customers from the freeway. Councilmember Cathey asked how many of the direct jobs within the campus are state jobs. Director Smith said the figures are from a study conducted in 2009 on Port properties. Executive Director Galligan said the study was completed only on Port property through phone calls to each business asking for the number of employees and payroll information. Senior Manager Mike Reid added that with the exception of the Washington State Patrol located on airport property, the Port s only state agency offices include the Attorney General s Office and the State Office of Printing, as well as the Timberland Regional Library. Councilmember Cathey asked whether the Port collects leasehold tax on state-occupied buildings. Director Smith affirmed the Port collects leasehold taxes on those properties as well. Executive Director Galligan introduced Alex Smith, Director of Environmental Programs. The presentation is on the Port s cleanup and dredge program for Budd Inlet. The program is important to Tumwater because the Port s impacts affect the entire county and all cities. More jobs and commerce created by the Port can lead to more investment in the community. The proximity of the Port to the freeways and between Seattle and Portland create an ideal situation for the Port. However, the Port has not maintained its fundamental highway of the channel and the port berths. The Port is pursuing authorization for a dredge. The program is massive in terms of obtaining permits. The Port is seeking the City s support in moving the program forward. Director Smith reported on the two projects, which have changed in scope over the last several years. The projects include a maintenance dredge to the berth areas and Swantown Boatworks to address short-term needs. The longer term project is the cleanup of Budd Inlet sediments. Director Smith displayed an aerial photo of the Port peninsula in 1963 and today. The majority of the Port s business at the Marine Terminal is as a gateway for commerce. The Port s roadways are navigational waterways and the berth areas. Currently, those areas are inaccessible to vessels. The federal government has responsibility to dredge some of the channels, which is a longer term project. The Port is responsible for dredging the berth areas. The Port has lost business because of inadequate depths. The Port has three berth areas and only one is functional. The terminal

4 September 11, 2012 Page 4 of 8 contributes more than $500,000 annually. She identified areas the federal government has the responsibility to dredge. Swantown Marina is the seventh largest marina in the state and contributes to the local economy. The average boater to Swantown spends $150 a day in the community. Swantown Boatworks is also a regional asset and is needed by the boating community for boat repairs. At low tides some areas only have eight inches of depth requiring shutdown of operations during low tides. The Port is moving forward to dredge the berth areas of the Marine Terminal, a portion of the turning basin, and Swantown Boatworks. The dredges are considered maintenance dredges. The dredge in the berths will go to -42 (authorized depth). A layer of clean sand will be added in the event that contaminated material is exposed. Permit applications are anticipated to be submitted for the maintenance dredge by the end of the month with dredging occurring during the 2013/2014 dredging season. The second project is longer term cleanup of Budd Inlet sediments. In 2007, Department of Ecology (DOE) identified the sediments as a cleanup site. DOE has sampled sediments as well as the Port and the average concentration in Budd Inlet is 19.9 parts per trillion of dioxin, which is the primary contaminant of concern. It s above the concentration that can be deposed in an open water disposal facility. Higher concentrations have been identified near the Port berths and stormwater outfalls. The Port recently amended an Agreed Order with DOE requiring the Port to conduct some additional investigation into the quality of sediments around the Port peninsula as well as beyond the historical operations of the Marine Terminal. Stormwater outfalls will be sampled along East Bay and West Bay. The Port will develop a cleanup plan and pursue some additional dredging in the context of the cleanup activity. Councilmember Spath asked whether sediment from Capitol Lake will continually impact the Port. Director Smith said sediment from the lake is a large amount. It contributes 3 to 4 centimeters of sediment each year, which requires maintenance dredging if the state doesn t dredge Capitol Lake. Councilmember Hoefling asked whether the Port s project is contingent on the decision by the state to either remove or retain the dam. Director Smith said staff has communicated with state representatives about the state s plans. The state at this point has no funds for returning the lake to an estuary. The state has $250,000 to begin the permitting process for a dredge of the lake. The Port s project must continue moving forward regardless of the state s process. Councilmember Hildreth asked whether the Port has experienced a build-up or a trend of increased sediment flowing from the lake into Budd Inlet. Director Smith said the amount is unknown but there has been a recent increase in sediment load caused by the draining of the lake to freeze mud snails. Additionally, since the lake hasn t been dredged in many years, sediment tends to flow over the dam. Discussion followed on the potential listing of the pocket gopher in the airport area as well as potential contamination of the old tank farm site. The old tank site has been cleaned and monitored. Completion of the cleanup activity is pending receipt of an acceptance letter from the state. Mike Reid, Senior Manager Business Development, reviewed the Port s current strategic planning process. The plan includes nine measured goals (targets). One is specific to Tumwater to work with the City of Tumwater

5 September 11, 2012 Page 5 of 8 OVERVIEW OF PORT OF OLYMPIA STRATEGIC PLAN: to generate 15 acres of commercial and 30 acres of industrial development on Port properties in Tumwater over the next 12 years. Some challenges have been identified. Some of the properties are not competitive with other industrial campuses in the area. Additionally, the right uses need to be identified as well as the marketing to attract those uses. Investments in infrastructure will be necessary to increase the competitiveness of the properties. The Strategic Plan will be monitored annually and measured to gauge success. Executive Director Galligan offered to provide the Council with a copy of the draft plan that will be released for public comment later in the month. C ommissioner Barner invited the Council and staff to attend the Commission s work session on the Strategic Plan on September 20 at 1:30 p.m. at the Airport Terminal. Manager Reid reported a public outreach component is included for the plan for public feedback. He noted that 15 acres of commercial development would encompass a majority of the Port s undeveloped commercial properties along Tumwater Boulevard. The Port has more acreage of industrial property. Executive Director Galligan added that the City agreed to be the Certification Agency on a grant received from Thurston Regional Planning Council to begin some planning design on roadway infrastructure in the area. Mayor Kmet said that on behalf of the City, the inclusion of the goal in the Strategic Plan is good news for Tumwater. He looks forward to working with the Port to help prompt some development in the area. Commissioner Barner encouraged the Council to discuss preferences of uses to recruit for the commercial area to assist the Port in its marketing efforts. Mayor Kmet said the City has a detailed Town Center plan for the area behind City Hall. Both the City s comprehensive plan and the Port s plan provide some direction. He agreed that as the City learns more about the Port s plans, those uses can be identified. Councilmember Hoefling commented positively on the information conveyed. She recommended expanding the discussion to include the Foreign Trade Zone, as it s likely the FTZ will be an important component in the uses that may locate in the area. Commission President Davis pointed out that the Port s vision of the area in Tumwater is not smoke stacks. The intent is for low-impact and carbon reducing footprint uses because the Port has a goal of reducing carbon by 25% by FTZs are a tool that can assist businesses in conducting business. As a Port, it is possible to facilitate that activity. The Port has the elements of a successful manufacturing base because of the availability of property, low taxes, access to I-5, a great community, and a willing workforce. Manager Reid reported the Port operates FTZ #216. FTZs were created in the 1930s to facilitate trade and increase the global competitiveness of U.S.- based companies. FTZs encourage and expedite U.S. participation in international trade. FTZs create a level playing field creating U.S. jobs, a strong economy, and retaining technology in the U.S. FTZs eliminate duty and help expedite and reduce the cost of international trade business. Other benefits include operational efficiencies,

6 September 11, 2012 Page 6 of 8 administrative savings, savings on merchandise, and duty deferral. Adminis trative savings can be substantial as it reduces daily entries to once weekly especially for high volume companies. FTZ #216 is a multi-jurisdictional FTZ. FTZ #216 encompasses a radius around the Marine Terminal (excluding King and Pierce Counties) up to Bremerton and south to Lewis County. The Port is the grantee of FTZ #216. Recently, the Port transitioned to an alternate site framework, which extended the FTZ to cover Thurston County and the other locations rather than individual sites within the boundary. Currently, one business in Tumwater is a member of the FTZ. The business is an importer of fine wines. The wines are imported and then relabeled to meet U.S. labeling standards. The company is able to bypass the U.S. Customs process at the Port of Seattle and manage that process within its warehouse. Commissioner McGregor said the opportunity for collaboration between the Port and the City provides benefits to the community. He looks forward to a continuing relationship. Commissioner McGregor left the meeting. REVIEW OF ACTIVITIES IN TUMWATER: City Administrator Doan provided an update on City activities. He agreed with earlier comments about the great working relationship with the Port. He s met with Port staff about the impact of the gopher listing on both Tumwater and the Port. Brewery redevelopment continues to be the City s highest priority. That process began in April with the hiring of Michael Matthias as the Brewery Project Manager. The focus is resolving infrastructure issues, environmental issues of flooding and removal of contamination on the property, and working on implementing zoning and development regulations based on the community s vision. The Brewery Neighborhood planning process is beginning for the 50-acre neighborhood considered Tumwater s historic downtown to create more opportunities for redevelopment and preparing the area for the eventual redevelopment of the brewery properties. Another planning project is the Capitol Boulevard Planning process through a public process to improve the boulevard for cars, bicyclists, and pedestrians in a safer environment as well as improving the aesthetics of the boulevard to increase commerce viability. The possibility of the pocket gopher listed as an endangered species has the potential of negatively impacting both the Port and the City. Development activity continues throughout the City to include the credit union, which will create a great start to investment in the Town Center. A hotel project is in process along Capitol Boulevard and Pepsi recently completed a 50,000 square foot expansion. Light industrial is planned of 1.5 million square feet of light industrial uses and another 1.5 million square feet of industrial space is currently involved in the permitting process. A 200-unit multi-family project is proposed off Rural Road as well as a mixed use five-story senior housing project on the old Mega Foods site. Single family development continues to be strong in Tumwater. City Administrator Doan responded to Commissioner Barner s questions concerning any resolution of the legal property issues of the brewery property and the status of the old brewhouse redevelopment activity. At this point some issues are resolved; however ownership is not entirely resolved to prepare moving the property forward for future purchase. The

7 September 11, 2012 Page 7 of 8 City continues to work with the owners of the old brewhouse. Councilmember Oliva suggested the Port should consider providing the FTZ presentation to the Tumwater Area Chamber of Commerce. He also suggested briefing the Commission on the status of the brewery. Councilmember Oliva referred to demand for coal in Asia and asked whether the Port is contemplating the export of coal. Commission President Davis indicated the Port has no plans to export coal. Executive Director Galligan added that the Port has many business opportunities for cleaner commodities. Councilmember Hildreth asked about other infrastructure improvements the Port contemplates as a need. Executive Director Galligan referred to other industrial parks in the county as an example of desired sidewalks, bike trails, lights, and many other amenities the Port campus currently can t offer to potential tenants. Manager Reid added other specific needs are high speed internet and stormwater management. Having some clarity in permitting in terms of what can be accomplished would help increase competitiveness in attracting new business. Councilmember Spath asked about the potential of the brewery property considered as a FTZ. Manager Reid affirmed that any area in Tumwater could be considered as part of the FTZ. Councilmember Hill said she looks forward to reviewing the Port s strategic plan. She asked about the potential of the Port donating surplus land for a dog park as an interim use. Executive Director Galligan said the issue has been discussed and the Port is considering a parcel to donate that conforms within the restrictions of the airport. He added that although the number one priority for the Port is to complete the dredging project, that project does not subordinate to the other eight targets in the strategic plan. The nine targets are moving forward concurrently. Additionally, the Port has articulated the benefits and the challenges associated with each target. Mayor Kmet referred to the Port s offer of a parcel for the dog park. He understands it is located at the south end of a wooded area that isn t practical. It appears there may be some potential opportunities on the north end the Commission could consider because of closer proximity to City. Th ere could also be some synergy between existing businesses and users of the park. He suggested exploring opportunities to find a location that adheres to the airport restrictions. Executive Director Galligan offered to consider the request. Councilmember McClanahan commented on his desire to continue good communication between the City and the Port because of the mutual benefits to each agency. Mayor Kmet reported on the City s regional partnership for legislative priorities. The main channel dredging was identified last year as a project to pursue for funding. The channel is an asset for the region and warrants continued support. Councilmember Hoefling thanked the Commission for providing an update. She supported working together on an ongoing basis. Mayor Kmet reassured the Commission not to consider the City s efforts on Capitol Boulevard and the brewery as competition to the Port s efforts at the airport. All the efforts are complementary. Improving Capitol

8 September 11, 2012 Page 8 of 8 REVIEW OF ACTIVITIES IN TUMWATER: Boulevard will also benefit Port properties. Commissioner Barner commented on the Port s goal and desire to continue an open dialogue with the City. Councilmember Oliva commented that at the last meeting of the Thurston Regional Planning Council, staff announced that the Washington State Department of Transportation had requested removal of the signal improvements on Tumwater Boulevard and the interchange. Another member suggested moving the project to a pending list instead of removal of the projects. That project is important to the Port, as it s a major access to the New Market Industrial Campus. Mayor Kmet said the City has made some significant steps in positioning the City for improving the interchange. The interchange will eventually reach capacity. Commissioner Barner commented on his green industrial park concept, which focuses on workforce development. Educational and labor union representatives met in July to discuss workforce development. A follow up meeting is planned in October. There is interest in developing a collaborative effort between industry, education, and labor. A white paperw as developed by Alan Hardcastle and Kyra Kester on growing Washington s green economy. The paper is on the Port s website. The paper addresses the need of the educational community to partner with economic development to plan for and develop a workforce prepared to step into those jobs. Commissioner Barner commented about Mike Harbour leaving Intercity Transit to accept a position at Sound Transit. He encouraged ongoing efforts to extend Sound Transit service to the region. Mayor Kmet referred to previous discussions by the Transportation Policy Board and meetings with representatives from Sound Transit. A preliminary white paper was developed detailing the requirements for extending Sound Transit. It would be enormously expensive as well as challenging. Commission President Davis recommended following up on a briefing to the Commission about the brewery project and scheduling another joint mee ting at the first of the year. ADJOURNMENT: With there being no further business, Mayor Kmet adjourned the meeting at 7:06 p.m. Prepared by Valerie L. Gow, Recording Secretary/President Puget Sound Meeting Services, psmsoly@earthlink.net