John Kelley Reports: Port Votes to Negotiate with APEX

For immediate release: Mar 11, 2010

Shipbuilder would need thousands of skilled trade workers.

After drama, intrigue and parliamentary bungling the Port Commission voted 7-0 to have staff negotiate with APEX Group of Companies for a proposed long term lease of the whole 1,000 acres of Naval Station Ingleside and adjoining port property. APEX wants to lease the property for one of its companies Swiftships and its subcontractors for a ship building operation that could ultimately yield thousands of high paying trade jobs.

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Even before the meeting things got off to a dramatic start when Ingleside City Councilman Willie Vaden was told that Ingleside City Council Mayor Stella Herrmann and City Manager Jim Gray would not be allowed to participate in closed sessions. That was a commitment Port Chairman Mike Carrell and San Patricio Commissioner Judy Hawley had pledged last week at an emergency Ingleside City Council meeting regarding Ingleside’s concerns about being left out of development discussions.

The original agenda had an executive session scheduled to receive information from Texas A&M’s port development director Dennis Beal as its first major item of business. Carrell however looking out at a standing room only crowd of heavy hitting economic interests including port industry and political leaders from both Nueces and San Patricio Counties and announced he would open up the session to the public.

Beal/A&M Presentation on Suitors
Beal reviewed Texas A&M progress on leasing or selling NSI land and facilities. At one point Carrell went to great length to ask Beal to explain his four phase plan companies had to complete before a presentation could be made to commissioners. Beal explained the phases as 1) the company makes an inquiry to A&M, 2) if A&M thinks they fit with the port’s specified vision they call them back and ask for a broad brush proposal, 3) A&M then does due diligence (Beal said it takes a long time) then 4) Beal decides to make a presentation to the NSI committee. In one glaring ironic note, the port had specified to A&M that no smokestack industries would be accepted while they have advocated placing the coke burning Las Brisas electric plant on port land near downtown.

Possible projects include:

1. N & N Associates is interested in building a rehabilitation hospital for 400 patients and 250 staff on 86 of the 434 acres adjacent to the base owned by the port. Beal said the negotiations had been going on for a long time. He stated they may be ready to present a proposal to the Commissioners in a few weeks.

2. The Texas General Land Office (GLO) is interested in supporting the efforts of the Wind Alliance project (made up of 14 universities and four private companies) to use 34 acres for future research and development. No actual offer at this time.

3. Beal said GLO also has sent them a letter of interest in “potential acquisition” of NSI and the surrounding property. GLO’s offer contained no plan for immediate development and because it is a state agency it would not pay local taxes but would contribute any profits from development into the Texas Permanent School Fund. It would put the state supported GLO in direct competition with private development companies, something Republicans, including Governor Rick Perry have condemned in the past as state sponsored Socialism.

4. The Texas Engineering Extension Service (TEEX) a state agency that trains fire and emergency management personnel is interested in providing a partially manned fire station on the base in exchange for having the use of facilities to expand their training program. No cash would be involved for at least two years.

5. An unnamed company who has an $18 million contract to create an intelligence center to assist the South Texas Sheriff’s Association needs 15,000 square feet of space.

6. Six undetailed smaller offers.

7. Beal mentioned APEX as one company and said they would meet that afternoon. Beal said nothing else about APEX, Swiftships or the deal. APEX company officials later said that the talks didn’t take place because Beal failed to follow through on an agreement to give the Commissioners an accurate portrayal of Swiftships. Beal was berated in a March 8th letter by Former Congressman Curt Weldon for what he described as an assessment of APEX that was “…nothing shy of malpractice, and possibly libelous.” to port officials in response to APEX’s initial offer (see “Ingleside Council to Port: Include us or no rezoning.” Home page.). APEX had proposed a 99 year lease and would assume development responsibility and M&O costs.

8. Beal said they received an offer for purchase late yesterday from Triple Five the company that owns the Mall of America. Triple Five is a Canadian conglomerate that has oil and gas exploration companies in Canada whose primary holdings are in real estate, amusement parks and leisure products. Beal seemed to have little information about the company itself and read word for word a company statement from their website.

Beal reported that Triple Five was interested in developing a service site for deep water oil drilling. Commissioner Ken Berry pointed out there is already too much capacity for the industry and as a result Gulf Marine is winding down operations, Kiewit’s work was slow and Harbor Island currently was vacant of any rig building or service operations.

Beal stated that Triple Five would be ready to make a presentation to the NSI subcommittee by the 22nd of March. If the port accepted the initial proposal Triple Five would enter an agreement to take on the maintenance and operations costs (M&O) of $500,000 a month for at least the 120 days it would take to do a feasibility study. Then an offer would be made.

Carrell concluded the Beal presentation by stating the proposals were still developing and he wasn’t sure what to do, maybe a little of everything. At that point Berry asked Beal a series of questions:

1. Was the hospital ready to contract today? Beal: no.
2. Was the GLO ready today and where would they get the money? Beal: no, don’t know.
3. Would TEEX be contributing any money for lease of the fire training facilities? Beal: no.
4. Was Beal aware that the Coast Guard announced that because of budget cuts they would be dropping all Homeland Security functions and returning to its traditional search, rescue and standard patrol operations? Beal: no.
5. What has Beal done to talk to Ingleside and Ingleside on the Bay to discuss their infrastructure and tax situations? Beal stated he took visiting proposers to Ingleside to discuss incentives but left that to them. He said he “was relatively familiar with what they do.”

Commissioner Francis Gandy asked Beal about four projects that Beal had discussed with them some months ago. Beal said they were still talking but had nothing else to present concerning those. Hawley asked at what point Beal thought they should include Ingleside council in the discussions? Beal answered after the transfer had taken place on May 1st.

At that point Commissioner Bobby Gonzalez stated it was important to include Ingleside and Ingleside-by-the-Bay as early as possible in any discussions as they provide infrastructure to the base. He went on to tell Beal it was important to make companies feel welcome and give every company a fair opportunity to compete.

Berry proposed deadline rejected.
Commissioner Berry then made a motion seconded by Gandy to have Port staff with A&M assistance negotiate with all parties including APEX and requiring Port staff to make a presentation with a recommendation on the APEX proposal to the Commissioners in 30 days. APEX had been rumored to have set a deadline of April 1 for the Port to make up its mind because they must secure property to build ships before requesting expanded contracts through the federal appropriation process which begins the next fiscal year in October.

At that point Carrell ally, Commissioner Richard Borchard made an unintelligible motion seconded by Hawley to run the process with due diligence to be done by A&M and set a no deadline. It took three times for Borchard to articulate what it was that he wanted. Berry declined the amendment to his motion but Carrell took a vote anyway.

One of the issues was what was the status of the Texas A&M MOU. Jimmy Welder, Port Counsel, explained in answer to a question by Berry that currently A&M gets no commission on agreements for lease or purchase of NSI property. Kostelnik pointed out in that case the Port is under no obligation to include them in any negotiation. That would change if agreements were made after A&M signs its new proposed agreement, yielding millions in commissions for them even on deals they didn’t bring.

Concerns about the longer deadline led Hawley to suggest that the Commissioners could have an earlier meeting if needed. This led Gonzalez to ask Carrell if he would call a special commission meeting if the APEX deal was ready for presentation. Carrell had previously dismissed attempts by Gonzalez and Berry to get the APEX deal on the agenda. Carrell pledged to have a meeting if staff had something to present.

The vote was 4-0 (Carrell, Hawley, Borchard, Kostelnik) with three abstentions to accept the amendment with no deadlines. Berry then asked for the amendment to be reread. Counsel Welder under questioning from Berry stated that the amendment was in conflict with the original motion and it would be better to vote Berry’s proposed amendment up or down. The measure to put Berry’s proposed deadline in place failed 4-3 with the four who supported Borchard’s amendment voting against Berry’s motion.

Hawley saves an almost lost opportunity.
At that point APEX representative got up to leave. Judy Hawley jumped in to ask him to speak to the commission which Carrell approved. Mustafa Tameez representing APEX stated, “…our interest is very simple, we think there is a great facility at Ingleside and are excited about this opportunity because there is a trained and talented work force that could help us expand our shipbuilding operations.” Tameez expressed politely but firmly that they were interested in expanding there operations at Ingleside, had an initial meeting were asked to submit a proposal which they did (to A&M) and then “…everything came to a screeching halt.”

Tameez outlined the urgency for both parties, saying APEX needs a facility to comply with the requirements of the next fiscal year’s federal appropriations process and the Port wants to avoid the $6 million a year maintenance and operations cost which will start May 1, a cost APEX would absorb. He went on to say “Candidly, this is a great facility, but there are others in the United States and we will begin our process of looking at facilities if there is no consensus in the community. Naturally we want to go somewhere where we are wanted. If we are welcome here we would love to partner with all stakeholders.”

He went on to state that “We’re concerned, because we’ve come with a proposal of a lot dollars, and if there is no indication between us, if we’re not allowed to negotiate this, then there are other options. We think there are two critical parts to this, 1) the facility itself is ideal for us for our expansion, 2) the labor pool that is available in this market in South Texas, that’s why we are here.” Tameez went on to explain how Swiftships had a need to begin building ships as soon as possible to meet not only U.S. but world demand. He went on to explain “we think this is the right place for us, but if we aren’t able to negotiate this, if there isn’t really isn’t a consensus in the community that you are looking for a partner to come in and take over this fantastic opportunity, that’s fine, but we need to understand that. We’re ready to go today.” After several comments, Tameez pointed out, “…just so it is clear, right now we are not engaged in negotiations at this time.

The potential of thousands of jobs.
To an area that has 18,000 people unemployed in Nueces County alone, and the disappearance of over 7,000 jobs with the closing of NSI, no question is bigger than what kind and how many jobs? When asked about the long term job projections, Tameez answered that this is the fastest growing area of ship building and introduced Capt. Jeff Perin USN (Ret.). Perin pointed out that not only did they have contracts with the U.S. Government but also to build the Iraq Navy. He talked about the kinds of employees that would be needed included engineers, electricians, helpers, welders, ship fitters, crane operators, pipefitters, carpenters, and everything that goes into supporting that large of an operation and facility. Pay scales for helpers would be by the hour range of low teens for helpers to the low 20’s in trades, more where it is more competitive for skilled labor.

He pointed out that they are the world’s leader in small coastal, harbor and riverine patrol craft and have the potential for thousands of jobs in years to come. They have doubled their Louisiana workforce in the last year and are ready to triple it to 375 on their 35 acre facility. In addition to Swiftships they would bring subcontractors including Northrup Grumman, MSI, QED, and other companies to build out the whole 1,000 acres as additional contracts were secured.

Francis Gandy then made a motion seconded by Judy Hawley to begin negotiations between Port staff with the assistance of A&M and APEX. The motion passed 7-0.

Perin in a later interview said the largest boat they are currently planning to build would be a fast missile boat over 200 feet long. They also train craftsman to meet their ship building standards. They will bring in companies that will develop and build their own workforces as well. Asked how they could expect such big growth, he explained that “it is the right time of the century for Swiftships.” He stated that most of their buyers are foreign governments with U.S. contracts being about 30% of their business that could expand to 50%.

Capital investments would include building ship assembly facilities and travel lift systems to move ships to water. APEX would lease the facility, invest the capital required and absorb the maintenance and operations costs. When asked how many jobs would be created, Perin said, “We wouldn’t be interested in a thousand acre facility if we weren’t planning on creating thousands of jobs.” Tameez reinforced that with the comment, “Candidly we wouldn’t take on this financial responsibility and risk if we weren’t confident in our ability to use it, otherwise we would just buy a ship yard in Mississippi.”