8a Memo Maritime Innovation Center
COMMISSION AGENDA MEMORANDUM Item No. 8a ACTION ITEM Date of Meeting May 14, 2019 DATE: April 26, 2019 TO: Stephen P. Metruck, Executive Director FROM: Dave McFadden, Managing Director Economic Development Stephanie Jones-Stebbins, Managing Director Maritime Tim Leonard, Capital Project Manager SUBJECT: Maritime Innovation Center (CIP #C801084) Amount of this request: $1,850,000 Total estimated project cost: $10,500,000 ACTION REQUESTED Request Commission authorization for the Executive Director to (1) authorize an additional $1,850,000 in design funding for the Port's redevelopment of the historic Seattle Ship Supply Building at Fishermen's Terminal (FT) into a new Maritime Innovation Center building and (2) execute an amendment to the existing service agreement for Fishermen's Terminal Phased Design Services, with Miller Hull Partnership LLP, in the amount of $1,000,000 to complete the final planning, design and permitting of the Maritime Innovation Center, for a new not-toexceed contract value of $5,000,000 The requested Maritime Innovation Center design authorization brings the total authorization to date for CIP #C801804 to $2,150,000, out of an estimated project cost of $10,500,000. EXECUTIVE SUMMARY As part of efforts to redevelop Fishermen's Terminal, staff is working to develop a Maritime Innovation Center that will help the region's maritime industry adopt advanced technologies and stimulate innovative entrepreneurship. Successful innovation centers can help sustain maritime industries and help ports modernize operations and key lines of business. This is a significant opportunity for the region: The global "Ocean Economy" is growing.It is valued on a conservative basis by the Organization for Economic Cooperation and Development (OECD) at $1.5 trillion (2010) and growing to $3.0 trillion by 2030; The Seattle region is rich in maritime resources and heritage, but this is under recognized by the general public and policy makers being overshadowed by high-tech. The maritime industry is also not particularly innovative; The Port has several facility options that could support a Maritime Innovation Center; Template revised April 12, 2018. COMMISSION AGENDA Action Item No. 8a Page 2 of 17 Meeting Date: May 14, 2019 Public and private partners are interested in Maritime Innovation Center as focal point to help advance: 1) electrification; 2) ship and vessel design innovation; and 3) marine renewables; seafood product development; and Promoting knowledge transfer, business incubation, and workforce development are the biggest needs in terms of addressing maritime innovation challenges (and opportunities). Washington State has put $5 million in the Department of Commerce's capital budget to help fund the Port's Maritime Innovation Center. We estimate it will cost $10-12 million to renovate and equip the historic Ship Supply Building so the state's investment represents a significant contribution towards the Maritime Innovation Center. Completing additional design work on the historic Ship Supply Building will enable the Port to determine whether this building is a cost effective location for the Maritime Innovation Center. Funding for the Maritime Innovation Center has been included in the 2019-2023 Capital Improvement Plan. JUSTIFICATION The Maritime Innovation Center (MInC) will act as a catalyst and platform for maritime companies to grow and together create a common culture and environment for entrepreneurship. By fulfilling this mission, the Center would meet the needs of distinct client communities, contribute to job creation, and provide for enhanced economic health to the region. The MInC would support the launch and growth of selected new and emerging companies by providing a stronger and more cohesive entrepreneurial environment in Washington State. The Center's primaryfocus would be on entrepreneurs building high-growth ventures. The MInC will also direct efforts towards supporting women, underserved communities, people of color and youth via a number of mechanisms, including specialized programs and events. The proposed facility includes a variety of services such as facility space, common office equipment, direct business assistance and guidance, mentoring, networking to facilitate capital, and other technical resources. A network of existing resources in the community would be developed to support client needs. To achieve its mission, the MInC's needs to meet the strategic objectives described below: Be the focal point for the local hub-and-spoke model as well as a global collaboration ecosystem In a local setting, the MINC must strengthen existing relationships and build new linkages with all relevant stakeholders (including non-maritime industries) to leverage the region's orientation towards environmental sustainability, technology innovation and maritime heritage. Maritime companies will benefit from this hub-andspoke model of collaboration, since regional expertise in high-tech software and data companies will be easily accessible for the introduction of disruptive technologies in the Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. 8a Page 3 of 17 Meeting Date: May 14, 2019 maritime field. At a global level, the MInC must play a similar role in maintaining a detailed understanding of the global ecosystem of startups, organizations and research institutions, and reciprocate with knowledge-sharing of activities from the MInC. Being part of this global collaboration ecosystem will ensure that the MInC's clients have access to many invaluable resources, including; o awareness of incubator and accelerator programs tailored to ocean impact technology, o success stories and events happening in other parts of the world, o top global subject matter experts, serial entrepreneurs, business leaders and investors with potential to get their entry and scaling in the US. Become centralized information source to BlueTech sector The MInC must become a repository of all relevant information to support new entrepreneurs in the BlueTech sector. Information to be made readily available at the MInC includes overview and means of access to all relevant services such as business development assistance and advisory services, professional networking with the hub-and-spoke representatives, education programs, etc. Offer incubator and accelerator environment The MInC must ensure that physical facility-based services are available to new entrepreneurs. This can be enhanced by leveraging existing work spaces offered by the various stakeholders within the hub-andspoke network. Offer education/career connected learning services The MInC will offer the community "general awareness" sessions about the various aspects of the maritime industry to people of all ages, backgrounds and professions. The MInC will also have dedicated knowledge-booster programs for the younger generations, offered up to high school students. Benefits to Stakeholders It is expected that the MInC, if successful in meeting its strategic objectives thereby achieving its mission, will benefit several key stakeholders in Washington State. Incubator and accelerator companies: These companies are more likely to succeed if they are to receive the right type and amount of support during their early development years, such as: o Reduced barriers to entry the MInC's environment will allow start-up companies to benefit from affordable office space, access to shared equipment, and meeting facilities, thereby reducing their overhead and operating costs during the critical formative years. o Networking and mentoring by leveraging local resources and networks, the MInC would allow companies to connect with the relevant mentors, suppliers, and funding agents. Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. 8a Page 4 of 17 Meeting Date: May 14, 2019 o Increased visibility and stature the MInC's incubator role will increase the visibility and presence of its tenant companies in the marketplace and advance their success potential. Admission to the incubator would imply an endorsement that enhances stature of new companies and increases their chances to secure funding. o Increased company valuation: The MInC's accelerator role will provide tenants with support to scale their businesses and offer opportunities to meet the most active investors to grow the value of their company. Community: The overarching benefit to the community is increased economic health and vitality through: o Job creation Incubator companies would create new employment opportunities for area residents and introduce young people to exciting new careers. Technology companies typically create higher wage and higher skill jobs. o Career exploration - the Youth Maritime Collaborative (YMC), formed to increase awareness regarding opportunities in the maritime industry especially for low income youth, will also benefit from the MInC. The facility will also support classes, field trips and project based learning. o Enhanced image A business incubator is an important element to enhance Puget Sound's image as a progressive, future-thinking place that encourages and supports technology business development for sustainable maritime and ocean industries. o Increased entrepreneurialism Business incubators create awareness of entrepreneurs and stimulate confidence among individuals to consider business and product creation opportunities. o Business development Established area businesses, especially those that develop relationships with early-stage companies, create long-term business opportunities as incubator companies grow and expand. o Increased tax revenue New jobs and new businesses in the incubator and those businesses that graduate from the incubator and spin-out into the community would generate a larger, more diverse tax base to support public services and contribute to many facets of community livability and health. DETAILS Operation and Governance Based on an assessment of various operational and governance structures, the Port of Seattle has defined its role in the MInC as a landlord, hosting the physical space while a partner will be assigned as an operating entity to ensure the MInC is working effectively and concentrating on the broader public and private interests in the maritime industry (see diagram on next page). Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. 8a Page 5 of 17 Meeting Date: May 14, 2019 Port of Seattle will provide the facility for the MInC and support setting it up and bringing it to an operational stage after which the operating partner will take over to run the program and the MInC as a whole. The operating partner will be responsible for the staffing recruitment as well. There are different operational and governance structures under which the MInC could operate, including formal partnerships with either public or private organizations. Deciding upon the appropriate model requires an evaluation of the model's tradeoffs with respect to several key criteria related to executing the Center's mission. Thekey criteria to consider include: Facilitate access to funding: different types of entities (i.e., public, private, nonprofit) will have different sources of funding and capital that they can access at different costs and legal limitations. Financial exposure: tax exempt status and ability to realize economies of scale or leverage in-kind contributions are both factors which influence the financial viability of the proposed Center and differ among ownership and operating models. Operational flexibility: ability to deliver Center activities via contracts, partner with other academic and peer institutions, and engage in a mix of public and private activities. Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. 8a Page 6 of 17 Meeting Date: May 14, 2019 Accountability: each entity will have unique success metrics and accountability mechanisms. The best model will be one that facilitates access to low cost capital, minimizes operating costs (is tax exempt and able to achieve economies of scale on the operations side), and is missiondriven and accountable to stakeholders. The preferred options are to have the Center operated: By establishing it under an existing non-profit such as a 501(c)(6) or 501(c)(3) By establishing it as a department under a non-profit university By establishing it as an independent non-profit entity Maritime Innovation Center Services A key component of the Center will be the business incubator and accelerator programs. The incubator will cater to entrepreneurs developing early stage business ideas and technologies in search of viable business ideas. The accelerator program will cater to businesses with defined products and business plans trying to scale their efforts. These incubator and accelerator services and programs are designed to increase a client's likelihood of successful development and growth beyond what the client company could achieve on its own. Offering value-added services is critical to the MInC's ability to successfully generate jobs and wealth in the region. Thus, the MInC service offerings are divided into six categories: Direct business development assistance Professional network and relationship support Educational programs Out-reach services Facility-based services Virtual services Incubator and accelerator clients would have access to all core programs and services as part of their monthly lease agreement. Per unit service fees would be required for additional office services and special programs that may require client support fees. The MInC will work to develop cooperative agreements and referral relationships with existing resource partners throughout Washington State who provide services that support the growth of early stage technology businesses. Such cooperation will avoid redundancy and redirect valuable time/resources toward services that address specialized and unmet needs of the MInC's clients. Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. 8a Page 7 of 17 Meeting Date: May 14, 2019 Facility Considerations Research of incubation and accelerator programs around the world shows that co-location of like-minded businesses or startups with collaboration from partners in academia, industry, and policy is critical to facilitate innovation. For the MInC to be successful in providing a culture of innovation for the maritime industry, it needs to provide a facility for this collaborative environment. The facility needs to include six programmatic components: Incubator office space Accelerator office space Anchor office space Event space Fabrication space Shared tenant space; conference rooms, and Center administrative office space The Port of Seattle completed a preliminary space and design concept to map out the potential program space with a facility concept at 12,000 square feet. The location for the Center is critical in ensuring it meets the need for new and emerging businesses in the maritime industry. Several site alternatives are summarized below, followed by approximate space allocation. For the Center's facility in the Seattle area, there are three basic sites being explored as options: 1) Existing FT Ship Supply Building 2) Space within planned building at Terminal 91 Uplands 3) Space within the proposed FT Gateway Building To select the new facility location for MInC from the 3 options mentioned above, a matrix measuring the needs of the new facility against the potential locations was developed. All of these alternatives would proximate the innovation center with companies (fishing & maritime supply chain companies) who can all collaborate to grow and modernize operations, thus advancing maritime innovation. The matrix below provides more details to examine the relative advantage and disadvantage of each location in comparison to one another. Facility Location Criteria DNVGL, the Port's consultants on the maritime innovation center business plan, established criteria to compare and evaluate each facility option: Public transportation access: Accessibility to the Center is important since it serves to be an important decision for tenants. Each site is given a public transit range as follows: 4 = Served by bus, light rail and other forms of public transit Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. 8a Page 8 of 17 Meeting Date: May 14, 2019 3 = Served by bus with stop at property entrance 2 = Served by bus with stop within 1/4 mile of innovation center 1 = limited public transportation with no proximate service Access to water: An assured water supply of sufficient quantity and quality is an important factor to consider when deciding the suitability of a location. Sites are scored with respect to the following factors: 4 = Facility is on fresh or salt water with moorage capacity 3 = Facility is within 1/4 mile of fresh or salt water - limited moorage capacity 2 = Facility is within 1/2 mile of fresh or salt water - no moorage available 1 = Access to fresh or salt water difficult or not optimal Access to laydown area for staging: Development and testing of new maritime technologies often require space to stage the devices before going into water or on board for deployment. Laydown areas can provide this critical staging space for deployments. These scores are given as follows: 4 = Facility provides a laydown area 3 = Facility is within 200 yards of a laydown area 2 = Facility is within 1/4 mile of a laydown area 1 = Access to laydown area is difficult or not optimal Proximity to Maritime Suppliers and Manufacturers: It is also advisable to locate closer to maritime suppliers and manufacturers as their services would be required quite often. Sites are scored as follows: 4 = Facility is within 1/2 mile of machine shops and maritime suppliers (inc. chandlery) 3 = Facility is within 1 mile of machine shops and maritime suppliers (inc. chandlery) 2 = Facility is within 3 miles of machine shops and maritime suppliers (inc. chandlery) 1 = Facility not located in proximity to maritime supply chain Visibility: This is important for marketing image and identity. The visibility range is identified as follows: 4 = Visible from Seattle arterials and surrounding streets 3 = Visible from property entrance 2 = Visibility possible from property entrance with signage or other building improvements 1 = Not immediately visible Historic preservation, aesthetics, and ability to leverage partner capital: When evaluating potential MInC sites, the importance of the location should be considered in terms of historical significance and the capital it can leverage. The score is established as follows: Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. 8a Page 9 of 17 Meeting Date: May 14, 2019 4 = Facility is historic and can leverage other capital $ 3 = Facility is new and can leverage other capital $ 2 = Facility is new, but it may not leverage other capital $ 1 = Facility not located in proximity to maritime supply chain Criteria Weighting The selection criteria allow for each to be rated and assigned a point value based on the scale defined above. A score of 1 is the least favourable and a score of 4 the most. Each criterion is also assigned a weight, the total of which adds up to 100%. When total point values for a criterion are multiplied by the weight factor, a weighted score will be determined for that criteria. The total of the weighted scores result in the final location's score and subsequent ranking. The highest weight assigned is 20% each and allocated to public transportation access, access to water, access to laydown area for staging and proximity to maritime suppliers and manufacturers. These are all factors that will have a major impact on MINC's operational capabilities. Visibility along with historic preservation, aesthetics, and ability to leverage partner capital are also criteria that have been considered and given a weightage of 10% which reflects a lesser degree of importance in making a location attractive. See table on page 10 for evaluation results Size and Space Allocation The MInC is assumed to be 12,000 square feet with the following space allocation: Accelerator Client Office Space: This component includes a mix of co -working, 1,500 sq. ft independent stations, and dedicated office space needed to support the individuals and firms in the Center's program. Incubator Client Office Space: This component is similar to the accelerator 1,000 sq. ft office space with a mix of co-working, independent stations, and dedicated office space needed to support the individuals and firms in the Center's program. Anchor Tenants: This component includes office space for additional tenants 5,000 sq. ft that would benefit from co-location within the Center. These tenants might include other more established businesses in the maritime sector that can lend advice and guidance while having access to innovations and startups. Event space: The event space is a venue for the Center and industry groups to 1,500 sq. ft host events. The space should be flat and open, allowing for a variety of uses including meetings, audio/visual events, and gatherings. The specific design of the event space should also allow for double duty as flex space for tenants. Fabrication Space: This component is a workshop space for the tenants. The 1,000 sq. ft Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. 8a Page 10 of 17 Meeting Date: May 14, 2019 area allows for development and assembly of prototypes. Common space: The space includes the office space for Center administration 2000 sq. ft offices, meeting and conference rooms, kitchen, lounge, and reception area. A suggested and important feature of MInC's design should be flexibility. Flexibility is necessary to provide modest sized spaces for new clients but allow for internal expansion and contraction as client business needs change during tenure in the Center. Movable walls and cubicle set-ups allow for flexibility is space utilization, with an ability to alter the space utilization on a temporary basis. V II I 1 = Not immediately visible 2 = Visibility possible from property entrance with signage or other building improvements 3 = Visible from property entrance 4 = Visible from Seattle arterials and surrounding streets VI Visibility 1 = Facility not located in proximity to maritime supply chain 2 = Facility is new but it may not leverage other capital $ 3 = Facility is new and can leverage other capital $ 4 = Faciltiy is historic and can leverage other capital $ Historic Preservation, Aesthetics & Ability to Leverage Partner Capital 1 = Facility not located in proximity to maritime supply chain 2 = Facility is within 3 miles of machine shops and maritime suppliers (inc. chandlery) 3 = Facility is within 1 mile of machine shops and maritime suppliers (inc. chandlery) 4 = Faciltiy is within 1/2 mile of machine shops and maritime suppliers (inc. chandlery) IV Proximity to Maritime Suppliers and Manufacturers 1 = Access to laydown area is difficult or not optimal 2 = Facility is within 1/4 mile of a laydown area 3 = Facility is within 200 yards of a laydown area 4 = Facility provides a laydown area III Access to laydown area for staging 1 = Access to fresh or salt water difficult or not optimal 2 = Facility is within 1/2 mile of fresh or salt water - limited moorage available 3 = Facility is within 1/4 mile of fresh or salt water - limited moorage capacity 4 = Facility is on fresh or salt water with moorage capacity Access to water 1 = Facility is more than 30 minutes drive from partners (UW Applied Physics Lab, Maritime Blue, etc.) 4 = Facility is within 200 Accessiility No Site Selection Criteria Site Ranking 2 = Facility is within 1/2 mile of public transit and within 30 minute commute from partners 3 = Facility is within 1/4 mile of public transit and within 20 commute from partners yards of public transit and within 20 minute commute from partners 100% Total Scores 10% 20% 20% 20% 20% Weight Site Evaluation 10% 3.7 3 4 4 4 4 3 Score 1 3.7 0.3 0.4 0.8 0.8 0.8 0.6 Weighted Score Site 1: Ship Supply Building 2.3 1 3 3 4 2 1 Score 3 2.4 0.1 0.3 0.6 0.8 0.4 0.2 Weighted Score Site 2: T91 Uplands 3 3 4 3 3.3 3 4 Score 0.3 0.3 0.8 2 3.4 0.6 0.6 0.8 Weighted Score Site 3: FT Gateway Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. 8a Page 11 of 17 Meeting Date: May 14, 2019 Operational Milestones and Roadmap The Port of Seattle plans to work closely with Maritime Blue and other partners to scale MInC slowly and purposely over the next three years as the facility is constructed. Staff has formed an advisory committee to guide the overall MInC initiative. Number Activities Quarter Months 2019 1 Provide detailed information about MInC Brief Commission on Maritime Blue plan and Maritime innovation Center Jan-19 ffitch to start briefing legislators on innovation center if in Governors' Q1-Q2 Jan-19 capital budget Seek design authorization for Ship Supply building May-19 2 Finalize Business Plan and Organization Revise maritime innovation center business plan completed with modified Q2 April-19 site selection criteria, financial assumptions and proformas 3 Maritime Innovation Center Advisory Group Meetings Kickoff Meeting March-19 Becomes subcommittee of Maritime Cluster Nonprofit Board Q1-Q3 May-19 Fall Planning Meeting June-19 Meeting Sept.-19 4 Conduct three fact finding trips Q2-4 Fact finding trip to Alta Sea @ Port of LA/Long Beach Q2 Fact finding trip to COVE (Halifax Innovation Center/SUNY Maritime Technologies Global Technologies Innovation Center Q4 Maritime Alliance conference/field trip to San Diego Q4 5 Host Networking Events (3) Q2-3 Emerging Maritime Company event Q2 Maritime Innovation BBQ featuring Pacific NW Ocean Cluster Q3 Reverse Pitch Event: Industry Problems and Opportunities event Q3 6 Finalize Partnership to operate incubator and accelerator programs Develop RFP or RFQ for potential accelerator/incubator partners Q2-Q3 May-19 Finalize partner and sign agreement with partner July-19 7 Finalize maritime mentors for the program Develop a plan to approach mentors Q2 Aug-19 Finalize mentors Sept-19 8 Maritime Accelerator Program (or Maritime Innovation Challenge) Publish website for the Accelerator Program Q4 Aug-19 Launch Accelerator Program with partner/s Oct-19 9 Pilot Maritime Accelerator Program (or Maritime Innovation Challenge) Application open for Cohort 1 Oct-19 Application closed for Cohort 1 Q4 Oct-19 Acceptance announcement for Cohort 1 Nov-19 Nov 15th: Accelerator Program starts Nov-19 Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. 8a Page 12 of 17 Meeting Date: May 14, 2019 Number Activities Quarter Months 2020 1 Assist to grow investor network with Maritime Blue Q1-4 2 Location of MINC finalized & development begins Q1 3 Organize quarterly innovation events Q1-Q4 4 2-3 fact finding trips Q1-Q4 5 Quarterly advisory meetings Q1-Q4 6 Operate Incubator/Co-working Space Q1-Q4 Cohort 1: Maritime Accelerator Program (or Maritime 7 Innovation Challenge) Q1 Jan 15th: Accelerator Program End Feb 1st week: Pitch Day for investors Cohort 2: Maritime Accelerator Program (or Maritime 8 Innovation Challenge) Q1-Q3 Applications open for Cohort 2 Mar-19 Application closed for Cohort 2 Mar-19 Apr 15th: Accelerator Program Starts Apr-19 June 15th: Accelerator Program End Jun-19 July 1st week: Pitch Day for investors Jul-19 Cohort 3: Maritime Accelerator Program (or Maritime 9 Innovation Challenge) Q4 Application open for Cohort 3 Octr-19 Application closed for Cohort 3 Oct-19 Acceptance announcement for Cohort 3 Nov-19 Nov 15th: Accelerator Program starts Nove-19 Number Activities Quarter 2021 1 Maritime innovation center starts construction Q1 2 Open applications for incubators and anchor tenants Q1 3 Finalize Incubators and anchors Q2 4 Sign agreements with incubators and anchor tenants Q4 Complete Cohort 3 & 4: Maritime Accelerator Program (or Maritime 5 Innovation Challenge) Q1-Q4 6 Quarterly innovation events Q1-Q4 7 Host Maritime Innovation Summit Q4 8 Quarterly advisory meetings Q1-Q4 9 3 innovation events Q1-Q4 Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. 8a Page 13 of 17 Meeting Date: May 14, 2019 Number Activities Quarter 2022 1 Maritime innovation center facility open Q1 External affairs strategy implemented to highlight innovation center 2 purpose/possibilities Q1 3 Host 3 Innovation Events Q2-Q4 Complete Cohort 5 & 6: Maritime Accelerator Program (or Maritime 4 Innovation Challenge) Q1-Q4 5 Quarterly advisory meetings Q1-Q4 Proposed Project Improvements and Design The existing Seattle Ship Supply Building at Fishermen's Terminal is to be renovated and converted into the proposed Maritime Innovation Center. Structural analyses performed on the existing building have determined that its structural piles and historic timber framework may be preserved and supplemented as necessary to support the new structure. All other major existing components including the building's interior walls, utility systems, outer envelope, and roof, will be demolished. The new Maritime Innovation Center structure will be constructed utilizing the existing Ship Supply Building's in-place framework and therefore retain its historic height and shape. The proposed project scope of work is as follows: 1. Abatement of regulated materials in existing structure 2. Partial building demolition (existing timber piles and structural framework to be preserved in place) 3. Subgrade, structural piles, and structural framework remediation 4. Core and shell (envelope, roof, interior core spaces, and mechanical systems) construction for new building 5. Utility services removal and replacement 6. New paving (building perimeter and parking lot) Final planning and design for the proposed Maritime Innovation Center and related site improvements will begin immediately after Commission approval of the requested additional design funding. This effort will build upon the previously completed 15% conceptual design. Miller Hull Partnership, LLC, the design consultant for the Fishermen's Terminal Phased Design Service, will perform these services and complete full construction bid documents from their current level. The original contract amount was $1,500,000 which included the scope for this project, but only authorized funding for an initial design. As a result, the contract must be amended to add the additional funding in the amount of $1,000,000 which will increase Miller Hull's FT planning and design services contract to $5,000,000 total. Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. 8a Page 14 of 17 Meeting Date: May 14, 2019 Community Outreach and Communications Initial community outreach and engagement around the MInC unfolded during the Port's Fishermen's Terminal(FT) Master Planning process in 2016 and 2017. Staff h osted multiple planning sessions, open houses and stakeholder meetings as part of developing new plan for FT. During the process, stakeholders cited a need for light industrial facilities with smaller spaces for maritime manufacturers and suppliers. Several participants suggested that FT develop space for meeting rooms/conference center Extensive outreach and engagement also supported the Maritime Innovation Center planning project (2016 and 2017): Hosted a SWOT workshop with 25 maritime stakeholders Developed on online survey that solicited input from 150+ stakeholders Hosted outreach meetings with partners in Anacortes and Port Hadlock Interviewed 35 Maritime stakeholders (28 distinct organizations) Facilitated a design charrette focused on adaptive reuse of the Port's Ship Supply building As the Maritime Innovation Center plan was completed, the state's Maritime Blue initiative started. It generated significant outreach and engagement in 2018 and the MInC was a central part of the strategy they shared with hundreds of maritime and community stakeholders. Estimated Schedule Activity Commission design authorization (initial design) 2016 Qtr 4 Shoreline and Building Permits from SDCI 2020 Qtr 3 Commission construction authorization 2020 Qtr 3 Building core and shell construction start 2020 Qtr 4 Tenant improvements construction start 2022 Qtr 3 In-use date 2023 Qtr 4 This Request Total CIP Design/Permitting $1,850,000 $2,150,000 Construction $0 $8,350,000 Total $1,850,000 $10,500,000 Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. 8a Page 15 of 17 Meeting Date: May 14, 2019 ALTERNATIVES AND IMPLICATIONS CONSIDERED Alternative 1 - Do Nothing Pass on Maritime Innovation Center development Pros (1) Retains Port capital for other priority projects and financial initiatives (2) Avoids temporary construction impacts to Fishermen's Terminal (FT) business operations Cons (1) Missed opportunity to achieve Port objectives of advancing maritime industry through innovation and modernization (2) Missed opportunity for making FT hub of regional innovation initiative This is not the recommended alternative. Alternative 2 - Find a different location at an existing Port owned facility Pros (1) The Port may be able to find a more economical location for the Maritime Innovation Center (2) Construction impact to existing FT tenant business operations may be more limited at any given time Cons (1) Other facilities are currently unavailable or less conducive for an innovation center (2) May jeopardize state funding partnership This is not the recommended alternative. Alternative 3 - Complete design work on historic Ship Supply Building Pros (1) Determines costs/benefits for Ship Supply Building (2) Allows Port to evaluate Ship Supply Building versus other facility options (3) Provide positive signal to state about Port commitment to an innovation center Cons (1) Design fund investment may show Ship Supply Building redevelopment is ultimately difficult or impossible to develop (2) Innovation center operations still in virtual state and somewhat unclear in terms of operations and related space needs. This is the recommended alternative. Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. 8a Page 16 of 17 Meeting Date: May 14, 2019 FINANCIAL IMPLICATIONS It is anticipated that the Center will generate a net positive operating income for the Port as a landlord from Year 1 onwards. The proposed Maritime Innovation Center is anticipated to generate average annual net operating income of approximately $200,000 over the first 10 year period for the Port. From the MInC operator entity's perspective, it is anticipated that they will be able to cover 79% in year 1 (increasing to 97% coverage by year 7) of its operational costs from the rental revenue from the facility. The MInC's operating partner will also have to ensure a steady funding source to maintain and cover operational costs. The operating entity would need to secure external contributions of approximately $ 72,000 annually on average for the first 5 years to sustain its operations. Cost Estimate/Authorization Summary Capital Expense Total COST ESTIMATE Original estimate $0 $0 $0 AUTHORIZATION Previous authorizations $300,000 $0 $300,000 Current request for authorization $1,850,000 $ $ 1,850,000 Total authorizations, including this request $2,150,000 $ $2,150,000 Remaining amount to be authorized $8,350,000 $ $8,350,000 Annual Budget Status and Source of Funds This project was included in the 2019-2023 Capital Plan under CIP C801084 FT Maritime Innovation Center with a total cost of $10,500,000. This project will be funded by the Tax Levy. Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. 8a Page 17 of 17 Meeting Date: May 14, 2019 Pre-Design Financial Analysis and Summary Project cost for analysis Port investment of $5,500,000. Analysis assumes Washington State contribution of $5,000,000 to the project. Business Unit (BU) Maritime Portfolio Management Effect on business performance The facility is estimated to generate annual NOI before (NOI after depreciation) depreciation of approximately $200K by year 5 of operation and does not include potential financial support provided by the Port to the Innovation Center for operations. The project will increase annual depreciation by approximately $183K based on an estimated 30 year life of the renovations. IRR/NPV (if relevant) NPV: ($3M) IRR: 1.9% CPE Impact N/A ATTACHMENTS TO THIS REQUEST (1) Maritime Innovation Center Design Funding PowerPoint Slide Presentation (2) Maritime Innovation Center Business Plan PREVIOUS COMMISSION ACTIONS OR BRIEFINGS January 22, 2019 Commission authorized an amendment to the Fishermen's Terminal Phased Design Services contract, with Miller Hull Partnership LLP, for $1,000,000 for final planning, design, and permitting for the Fishermen's Terminal GatewayBuilding and associated facility improvements. January 8, 2019 Commission received a briefing regarding Maritime Blue Plan and the Maritime Innovation Center. December 5, 2017 Commission authorized an amendment to the Fishermen's Terminal Phased Design Services contract, with Miller Hull Partnership LLP, for an amount up to $2,000,000 for planning, design, and permitting for Salmon Bay Marina redevelopment. December 13, 2016 Commission authorized an initial $3,000,000 for the Fishermen's Terminal Redevelopment program planning and design; the total preliminarily estimated design cost was $7,000,000. May 17, 2016 - Commission received a briefing on the planning strategies comprising the Fishermen's Terminal Long-Term Strategic Plan. October 27, 2015 - Commission received a briefing about the progress of the stakeholder outreach program for the Fishermen's Terminal Long-Term Strategic Plan. August 11, 2015 - Commission received a briefing on the proposed scope and goals in advance of the launch of the planning process. Template revised September 22, 2016; format updates October 19, 2016.
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