The warehouse (lower left) and vacant land of the former Kimberly-Clark paper mill on the Everett waterfront, as seen Oct. 23, 2019. (Chuck Taylor / Herald file)

The warehouse (lower left) and vacant land of the former Kimberly-Clark paper mill on the Everett waterfront, as seen Oct. 23, 2019. (Chuck Taylor / Herald file)

Port makeover of old mill property loses $15.5 million grant

Key federal money was rescinded because of a technicality, the Port of Everett says, and it has reapplied.

EVERETT — A key piece of financing is in doubt in the Port of Everett’s plan to build a cargo terminal on waterfront real estate that once was the site of a paper and pulp mill.

The U.S. Department of Transportation has rescinded a $15.5 million grant for the project on the former Kimberly-Clark property due to what port officials are calling a technicality.

The port has reapplied for additional grant money, which was expected to cover half of the cost of readying the land for cargo.

Port CEO Lisa Lefeber said she’s “optimistic,” but the federal programs are highly competitive.

If the U.S. DOT doesn’t pick the proposal, the port’s plan to start construction in 2021 and finish in 2022 would likely be derailed.

Port officials are confident the project will move forward regardless of whether or not it receives the grant money. If the project isn’t awarded the funding, it will be done in phases instead of all at once, they say.

“Bottom line, it just delays the economic benefits to this community,” Lefeber said. “We’ve waited so long to have the Kimberly-Clark site back in productive use. It would really be a shame if we were unable to move forward as planned based on a technicality.”

The setback comes as the port is grappling with the fiscal pressures of the coronavirus crisis. Closures have affected port operations, which could result in delays for other capital projects, port officials have said. Several businesses that lease property from the port are also struggling, and some commercial spaces are empty.

The mill, which shuttered in 2012, was on land between the port terminal and Naval Station Everett.

Port commissioners voted to condemn the land in June 2019, despite protests from well-established figures in the seafood industry who had plans to buy the site and other members of the community who wanted to see it in private hands.

The port applied for the grant last summer, before it finalized the $33 million purchase of the 58 acres in the fall. So in its application for the program — known as BUILD, an acronym for Better Utilizing Investments to Leverage Development — the port requested money to pay for construction and offset the cost of purchasing the land, Lefeber said.

Days after the port acquired the land, the grant was awarded.

The Department of Transportation later asked for more details about the acquisition.

“Because we had already closed on the property, and that was a piece of the project, the Department of Transportation felt there was too much difference in the application,” Lefeber said.

John Augustine, director of the department’s Office of Infrastructure Finance and Innovation, said in a letter to the port in May that the project’s “proposed scope exceeds the 58 acres of property acquisition and improvements on three acres described in the July 2019 application.”

He encouraged the port to apply for the program again.

The port submitted another round of applications in May — not only to the BUILD program, but also to programs known as Infrastructure for Rebuilding America and Port Infrastructure Development. This time, it’s requesting $17.75 million.

The project cost and scope have swelled with design plans in progress, Lefeber said. But that progression is “typical,” she said.

“There’s always a risk in a reapplication you are not successful,” Lefeber said. “So that is a very big concern and one of the reasons that we fought so hard to make the case that this was not a change in scope.”

Meanwhile, cleanup work continues at the mill site, even amid the pandemic.

Under a pact with the port, contractors of Dallas-based Kimberly-Clark have until the end of 2020 to decommission shoreline pipes, remove an estimated 12,000 tons of contaminated soil, and haul away 180,000 to 200,000 tons of crushed material left over from the mill’s demolition.

Crews started in early March. Then the construction shutdown order by Gov. Jay Inslee halted work for about four weeks.

The cleanup is still expected to be done later this year, Lefeber said.

“We’re continuing to prepare everything as though we will be able to continue to move forward with the project in the mid-2021 time frame after the cleanup is complete,” she said.

Rachel Riley: 425-339-3465; rriley@heraldnet.com. Twitter: @rachel_m_riley.

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