Does Vigor Still Need Local Tax, Utility Breaks?

As Ketchikan’s shipyard continues to grow and attract contracts, questions arose last week about whether the community should continue to offer tax and utility breaks for the property.

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Ketchikan’s shipyard is owned by the Alaska Industrial Energy Development and Export Authority, but it’s operated by Vigor, a Pacific Northwest company that owns shipyards in several states.

Ketchikan’s shipyard is seen in 2012. (Photo by Ed Schoenfeld)
Ketchikan’s shipyard is seen in 2012. (Photo by Ed Schoenfeld)

Vigor bought the operating rights a few years ago, and the Vigor Alaska operation is very likely about to get a lucrative contract to build two new ferries for the State of Alaska.

With that in mind, does the shipyard still need financial support from the community? That’s the question asked at two recent events, a Ketchikan Borough Assembly meeting and the regular Chamber of Commerce lunch.

Here’s Borough Assembly Member Agnes Moran, who said the community should look into developing an exit strategy.

“We now have a very large company running that shipyard that essentially has a monopoly on the West Coast,” she said. “It recently bought a shipyard, it recently bought an ironworks. You’re looking at a subsidy of a million and a half dollars every year, coupled with the fact that the city’s looking at bonding for infrastructure projects.”

The “subsidies” Moran referenced are through local property tax breaks from the city and borough, and a deal on electricity through the city-owned Ketchikan Public Utilities.

Assembly Member Bill Rotecki agreed with Moran that the discussion should take place.

“If the local municipalities and their taxpayers are subsidizing them substantially, it shouldn’t be forgotten,” he said. “It should be looked at and evaluated. I agree with that wholeheartedly.”

During the Chamber of Commerce lunch, candidates for Borough Assembly were there for a candidate forum. An audience member asked what they thought about maintaining or eliminating Vigor’s tax and utility breaks.

Borough mayor candidate David Landis said a conversation needs to happen.

“Obviously, the shipyard is a cornerstone of the business in this community and it’s vital to keep it here,” he said. “That being said, you don’t want to give everything away.”

Incumbent Assembly Member Mike Painter, who is running for re-election, agrees that the issue needs to be revisited. Incumbent Glen Thompson, also seeking re-election, said local subsidies should go away when the shipyard is self-sustaining.

“I think we’re very close. The Alaska Class Ferry demonstrates the ability of the system, there’s now about 150 people working there on a year-round basis,” he said. “I think last year, there was about $2.5 million of profit. The city and borough subsidized about a million and a half of that, but even if you take that subsidy away they still would have made a profit. Is that enough to sustain a business going forward? That’s question is where we are. We need to answer that.”

Assembly candidate John Harrington suggested that the state exempt the shipyard from paying property taxes, which the state does for an AIDEA property further north.

Lewis Armey Jr. is running for borough mayor. He was generally critical of the shipyard, but didn’t have an answer to that specific question.

Vigor Alaska’s Director of Shipyard Development Doug Ward attended the Chamber of Commerce luncheon. After the event, he said he felt the candidate’s answers were reasonable, and he’s willing to have the discussion.

Ward said the issue of self-sufficiency is always on his mind.

“We’re still operating a complex manufacturing activity in a region and in a state that lacks the basic industries that goes along with supporting these kinds of complex projects,” he said. “I think the question gets to how much employment do we want to create through shipyard investment.”

Ward said the employment projections are 300 to 350 workers once all the facility infrastructure is in place. They’re about halfway there as far as employees go, and the last big piece of infrastructure needed is a large, dedicated ship repair hall.

He noted that the agreements with the city and borough include a profit-sharing component.

“We’d like nothing more than to increase our profitability to the point where AIDEA can begin spinning off our payments to AIDEA back to the community through revenue sharing,” he said. “We’d love to make that happen.”

Ward said it’s a complicated issue, and one that he’s sure the community will be talking about a lot over the next year.