River/Gulf delay brings 5% penalty
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By Tory Brecht | Sunday, August 26, 2007 |
River/Gulf Grain’s monthly lease payments for its industrial site on Davenport’s riverfront will increase by 5 percent beginning this week, because of the lack of progress the company has made in relocating downriver.
In January, the Levee Improvement Commission granted the company a two-year extension to stay on River Drive, despite reluctance and misgivings of some commissioners who pointed out River/Gulf already had five years to find a new location.
The company’s decision to open an ethanol plant in Buffalo, Iowa, rather than simply moving its commodity shipping facility, led to the request for the extension. The company planned to consolidate its grain and ethanol operations at the riverfront site in Buffalo.
The ethanol plant project is on hold, however, meaning River/Gulf will not comply with the first milestone of the renewed lease by Aug. 31, which mandated substantial completion of grading work at the Buffalo site.
The current lease is $5,832 per month, said Charlie Heston, a program manager with the city. There are a total of five milestones the company must reach before Nov. 30, 2009, when its lease terminates. Each one it misses will add another 5 percent to the total lease cost.
“Their rope is still a short rope,” Heston said. “They’ve got two years, and they should be moving on with their project.”
Heston said he wouldn’t be surprised if the company requested yet another extension, however.
“Typically, what they’ve done is show up a year beforehand and beg for mercy,” he said.
“We’ve seen that four or five times.”
The city is eager to see River/Gulf move so the near-downtown riverfront site can be converted into greenspace or made available for future commercial or residential development.
Richard Goldstein, president of River/Gulf Energy, said the Buffalo project is on hold while the company can study alternative technologies to produce bio-fuel and look for financial partners.
“We want to make sure we have the highest-revenue, lowest-cost plant possible,” he said.
The company will honor its lease agreement and the resulting penalties for missing milestones, he added.
Curtis Beason, an attorney representing River/Gulf, said his clients are “working in good faith to get this project going.”
Levee commission member Lucky Lang, who voted against the lease extension in January, said he’s not surprised the company missed its milestone, given its past history.
“I was concerned right from the beginning that these people were just trying to buy time,” he said. “The commission is still divided on the issue — some people think that area should remain an industrial wasteland. I happen to think it’s the entrance to our downtown and should be treated that way.”
Lang said the company has little incentive to meet the city’s demands, since its rent is already below market rate anyway.
“Even with the maximum penalty, they aren’t going to hurt,” he said. “Penalties are supposed to hurt, not be equivalent to cost-of-living increases.”
Lang is hopeful the commissioners will take a hard line if River/Gulf seeks another extension. He said he was buoyed by Mayor Ed Winborn’s promise at a recent meeting that he would be opposed to another extension.
“I don’t know what it’s going to take to change the minds of the other commissioners,” Lang said.
The company’s second milestone occurs on April 30, 2008, Heston said.
Meanwhile, Builders Sand & Cement Co. next to River/Gulf is making progress on moving its entire operation from 615 E. River Drive to the former Payless Cashways site on West River Drive when its lease expires in November.
Tory Brecht can be contacted at (563) 383-2329 or tbrecht@qctimes.com. Comment on this story at qctimes.com.
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