New London will share in State Pier revenues under new deal
New London — The city will receive 10 percent of the Connecticut Port Authority's share of the revenue from State Pier, and an annual $75,000 fee to defray the cost of police, fire and other city services.
The agreement was announced Wednesday morning by Gov. Ned Lamont — whose office helped negotiate the deal — and city and state officials at a news conference at a packed City Hall. Earlier in the morning, the port authority's board met and voted to approve the agreement, which guarantees payments to the city for 20 years.
Mayor Michael Passero said the governor delivered on a promise to be a partner with New London, and set the relationship between the port authority and city "on the right path."
"The agreement today is the beginning of the process to correct some historic inequities that were built into that relationship," Passero said. "New London will be receiving additional revenue in recognition of its role as the host city for the State Pier."
The port authority also committed to supporting any proposals to change statute to include the mayor of New London as an ex-officio member of its board, which would guarantee that the city has a seat at the table during future discussions surrounding development of State Pier.
On Jan. 7, the port authority announced a 20-year deal with New Haven port operator Gateway to run State Pier, a state-owned facility. The deal drew immediate criticism from Passero, who said he was disappointed there was no guarantee of funding to the city. He also expressed dismay at being sidelined from the negotiations. The Southeastern Connecticut Council of Governments backed the city's bid for a better deal, sending a letter to Lamont asking him to get involved.
Calling the deal a public-private partnership, Lamont said it's a template for how he'd like to think about development in the state going forward.
Scott Bates, chairman of the port authority's board, said the deal represents "a new day for New London."
"Every day you see a ship come into New London, New London gets a piece of the action from that," Bates said.
The port authority, under the agreement with Gateway, will receive 7 percent of Gateway's gross annual revenues at State Pier, with a minimum annual guarantee of $500,000. That means the city is guaranteed a minimum of $50,000 annually, in addition to the annual $75,000 fee for municipal services.
The fee for services will increase annually based on the Consumer Price Index. The revenue share minimum will increase to $68,750 after five years, and will continue to grow every five years after that.
The minimum is meant to protect the city against a downturn in the economy or decline in activity at the port, Bates said. With increased activity, New London will see more money.
Under its expiring agreement with Logistec, which has managed the pier for two decades, the port authority gets 6.75 percent of the assessable revenue generated from the port. That’s amounted to about $500,000 to $550,000 in recent years.
Gateway will take over operations at State Pier on May 1, under the name Gateway New London LLC.
Matthew Satnick, co-CEO and chairman of Enstructure, Gateway's financial partner, said Gateway has customer-specific, commodity-specific and market-specific ideas for New London's port. The ideas are based upon what the company has built in New Haven, which is the highest-volume commercial shipping port on Long Island Sound. He said the company has customers who are interested in moving to New London but declined to talk specifics at this point.
The city also will continue to receive funding from the state under the payment in lieu of taxes program for the State Pier property, which totals about 32 acres. Last year, the state paid about $164,750 in PILOT funds for State Pier.
Passero said "most importantly" the agreement promotes the larger goal shared by "all the stakeholders in State Pier": to turn New London's deepwater port into "the offshore wind capital of the Northeast."
New London officials have worked with offshore wind companies Deepwater Wind and later Orsted, which purchased Deepwater, to lay the groundwork for State Pier to become a staging area for offshore wind development. Deepwater Wind developed the five-turbine wind farm off Block Island and is under contract to deliver 300 megawatts of electricity to Connecticut from a wind farm off Martha's Vineyard.
Orsted is not part of Gateway's 20-year contract to operate State Pier, even though company officials spent several months laying out a vision of working with Gateway to help transform State Pier into a world-class offshore wind hub supporting upcoming projects and potentially drawing suppliers and manufacturers to the region.
Lamont said a focus of his administration is on reliable and affordable energy, and reducing the state's carbon footprint.
"Wind power is going to be a significant piece of our future, and New London is at the very front of the line," he said.
Passero, Bates and Lamont agreed that significant additional investment would be needed in State Pier to compete with other ports in the Northeast vying to be staging areas for offshore wind development, but none of the men was willing to say an exact dollar figure.
Gateway has committed $30 million in capital improvements, such as equipment and maintenance at State Pier. The port authority also received $25 million from the state for improvements to the facility. Orsted has committed to keeping Deepwater Wind's pledge to invest at least $15 million in the pier.
Deepwater also has committed funding to New London, pledging an annual $750,000 investment in the city as part of a host community agreement for the length of its stay in New London. Orsted has said it would maintain Deepwater Wind's commitments and plans to open office space in the city as well, but city officials say it remains unclear how long Orsted will stay.
Passero said those discussions are ongoing. Separately, the mayor said he is working closely with Lamont's staff on the Crystal Avenue property that houses a closed high-rise apartment complex, which has been talked about as an area that could be developed in conjunction with port activity, and "the value of that as a port asset."