EDITOR’S NOTE: This is the second of a two-part series about the creation of the Harbor-Works Public Development Authority. The first installment, which appeared Sunday, can be accessed at the bottom of this home page.

PORT ANGELES — The city of Port Angeles first approached Rayonier Inc. about creating the Harbor-Works Public Development Authority about a year ago, Port Angeles City Attorney Bill Bloor says.

This was at the same time that the city was seeking public input into the future use of the contaminated site of the dismantled Rayonier pulp mill.

One of the details addressed was that the city would in exchange get use of the 5-million gallon secondary treatment water tank that still exists on the Rayonier property for its combined sewer overflow program, Bloor said.

The sewer overflow program is in response to a mandate from the state Department of Ecology that the city has to eliminate sewage from entering Port Angeles Harbor from overflowing storm drains by 2015, Bloor said, and acquiring the tank as a receptacle would be the most “efficient and economical” solution.

Bloor said the mill site cleanup and ¬­sewage overflow issues have been subjects of discussion between the city and Rayonier for the past three years, and acquiring the property through a public development authority was seen as a solution to both.

Referring to the site cleanup, Bloor said: “We told Rayonier we would like to help the project move forward. In exchange we wanted the tank.

“We wanted to get the tank, but we also wanted the property.”

Tank included in draft pact

The city acquiring the water tank is included in a draft purchase and sale agreement between Rayonier and Harbor-Works, presented to city officials at a June 25 meeting in Seattle.

The 75-acre Rayonier mill site, which in part covers the location of a former Lower Elwha Klallam village, is contaminated with pockets of PCBs, dioxins, arsenic, cadmium, mercury, lead and other hazardous contaminants.

The mill operated for 68 years until it closed in 1997. Rayonier, Ecology and the tribe are partners in the cleanup process that began in 2000.

The city and the port created Harbor-Works at a joint meeting of the City Council and port commissioners on May 20 for the purpose of acquiring the Rayonier property, assisting in its cleanup and directing its redevelopment.

Acquiring the property would make Harbor-Works a liable party in the cleanup of the Rayonier site, which will include anywhere Ecology finds the company responsible for contaminating.

Ex-City Manager Madsen

Bloor said former City Manager Mark Madsen — who resigned in July effective at the beginning of September, citing “untenable, hostile work conditions” created by certain City Council members and city staff — was the main figure behind the formation of Harbor-Works.

The city and port have come under increased criticism from some Port Angeles residents for not publicly saying that the public development authority was being created until a meeting announcement was published in the Peninsula Daily News a few days before May 20.

City and port representatives have said the appropriate place for public input was at that meeting.

But the City Council minutes of that meeting don’t list a public comment period prior to the adoption of the Harbor-Works charter and the ordinances that created it.

A second reading of the ordinance that formed Harbor-Works, which would have delayed a vote, was waived at the meeting.

City Council members Don Perry, Dan Di Guilio and Betsy Wharton, deputy mayor, said they were told by city staff that Harbor-Works had to be approved on the fast track at the meeting to allow Ecology to include Harbor-Works in its upcoming biennium budget for July 1, 2009-June 30, 2011.

All three of those council members now say they had not seen any of the documents to create Harbor-Works prior to the May 20 meeting.

Ecology began planning for the budget last spring.

Rebecca Lawson, Ecology regional toxics manager, said Harbor-Works will not be included in the budget because it is ineligible for cleanup grants since it has yet to acquire the Rayonier property.

Lawson said Harbor-Works can still apply for cleanup grants at any time once it becomes a liable party through ownership.

50 percent of cleanup costs

As a public entity, Harbor-Works could apply for a grant when it becomes a liable party that would cover 50 percent of the cleanup costs.

Without owning the property, Harbor-Works can receive a $200,000 “integrated planning grant,” Lawson said.

Perry said Harbor-Works was created because the city by itself couldn’t obtain the funding needed to acquire, clean up and redevelop the Rayonier property.

This way, he said, Harbor-Works can draw on resources from the port and the city.

Harbor-Works’ start-up costs are funded by identical $150,000 loans from the city’s and port’s economic development funds.

“My feeling was that the Rayonier property had been sitting there literally going back and forth between Rayonier, Ecology and the tribe forever and a day,” Perry said.

“This is some formal way of getting that property back onto the tax rolls.

“I still think it’s a great idea to get that property and make it a productive piece of property and contribute to the economic development of Port Angeles.”

Perry said the City Council directed staff in closed-door executive session to put together the draft interlocal agreement and ordinance a few months before the May 20 meeting where Harbor-Works was created.

He said he couldn’t remember the exact date, but that it was likely around February.

Planning for Harbor-Works, including the May 20 date, was known to the City Council in January, City Council member Karen Rogers said in an e-mail to port Commissioner John Calhoun on Aug. 29.

A copy of the e-mail was presented to the PDN by Port Angeles residents Norma Turner and Shirley Nixon, who filed a request to the state Auditor’s Office on Sept. 11 to investigate the formation of Harbor-Works to ensure that the city and port didn’t violate any state laws.

Rogers, who did not return phone calls requesting comment, served as liaison to city staff during the formation of Harbor-Works.

Mayor’s appointment

Mayor Gary Braun said he appointed Rogers to the position, though Perry, Di Guilio and Wharton said they weren’t aware of it until the May 20 meeting.

Braun said he didn’t intend to hide anything from the City Council.

“I don’t want to make any excuses,” he said.

“It’s my fault I didn’t get it out sooner.”

The cleanup was initially estimated to be completed in 2004, but had been stalled because Rayonier had been unwilling to fund soil and water testing outside of its property boundary, said Jim Pendowski, Ecology toxics cleanup program manager.

The cleanup was switched from Ecology’s solid waste division to toxics a year ago.

With more resources and staff, toxics can conduct further testing on its own and charge Rayonier with the cost if the company is found responsible for contamination.

Ecology now expects the cleanup to be completed by December 2012.

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Reporter Tom Callis can be reached at 360-417-3532 or tom.callis@peninsuladailynews.com.