PORT ANGELES — The Port of Port Angeles took back full control Tuesday of a parcel under lease to Peninsula Plywood with every intention of tearing down the 70-year-old mill and installing businesses at the site that focus on marine trades, port officials said.
PenPly President Josh Renshaw said Tuesday he had not found a buyer for the debt-plagued, 22-month-old business on Marine Drive — a venture heavily financed with public money.
He turned the keys to the facility over to the port at about 3 p.m., a port official said.
Renshaw also said that the company would not have the money to pay city utility bills or port back rent.
“The company is dissolving,” he said Monday as he cleaned out his office.
“We were trying to attract new money in to take it over, but we couldn’t quite put it together.”
Said Jeff Robb, the port’s executive director: “The lease is basically null and void.”
Under an agreement that PenPly signed with the port in early December, the mill had 14 days to find new ownership or vacate the premises.
“The agreement stipulates that [Tuesday] at the close of business, the site reverts to the port,” Robb said earlier Tuesday.
The mill, which sits on a 19-acre downtown waterfront parcel, shut down as Kply in November 2007 and reopened as Peninsula Plywood on March 1, 2010.
Renshaw, Kply’s former sales manager, spearheaded the effort to restart the mill as Peninsula Plywood — the name the mill had when it first opened in 1941.
He marshaled city, county and state officials to gain funding for the mill, while PenPly’s investors provided $700,000 to receive a
$1 million state Department of Commerce loan.
During its brief lifetime, PenPly provided $10 million in payroll, “maybe more,” Renshaw said.
At its peak, the mill employed 159, although that number dwindled to seven this fall, Renshaw said.
The port owns the mill building and the land, while banks have liens on the assets, Robb said.
Port officials are considering uses for the site — and they don’t include the manufacturing of forest products such as plywood.
The port’s land-use plan “identifies that site for marine trades,” Robb said, noting log storage and debarking will likely continue on the property while the China market remains strong.
Port Commissioner John Calhoun said the facility, valued at $4.2 million, should be razed.
“I estimate resolving that at the end of January,” Calhoun said.
Robb said Tuesday there would not be “significant progress” on levelling the mill during 2012 because of a full environmental assessment that will be required.
“Once we’ve got a technically clean site, we’ll go to deconstruction,” Robb said.
“We need to redevelop that property for marine trades.”
Robb will provide a status report on PenPly at the port commissioners’ 9:30 a.m. Jan. 9 meeting at the port building, 338 W. First St.
The mill still owes about $2,000 in wages to employees, Renshaw said.
Renshaw cited several reasons for PenPly’s demise.
After starting “on a shoestring,” a May 2010 fire forced the owners to borrow more money, creating “a big, big financial hit” that included $750,000 in lost sales, Renshaw said.
In addition, it cost about $350,000 a week to operate the mill, about $170,000 of which was spent on veneer alone.
But the company itself was also at fault, Renshaw said.
“We tied up capital by not controlling inventory enough,” he said.
“That’s the one thing I think is most unforgiveable,” he added.
“There’s not really any good reason we could not have done that better. That was a substantial mistake.”
It’s the second time in five years that the port has taken back possession of the plywood mill’s premises.
In 2008, the port took possession from Klukwan Inc. of Alaska, which operated the mill as KPly until it closed in November 2007, when 132 people lost their jobs.
Renshaw said it would be up to him and the other company board members — Grant Munro, Wilmer Possinger Jr., Bob Parke and Eric Flodstrom, all of Port Angeles — to decide if the company will file for bankruptcy.
“I’m not sure what the right thing to do would be,” Renshaw said.
“First, we’ve got to get this thing wound down and then figure out what we need to do.”
“The assumption is that the assets won’t cover anything more than the secured creditors,” Renshaw said Monday.
“We are in default to the banks. They are moving forward with the sale of the assets now.”
Renshaw said three creditors will be paid first with the proceeds from those sales: Sound Community Bank, the state Department of Commerce and Enterprise Cascadia, a nonprofit community development financial institution, in that order.
He does not expect to pay about $300,000 in utility bills to the city and at least $82,783 in back rent to the port, an outlook reminiscent of Kply’s shutdown, when Klukwan owed more than $200,000 in back rent.
“There is no money at PenPly, so PenPly will not be able to pay the city and the port back,” Renshaw said.
A $1 million loan from the state Department of Commerce helped get PenPly up and running, and Renshaw had credited state Rep. Kevin Van De Wege, D-Sequim, with helping to secure the loan.
“It is a sad day,” said the 24th District legislator. “We tried.”
He said he had “absolutely no regrets” about the state Department of Commerce loan.
“You’ve got to take some risk to get businesses going, and this risk paid off with two years of payroll.
“Any help that the state gave them was well worth it.”
The state Department of Commerce also provided a $500,000 grant in June to keep PenPly operating.
Renshaw, 48 and single, moved to Port Angeles in 2006.
The Medford, Ore., native, has been contacted by three companies that manufacture forest products — two in Oregon, one in Washington state — about future employment in management positions, he said.
“I want to see what I’m doing and then figure it out,” Renshaw said.
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Senior Staff Writer Paul Gottlieb can be reached at 360-417-3536 or at paul.gottlieb@peninsuladailynews.com.