"It's not a pretty picture"

Local leaders react to mill's closure

Six days after McKinley Paper announced it will cease operations in Port Angeles this summer, our region's top business experts and agency heads gathered during the County Commissioners' weekly work session on Monday to send a clear message: Our leaders are reactive, not proactive.

Clallam Economic Development Council (EDC) Director Colleen McAleer summoned an impressive group: Union leaders, McKinley's General Manager, development leaders, an economist, a mill supplier, the Olympic Workforce Development Council, Peninsula College, the Chamber of Commerce, self-employment specialists, the State's Labor Council, the Mayor of Port Angeles, Social and Health Services, a State Representative, and a congressman's aide.

Clallam County may not communicate regularly with industry heads, and it may not be the best at nurturing struggling businesses, but area leaders can write the textbook on how to triage and begin cleaning up once top employers pull the plug and leave town.

Nearly 200 McKinley Paper employees received this notice.

Mckinley's General Manager, Kevin Scott, said he was surprised to learn of Mexico-based parent company Bio Pappel's decision to shutter the mill on Ediz Hook. He said the decision was based on energy and transportation costs.  "We were all pretty shocked last week when the corporation announced that, based on economics, their plan was to idle the mill."

Scott explained that in a world increasingly reliant on packaging, he was hopeful the mill would see a resurgence, especially since the mill produces "void fill" for Amazon — the crinkled strips of brown paper inside boxes that keep smaller packages from shifting.  Scott said the mill is a little over 100 years old and that most of the equipment is aging, inefficient, and not designed for the grade of product they make. "The mill has been unprofitable for a while," admitted Scott, hopeful that it will reopen when market conditions warrant.  

"It's a very tough thing. There are a lot of good people in the mill," said Scott, who signed his own layoff notice last week.  

John Fox, Union President, called the layoffs "a catastrophic event" for employees, their families, and the entire community. He said that the company's code of ethics, which emphasizes respect, dignity, and trust, is without sincerity or merit. "Our local has worked tirelessly to pull this mill from the grave into full operation. We've all sacrificed so much to make this mill successful with little or no support from our owners."

Economist Dr. Dan Underwood ran through the numbers. The estimated employment income of the 193 positions is $16 million. An additional 151 supply chain jobs also rely on the mill, and that estimated labor income is over $11 million.  Direct and indirect income spent in the local economy generates $3.2 million and supports another 73 jobs.  That's a total of 418 jobs and over $31 million in lost labor income.  "It's a lot, it is significant," said Dr. Underwood.

The direct loss of taxes to County and City governments will be about $300,000.  When factoring in the loss of taxes related to the supply chain, it's just short of another $500,000.  An additional $320,000 of taxes will be lost in the general economy.  A total of $1.1 million in tax revenue to the county and City of Port Angeles will be lost.

“There are really only three types of people: those who make things happen, those who watch things happen, and those who say, What happened?” ― Ann Landers

Trucking operator Bill Hermann's statement to local leaders crystalized the ripple effect on the local economy. He spoke on behalf of Hermann Brothers, which transports much of McKinley's products and supplies. Hermann expects his trucking company will have to cut 30 to 35 jobs, which amounts to over $3 million in payroll annually, plus benefits. Herman said, "It was quite a blow" when he heard the news last week.

"The Peninsula is an island, and we are at the tail end of it," said Hermann.  He explained that it's important to be efficient when operating a remote business, and he thought the mill and trucking company were doing a good job of that.  Hermann said that if the "idle down" lasts six months or a year, "we're going to have to start over again.  And then they [the workers] are going to have to ask the question, is it worth it to start over again?  It's not a pretty picture."

"Another thing," said Hermann in closing.  "I've gotta get my one-liner in.  The one thing we want everyone to remember is that we are a 'one-road community.'  Please, no roundabouts on our one road." 

Washington State DOT recently announced plans for six roundabouts between Sequim and Port Angeles.

In an email sent to region leaders, Bruch and Bruch Construction Project Manager Sean Coleman shared additional insight. He said every truck on the Peninsula costs about $2 per minute which contributes to the cost of all goods coming in and out of Port Angeles.  He added that "culvert construction and the thought of roundabouts is going to get a lot worse... Pretty sure Bill Hermann has been saying this, but WSDOT and our State Reps won’t listen."

Representative Mike Chapman was listening online and acknowledged that the loss of jobs is devastating.  He touted his many achievements in Olympia that have helped the paper industry over the past years.  According to Chapman, he has sponsored many bills, tax exemptions, policies, and legislation that have helped bulk and paper mills.

Chapman did not mention his recent support for removing 3,000 acres of DNR managed land near Port Angeles from the timber harvest schedule.

The Elwha River Dams once supplied power and water to area mills.

Chapman, a former Clallam County Commissioner, said, "One of the lines I've used in Olympia, and I'm reluctant to share it with all of you, but many people will say that I've used this line, is that if the day comes that a mill closes in my district, I don't want this job anymore."

Mike Chapman is currently running for state senate (see below).

Port Angeles Mayor Kate Dexter called the mill closure "unfortunate” and said she is committed to providing as much as she can for city residents in the form of a "utility assistance package." 

In May, Mayor Dexter visited the Commissioners' boardroom and requested that they write a letter of support for transferring timber parcels off the harvest schedule and into the City's management. These working forests help fund schools, libraries, and emergency services but she provided no alternative to bridge that funding gap. The timber from those parcels also supports jobs in Mayor Dexter’s city.

The parcel transfer application, completed by Mayor Dexter and City Manager Nathan West, asked if there was any known opposition to removing the parcels from the harvest schedule. Mayor Dexter and Manager West, co-leaders of a city with four mills that employ hundreds of residents, answered, "There is no known opposition."

One tax-funded nongovernmental agency, the North Olympic Development Council (NODC), whose stated mission is "empowering the North Olympic Peninsula to pursue and invest in its own economic and environmental destiny" wasn't introduced at the meeting. Still, its president, Clallam County Commissioner Mark Ozias, attended and didn't say a word during the discussion.  If the $50 million "Recompete" federal grant for economically distressed regions is awarded to Clallam and Jefferson counties, Ozias' organization stands to receive 17% ($8.5 million) of those funds. The NODC plans to spend those funds on training and hiring grant writers for area Tribes.  

Monday's necropsy of the mill lasted nearly two hours. Leaders backpedaled and brainstormed what measures could be taken to halt the shutdown or possibly shorten the idle time. Mill management emphasized that operations were ceasing, but the difficult task of reopening the mill may happen someday.  

Finally, the recently terminated Manager of Human Resources at McKinley Paper asked to join the discussion. She said something that hadn't been mentioned.  "The discussions that are happening here should have been happening long before McKinley came on.  They should have been happening when Dupont was here." 

As an example, she mentioned the "pipeline," an aging two-and-a-half-mile pipe that transports water from the city to the mill site.  The large pipe beside Marine Drive has sprung 11 leaks in the last year and requires $4 million in upgrades.

Port Angeles Mayor Kate Dexter was quick to point out that, according to the lease, the mill is responsible for those upgrades. That won't be an issue now that the mill is closing, but Mayor Dexter may have solved her city's water shortage problems.

The Human Resources Manager closed with advice to prevent this from happening again:  "Get engaged, get involved, push the envelope, ask the hard questions." She also asked why the parent company, Bio Pappel, wasn't at the meeting.

EDC Executive Director Colleen McAleer said, "We'll definitely reach out to them.  I will see if we can have some conversations."

People’s Forum

July 18th is the next candidate discussion at the Fairview Grange. Marcia Kelbon and Mike Chapman are both running for State Senate.