Harrison County

Can Topship deliver 1,000 Gulfport jobs promised?

TIM ISBELL/SUN HERALDEdison Chouest Offshore vessels are docked on the industrial seaway in Gulfport, where a new ECO affiliate, Topship, is leasing acreage from the state Port of Gulfport. Another ECO company, Gulf Ship, has been located in the Harrison County Industrial Park off Seaway Road since 2006.
TIM ISBELL/SUN HERALDEdison Chouest Offshore vessels are docked on the industrial seaway in Gulfport, where a new ECO affiliate, Topship, is leasing acreage from the state Port of Gulfport. Another ECO company, Gulf Ship, has been located in the Harrison County Industrial Park off Seaway Road since 2006.

In exchange for 1,000 jobs promised, Mississippi has agreed to give $36 million to Topship, a new affiliate of global transportation company Edison Chouest Offshore, without checking out two similar projects that failed to sustain job pledges.

Instead, Mississippi Development Authority representatives said they examined the finances of ECO and twice visited the company's massive operations at Port Fourchon, La., a sight to behold as it materializes in the marshes of Louisiana south of New Orleans.

"We were able to see the full operation at Port Fourchon, which is really very impressive," said Manning McPhillips, MDA's chief administrative officer.

"We discussed business plans, what they saw that they'd be doing in Mississippi. We talked about different project mixes the different type things that could be done in Mississippi, that kind of thing. Got a tour of their facilities. Got a history of the company and got to meet with several of their leadership."

When asked if ECO would be responsible for repaying any money if Topship failed to live up to its promises, McPhillips said he would have to check. MDA spokesman Jeff Rent later sent the Sun Herald an email that said, "I spoke with our attorney and she told me that Topship, LLC is responsible for the company's obligations, not the parent company Edison Chouest Offshore."

The Chouest family built ECO and its maritime spinoffs, all private companies, from a boat-rental business founded in 1960 in Galliano, La. ECO representatives have not returned calls from the Sun Herald.

Though MDA examined ECO, McPhillips said the agency did not consider economic-development agreements with two established Chouest affiliates: LaShip in Louisiana and Gulf Ship in Gulfport.

Both LaShip and Gulf Ship employ far fewer workers than originally promised. MDA and the state port chalk up the low employment numbers to the vagaries of the oil industry.

"The market will recover, as it has in the past, and we fully expect that hiring will resume at Gulf Ship," Rent said in response to questions the Sun Herald was asked to submit in writing.

Gulf Ship was not examined, Rent said, because it is "a separate legal entity with no bearing on the discussions with Topship."

Norton Francis, an expert on tax policy and state financing incentives for economic development, said deals struck with other ECO affiliates and how they worked out "absolutely" should have been examined.

"In this company's case, if they have two or three affiliates that have received incentives, you definitely want to look at them and say, 'Did they fulfill their obligations? Did they really bring the impact we wanted?'" said Francis, senior research associate with the Urban-Brookings Tax Policy Center in Washington. "And it's not just a matter of fulfilling the obligations of the contract, the state is doing this to generate additional economic development.

"If a company comes to a town in Mississippi and the promise is all these jobs, there's a sort of an implicit promise of even more jobs that will spin off from it from the economy growing. Did that happen? Those are the questions you want to ask."

Conflicting numbers

Gulf Ship laid off employees the week before Bryant, ECO president and CEO Gary Chouest and MDA staffers visited Gulfport to applaud the deal in a banquet room filled with politicians and business people. Nobody mentioned the layoffs, just the 1,000 jobs Topship promises.

Several current or former employees of Gulf Ship told the Sun Herald the latest round of layoffs has left the company with only 110 employees.

Harrison County spent $12 million in post-Katrina recovery money, earmarked for economic development, on a boat-launching facility for Gulf Ship, which builds oil-supply vessels for ECO. In exchange, Gulf Ship was supposed to create 800 jobs.

Rent said MDA closed out the project in November 2013, after Gulf Ship met its job requirement.

The Harrison County Development Commission has been collecting employment numbers for Gulf Ship, which is in the same Harrison County industrial park where Topship plans to build, from around the time the company opened in 2006.

"The biggest number I remember asking or hearing was in the 600 area -- 600 to 650," HCDC Executive Director Bill Hessell said. "Did they get 800? They may well have, but if we didn't ask at the time, we didn't know. We try to get numbers every six months, but that doesn't mean we did.

"Edison Chouest is a private company and they're very private about their business."

Job quotas

The state Port of Gulfport must create 1,300 permanent jobs by early 2020 in exchange for its own post-Katrina restoration and expansion grant of $570 million. Bryant, MDA and port Executive Director Jonathan Daniels are banking on Topship to help the port meet its job quota.

Topship pledged to create 700 jobs by the end of 2020, with 300 to follow by 2022.

Daniels said the port is working with Topship to ensure all permanent jobs created before the port's deadline are counted, but the port expects new jobs from other companies as well.

The state is granting Topship $10 million for infrastructure improvements on the property and $1 million for workforce training. The state will give Topship $5 million of the total only after the company's jobs commitment is met, according to a copy of the agreement.

The port will hand over $25 million of its Katrina grant for an unspecified project the port and Topship agree on.

Topship will receive a host of tax breaks as well, including a 20-year exemption on state income taxes, and 10-year exemptions on county and city property taxes.

Daniels and Manning McPhillips said Topship will be an entirely different company from Gulf Ship, even though it is unclear what operations Topship will undertake. Gary Chouest said while he was available during the Gulfport meet-and-greet that plans are still being finalized. Topship has pledged to invest $68 million on property improvements.

Gulf Ship builds a specific offshore-supply vessel. MDA and Daniels said Topship's operations could include construction of offshore oil and gas ships, manufacture of underwater components for oil and gas companies, and government ship fabrication.

At the meet-and-greet, Chouest told the Sun Herald: "We know we'll do shipbuilding, it's just a matter of to what extent, but the property itself is large enough to support many other facets of the offshore industry besides shipbuilding, and that's one of the reasons we decided to invest there. If we were only doing shipbuilding, we wouldn't have needed that large of a facility."

The port put up $16 million for the 116 acres, while Topship is making a prepayment of $16 million on its lease to cover half the purchase price. In 10 years, Topship can buy the property by paying off the remaining principal on the loan. The port bought the land off Seaway Road from Ingalls Shipbuilding, which closed its composite-components yard there in 2013 after the Navy switched to steel components.Unmet obligation

ECO's LaShip at the Terrebone Parish port is the company's largest shipyard, according to the ECO website. The website says LaShip employs 1,200. But that number was down to 611 by the end of June, the last date for which figures were available from Louisiana Economic Development.

LaShip received public economic incentives valued at $75 million, the Associated Press reported in February 2011.

LaShip was supposed to create 1,000 jobs by September 2012 and sustain the number through December 2015. The agreement was amended in August 2012, requiring LaShip to meet its job commitment by March 2014 and maintain the number through June 2017.

A statement Louisiana Economic Development spokesman Gary Perilloux sent to the Sun Herald said, in part, "Plummeting crude oil prices have dampened demand for the platform supply vessels and offshore construction vessels that it and other Gulf Coast shipyards produce, which led the company to reduce its workforce to 611 by its last reporting deadline

" The time has not expired on (LaShip's) contractual obligations to the state, and final assessment of the project performance will be made at the end of the contract period. At that point, the state will assess LaShip's performance and will retain the right to reclaim previously disbursed funds in an amount commensurate with unmet performance objectives."