This section deals with three administrative concerns: What are the financial arrangements of the proposed surimi plant? What is the administrative structure under which the study is being conducted at present? What is the legal structure between Gloucester CDC and the proposed Gloucester Fish Inc.?

Based on the profile of the model surimi plant that is currently being built in Iceland, in accordance with specifications outlined by Dr. Stephen Kelleher of the University of Massachusetts Marine Station, the financial schematics of the proposed surimi plant in Gloucester can be listed as follows:

" Rough estimated labor cost is $2.35 million and an additional $2.0 million for such other costs as electricity, water, and other ingredients. And yet, can the needed amount of water be made available to the plant? Can sea water be used? What is the cost of stainless steel equipment? What are the costs of discharge? Can vessels be equipped to dispose of the water discharges a sea?

These estimates are concerned only with the sale of protein. There is also the possibility of producing oils, pharmaceuticals, and other products. For instance, a 30,000 mt production will yield 3000 mt of oil. At the current price of $750 per mt, one can add an estimated income of $2.25 million. To be specified that this is a product that results form the operation of the plant, without additional machinery, or other operational steps- except for holding and selling costs.

A useful comparison can be derived from assuming that the fish is transformed into fish meal. The final price to be gotten from this type of operation would be approximately $2.7 million. And the costs of production would not necessarily be that much lower. Such costs can be as high as $2.5 million.

These are broad figures and broad estimates. In order to determine the detailed financial feasibility of a surimi plant in Gloucester, we need to reach decisions and obtain detailed information on a number of other preliminary factors. For instance, if the plant is owned by fishermen as well as by shoreline facilities operators, fishermen as well as shoreline facilities operators might be satisfied with an initial fair return-with the understanding that the ultimate financial benefits to them will be increased first by a share of the profits from the sale of the product and then by the increase in value of their individual equity position in the plant.

A strictly interrelated series of issues concerns the assumption of financial burdens to equip existing boats or to build new boats capable of harvesting and transporting pelagics in Refrigerated Sea Water (RSW) containers. Who will assume those burdens? How will eventual benefits be apportioned among participants in the venture?

Before initiating the detailed financial analysis, we need to determine the relationships of all factors to each other: quantities of fish to be utilized, and consequently quantities of water, quantities of discharges, quantities of energy, and quantity and type of labor necessary to run the operation at the desired level of activity.

Before initiating the detailed financial analysis, we also need to determine the size of the plant that we want to build in Gloucester and consequently the precise cost factors associated with that preliminary determination.

This report and its immediate accomplishments have to be examined as being part of a long term trend in fisheries development in Gloucester that starts with the depletion of traditional species of fish like cod and haddock in the 1980s and the consequent near closure to fishing of these species by an agency of the Federal Government, the New England Fisheries Management Council.

This condition of fish stocks has led to a very large number of consequences relating to the social and economic composition of the City of Gloucester. Much income was lost; many jobs were lost; and many lots on the waterfront became either idle or were utilized at less than an ideal capacity. This physical condition of the waterfront has led many souls to conceive of the potential exploitation of waterfront property for either residential or commercial activities that relate to tourism. If the latter alternative to the utilization of waterfront property is taken, many will agree that the very socio-economic composition of the city of Gloucester will perhaps irreversibly change.

Clearly, the owners of waterfront property cannot for long tolerate a condition of idleness for their properties. Real costs such as maintenance and fiscal costs, as well as the real loss of opportunities, militate against this possibility.

Since, as it can be seen from the two charts enclosed in Section VII.a, the stocks of pelagic species of fish like herring and mackerel have in the meantime grown to a very large quantities, the natural hope has been to use these species for the physical and economic rejuvenation of the waterfront through a program of action that is explained in the following pages.

The Gloucester CDC has presented this case, in a large variety of ways to the public at large and to people directly concerned with the development of the waterfront. Specifically, we have made this presentation to

A presentation of the project was also made at a meeting of the Gloucester Fisheries Commission. This presentation became an implicit presentation of the project to the public at large. This presentation was in fact reported in the Gloucester Daily Times. The article by Barbara Taormina is attached.

The response has been most encouraging. The feedback from the persons consulted about the project can be characterized as follows. While the degree of enthusiasm has been varied and the number and the degree of concerns have been varied, the consensus has been that it is worthwhile to explore all the technical details involved in the physical and financial feasibility of a surimi plant in Gloucester.

As stated in the original proposal, the plan of action will be determined by experts working intensely with community people -- especially fishermen, seafood processor, and marketers -- through the formal establishment of an Advisory Board to the GCDC.

The GCDC will operate at the will of a Board of Directors that is widely representative of the community and the advice of broad-based Advisory Board that is drawn both from within and outside the fishing industry. The aim is to encourage and engage community-wide participation in the development of the plan in order to maximize political support for the project and minimize resistance to it.

So far we have received commitments of assistance from Pat Kurkul, the regional administrator of NOAA, Fisheries Northeast and from Dr. Herbert Hultin, the director of the University of Massachusetts Marine Station at Hodgkins Cove, Gloucester, Massachusetts.

The executive director is Carmine Gorga. Mr. Gorga has about thirty-five years of experience in various aspects of fisheries development. Dr. Gorga's resume is available at www.polis-tics.com.

As the leaders of the newly formed Gloucester Community Development Corp., a local non-profit economic development organization, Gorga and Lima are making the rounds with an idea to create a new high-tech plant to process herring and other pelagic fish.

Both Gorga and Lima are members of Gloucester Initiatives, a grassroots group of local activists committed to protecting the harbor as Gloucester's central economic resource.

Their immediate goal with the new herring plan is to get fishermen, processors and other waterfront advocates to the table to talk. The long-term goal is to transform Gloucester into a high-tech seafood processing center.

"We are looking at getting support for a herring manufacturing plant," Lima told the commission. "We are looking at creating a value-added product with a manufacturing plant that's very high- tech, very green."

The idea as it now stands is to build a plant that will process herring, mackerel and menhaden into surimi (sir-ree-me), a concentrated fish paste that is used as the basis for other seafood products.

Nowadays, whole fish is boned, skinned, minced, washed and strained into concentrated fish paste, which is then flash-frozen. Processors then add flavorings such as crab extract, as well as natural coloring and natural binders and stabilizers, such as starch, salt, egg white and sugar.

Although Gorga and Lima have yet to start work on the details of what they estimate will be a $10 million plant, they highlighted what they believe are the proposal's key benefits.

Because the waterfront lacks the infrastructure to handle fish waste, most fish is landed and then shipped with little or no processing. A surimi plant would bring fish processing back to the waterfront, which has essentially operated as a fish transfer station for the past decade.

Processing pelagics into surimi would add approximately four times the value to the original fish product, according to Lima. Those types of potential profits make working with low-paying catches a more attractive option to fishermen and processors accustomed to earning six cents a pound or less from herring.

Surimi's value-added benefits also ease the need for huge volumes of fish needed to support a more traditional herring or mackerel manufacturing plant. Thus the risk of overfishing and depleting stocks is less of a concern.

Lima also stressed that the plant would incorporate the latest water reclamation and processing technologies that would produce little or no waste.

Gorga and Lima want to talk with anyone and everyone about the idea, but they are paying close attention to ideas and opinions from the waterfront.

"We want to put together fishermen and processors and let them argue about their needs," said Gorga. "We want them on both sides of the table surrounded by experts who can offer technical advice."

But they also intend to work closely with the city's Community Development Department, Mayor Bruce Tobey, the Cape Ann Chamber of Commerce and anyone interested in becoming involved in hammering a working proposal that will draw funding and investors.

"Saying the fishing industry is dead is almost a slogan and this is what has to be changed," said Gorga, who hopes the new idea will help boost community confidence in the waterfront. "The issue is to convince people in Gloucester that the fishing industry is alive and well and can have a brilliant future."

Legally, the project is designed to work at two levels: the level of the Gloucester Community Development Corporation, and the level of Gloucester Fish inc.

The first is a not-for-profit organization. Its purpose is to gather community-wide participation and support for the project. The Gloucester CDC is also designed as a pass-through for benefits gathered from the community at large to go back to the community at large, but filtered through the specific interests of Gloucester Fish Inc.

Gloucester Fish Inc. does not yet exist, but it is talked about on the waterfront and the community at large. Gloucester Fish Inc. is designed as a for-profit standard business corporation, owned, controlled, and managed with complete independence from the CDC.

The particular relationships that develops between the two organizations will depend on a number of factors, predominant among them the type of financial investment that is going to be attracted by Gloucester Fish Inc. If the capital will come exclusively from private concerns, the input from the CDC will be nil. If, however, the other extreme of the arc of possibilities becomes a reality, namely, if the venture should be financed solely by public money, then a whole set of possibilities will have to be explored and eventually firmed up.

The ideal relationship that we have put forward for consideration at this stage is an "own-lease" agreement. This agreement would function as follows. At first, the CDC owns 100 percent of Gloucester Fish Inc.- and still does not interfere with the internal management and control of the firm. Gloucester Fish Inc. will simply lease the facilities. But immediately the lease payment will be transformed into an equity position, on a sliding scale so that in perhaps five to seven years, Gloucester Fish Inc. will have paid, through its lease, for the initial value of the facilities and will own them outright.