CORDOVA BLUES
THE WATERS OF PRINCE WILLIAM SOUND KEPT CORDOVA ISOLATED AND SELF-RELIANT - UNTIL THREE DISASTROUS FISHING YEARS LEFT THE TOWN GASPING

By HAL BERNTON
Daily News business reporter

CORDOVA- Prince William Sound fisherman Gerald McCune lost his boat to a bank last July. The banker came down from Anchorage, a blue-jean clad vice president of credit who politely went out about his business. He asked McCune to clear out his belongings a sleeping bag, a few canned goods and nautical charts. Then he placed a white foreclosure sticker on the 28-footer and had it hauled ashore.

The bank put the boat up for auction to help pay off McCune's $24,000 fishing loan. The bank took bids through Sept. 28. But a strange thing happened. The bank didn't get any offers, not from anyone in this town, where fishing is the No. 1 industry, or from anywhere else in the state.

"They advertised in three newspapers and got none zero," McCune said.

Now the bank is trying to see if McCune might somehow take the boat back with the aid of a federal loan.

That's how bad things are in Cordova these days. Boats aren't selling. Neither are fishing nets or homes or much of anything else as this town of 2,900 ends one of the worst fishing seasons in decades.

The season began last spring with a herring run so sickly and weak that biologists canceled the seine harvest.

Then in August, runs of pink salmon the most abundant of Alaska salmon collapsed. Fishermen caught less than 6 million of the more than 25 million pink salmon state biologists had predicted. The few fish brought to processors fetched 15 cents a pound, less than half the price of five years ago.

Cordova accessible only by boat and air has always been a bit on

the ragged edge, a place where no one gave you a hard time if your roof was covered with moss or the paint on your siding was peeling down to bare wood.

More than any other town in southcentral Alaska, Cordova's fortune has been tied to the sea. As long as the fishing was strong, Cordova spread along spruce-covered mountains bordering the northeast Prince William Sound did just fine.

But this is the third year in a row the town's fishing industry has been struck by either low prices or weak pink salmon runs. The ailing fisheries have pushed this town into a deep recession.

A few longtime residents have already left town, and others find themselves at the mercy of bankers and state lending agencies that hold mortgages on their fishing boats and houses. As winter approaches, many in town appear to be battling a kind of group depression.

"People don't go out and socialize as much as they used to. They're constantly worried and don't see a light at the end of the tunnel," said Libbie Graham, a Cordova businesswoman.

To shake Cordova out of the doldrums, state officials want the community to back Gov. Wally Hickel's proposed Copper River Highway that would link the town to the state road system and bring in more tourists. "It's real hard to build an economy on a (fishery) resource that's so unstable," said Paul Fuhs, the state's commissioner of Commerce and Economic Development.

Fuhs also has proposed a deep-water dock for cruise ships and funding for a new hydroelectric plant to try to reduce the town's power rates.

But residents remain deeply divided about the town's future.

Some don't see salvation in summer parades of Winnebagos pulling into Cordova to gas up and buy groceries. They want the town to retain its isolation a place without malls and sprawl, where there's no need to lock the front door. They are pinning their hopes on the fisheries rebounding and have fought both the road and a local logging operation that until recently clear- cut Eyak Corp. Native land outside of town.

Others have backed the road as a key to broadening the economy, developing other industries, such as logging.

"The community does not present a clear picture to people of what they want, and they really need to do that," Fuhs said. "We're a little reluctant to step into a situation where you may get clobbered from one side or other."

A recent mayoral election underscored the division within Cordova.

Hotel operator and road-supporter Margy Johnson narrowly upset incumbent Charles K. Weaverling, a Green Party member and longtime road opponent. In the final count, they were separated by just two votes.

Johnson will face a city beset by revenue declines that already have forced many reductions, including a police cutback from round-the-clock duty. Things could get worse this winter as consumer spending declines erode city sales tax revenue and property values.

On a Saturday afternoon this fall, Don Narrance, co-owner of Cordova Commercial Co., surveyed a store full of pipe fittings, hardware and other supplies, but empty of customers. Business, he said, "is the worst in 20 years."

Another measure of the bust is Graham's fishing-supply operation that sold only one net in the past two years. Earlier this year, Graham walked away from the store, losing some $200,000 in investments as she gave it up to another businessman to help make bank payments.

Other business people are trying to call it quits, but can't find any buyers. "I've been trying to sell for three years, but it's hard to find someone who has a down payment," said Laura Brown, owner of Laura's Liquor Shop on Cordova's main street.

The housing market also has been transformed by the recession. Back in 1990, it was so tight that even the dowdiest of houses was quickly snatched up. Rental housing was so scarce that city officials asked North Pacific Rim Housing Authority to build some low-income units.

This year, as the authority's five duplexes are finally under construction, there are lots of rentals, and more than 30 homes for sale languish on the market, said Linden O'Toole, a local real estate agent. "The prices haven't come down. But nothing's moving. Some homes have been for sale for more than a year," O'Toole said.

Not everyone in town is in trouble. More than 350 fishermen list Cordova as their residence and many use gillnets floating nets that catch fish by the gills to take red and silver salmon. Those fishermen have been helped by strong runs of red salmon in the Copper River just outside the Sound.

But McCune who lost his boat to the bank is a longtime gillnetter. He says he was hurt by weak markets. He also may have spent too much time working on fishery issues as president of the United Fishermen of Alaska and a local Cordova fishing group, and not enough time on the water, he said.

"Once you're behind on your payments, it's really hard to catch up," McCune said.

Those with the biggest debts are seine-boat fishermen, who use large boats and purselike nets to catch herring and pink salmon. Some made big money chartering boats during the 1989 Exxon Valdez oil spill. Tax laws allowed them to shelter their earnings by financing expensive new boats, and that's just what they did.

"We have two dozen boats in the harbor that cost more than $250,000 apiece," said Bill Myers, a Cordova fisherman who opted to sit out the cleanup effort. "There's no way the fisheries could support those kind of payments."

Others dove into the pink fishery in the boom years just before the spill. O'Toole and her husband spent $280,000 on a seine permit that today is worth less than $60,000. She says they may have to file for bankruptcy.

Officials from state lending agencies that hold the biggest chunk of boat loans say they're not going to foreclose on any vessels this winter. Loan officers from private banks say they also are trying to avoid foreclosures and be flexible over late loan payments. But Jon Stavig, of the Cordova branch of National Bank of Alaska, said he "doesn't want to set a blanket policy. We will deal with these issues on a case-by-case basis."

Fishermen also are hurt by major problems with a hatchery program that in recent years has produced most of the Sound's pinks. The program is operated by Prince William Sound Aquaculture Corp., a nonprofit corporation created by a group of veteran Sound fishermen who back in the 1970s were eager to even out the boom-and-bust cycles of wild pink salmon with hatchery runs.

By the late '80s, pink salmon harvests were among the highest on record due largely to the success of the hatchery runs. Things began to go bad in 1991, when the fish came back in a late rush that overwhelmed processors and prompted fishermen to dump more than 3 million salmon. Then last year, the hatchery runs declined. And this year, they collapsed altogether and so did the corporation's finances.

At a fall board meeting, the corporation's board gathered at Cordova's Moose Lodge to grapple with a more than $4 million shortfall in the money needed to keep the hatcheries operating through next June.

"I can't see maintaining the status quo when we don't have a dollar to operate on," said Jimmy McCune, who with his older brother Gerald has fished the Sound for more than three decades.

McCune wanted to see big cuts in the budget. The board settled on cuts of up to 10 percent, and approved a resolution allowing the corporation to try to borrow more than $4 million in operating funds.

But the corporation already is $25 million in debt. All that money is owed to the state Division of Investment, and the agency doesn't have any more to lend. "It just isn't there," said the director Martin Richard.

McMullen said he hopes something can still be worked out with the state, or perhaps with money from the $1 billion fund created by the federal and state Exxon Valdez lawsuit settlement.

McMullen is hoping that hatchery runs will rebound next season and that the corporation can begin to climb out of debt. But no one knows just what's wrong with the Sound and when things might improve.

Some fishermen are convinced the cause of the fishery problems is the Exxon Valdez spill that gushed some 11 million gallons of North Slope crude into the Sound in the largest oil-tanker spill in U.S. waters. They have joined in a private-claims lawsuit seeking more than $2 billion in damages from Exxon Corp.

"There's a lot of people who say that those fishermen should just quit whining," O'Toole said. "They can put it all behind them because it's not happening to them. It's not something that we can get resolved and put behind us. What we need is a settlement from Exxon."

Exxon officials figure the company already has paid its oil-spill dues. Exxon made good on $300 million in Alaska fishermen claims for oil-spill damages and spent another $30 million to charter boats during the cleanup, said Dennis Stanczuk, a company spokesman.

Stanczuk cites Exxon Corp.-sponsored studies that showed the oil caused no long-term damage to herring or salmon.

Meanwhile, federal and Alaska state studies found that oil did cause some damage to herring and salmon. But these studies fall far short of linking all the Sound's fishery problems to oil.

Scientists such as University of Alaska oceanographer Ted Cooney have speculated that recent cool, windy spring weather may have decimated the zooplankton resource that sustains young salmon as they're released from hatcheries.

But fishermen are unwilling to accept any theory that lets Exxon off the hook.

"No one wants to be half-damaged," said Karl Becker, a Cordova seiner. "That's the nature of litigation."

Johnson, the new mayor, wants Exxon to settle the fishermen's claims. But she also wants the town to try to get over the spill.

"We need to stop being a victim and move forward," Johnson said. "We need to get beyond this depression."

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