Cash-strapped Schooner Virginia appears dead in the water

Six years ago, the wife of then-Gov. Mark Warner stood on a dock near Waterside and smashed a bottle of champagne on the bow of a sleek wooden sailboat. The crowd cheered as foamy bubbles slid down the hull into the Elizabeth River.

Christened by first lady Lisa Collis, the Schooner Virginia, the first tall ship built on the Norfolk waterfront in more than a century, was born.

The Virginia led the Haborfest Parade of Sail, set a blazing speed record in the Great Chesapeake Bay Schooner Race, hosted students for seamanship programs, and called on ports from Nova Scotia to the Virgin Islands as the commonwealth's official tall ship.

But this weekend, when boats from all over the East Coast tie up in Portsmouth after finishing the annual schooner race from Baltimore to Portsmouth, the Virginia, for the first time in its history, will not be among them. Built and operated with more than $5 million in public money, the vessel will bob idly at a pier behind Nauticus.

The non profit foundation that owns the ship, the Virginia Maritime Heritage Foundation, is carrying $1.6 million in debt. Board members called the ship back from the Caribbean, laid it up and fired most of the paid crew in December when cash ran out.

A last-ditch effort between schooner officials and the Nauticus Foundation to get the Virginia sailing again is now under way, but many details remain to be worked out, said Will King, the schooner foundation's now unpaid executive director.

"It's do-or-die time for the Schooner Virginia," said Bob Stanton, a longtime board member and founder of a commercial real estate company. "We either come up with a plan to operate it that is financially sensible or we're going to have to face the ultimate consequence, which is to sell the vessel, pay off the debt, lick our wounds and go home. That is not what we want to do."

If there's a surprise in this story, it might be that the Virginia didn't stop sailing earlier. Sluggish private fundraising, a heavy reliance on now dried-up state money and bank loans, a lack of sailing programs that paid the bills, and the sinking economy grounded the Virginia, according to interviews and a review of the ship's financial records.

"It was touch-and-go for years," said Palmer Rutherford, another longtime board member and retired attorney.

Hundreds of disappointed volunteers that helped build, maintain and sail the Virginia are wondering about its fate.

Wooden boats don't age well when they sit. They swell, shrink and take a beating from the sun. No crewmen are aboard to catch problems early. The Virginia sprang a leak this summer and the boat took on 2 feet of water. An underwater dive team had to caulk it. The boat needs a fresh coat of $200-per-gallon bottom paint.

"It's like seeing your bright, attractive college-bound daughter drop out of school, start smoking cigarettes, get fat and ugly, and move into your garage," said Mike Goodwin, a longtime volunteer who helped build it. "There's an emotional attachment and it's heartbreaking to see it. You know what it's capable of doing."

One thing the Virginia is capable of is speed. It was modeled after pilot boats that raced out to guide ships into Hampton Roads ports.

In 2007, it sailed the 127 miles from Baltimore to Portsmouth in the Great Chesapeake Bay Schooner Race in 11 hours and 19 minutes, a blistering average speed for a sailboat of about 11 m ph, a record that still stands.

Hundreds of students have been aboard for programs, learning seamanship and teamwork.

But paying for Virginia's approximately $1 million budget has always been a challenge. Generous public funding masked the fact that the Virginia never had a business model that worked.

Between 2000 and 2008, the General Assembly poured $2.1 million into the Virginia for construction and operation through its non-state agency grant program. Federal transportation money funneled through the state accounted for another $2.8 million. Norfolk chipped in $124,000, most of it coming through the city's Economic Development Authority. One year, Portsmouth contributed $10,000.

From 2006 to 2008, an average of $850,000 of the boat's $1 million yearly budget came from public sources. When that money dried up, it became impossible to make ends meet.

Adult and youth sailing programs never made enough money. For example, the ship's educational program income was $196,000 in 2008, while salaries and benefits for a crew, captains and administrators reached almost $500,000, tax records show. Insurance, advertising, routine maintenance, supplies and interest on two major bank loans - one for $2.6 million in 2005 and one for $1.8 million in 2007 - piled on more costs. One-third of the 2005 loan was eventually forgiven, a gesture that helped keep the Virginia going but didn't solve underlying problems.

One reason for the struggle is that the Virginia has never had a clear mission.

To get state funding, board members touted it as an economic development tool and ambassador to serve as an advertisement for the commonwealth, a mission with unquantifiable and vague benefits that didn't make money.

To attract donors, board members emphasized educational programs. Many of those were in New England in the summer or the Caribbean in winter, which created two problems.

The far-flung excursions were expensive, and the lack of local visibility made it hard for many Hampton Roads residents and potential donors to feel a connection to the ship.

"When the mission is broad, sometimes you need to refocus," King said.

Nothing the schooner foundation tried seemed to work. A luxury yacht donated to the foundation to be sold to raise money for the Virginia fetched only a tiny fraction of its appraised value. Ideas to form partnerships with public schools and Old Dominion University fizzled.

And then there was the lagging private fundraising.

"Frankly, we were disappointed in the private sector," Rutherford said. "We thought corporations were going to be standing in line. People would give us $25,000, but we needed people to give us $250,000."

A vocal critic of the board of directors is Rick Boesch, the founder of the Schooner Virginia Project.

"Their job is to raise money," said Boesch, who now lives in Norway. "If they are unwilling or unable to do so, you bring in folks who will. There was a severe lack of success in that important mission."

"I disagree 100 percent with Rick Boesch," Stanton said. "I'm confident our board did what it had to do. It was just tough to raise money while we were losing money."

Stanton and Alan Lindauer, a board member and retired founder of Waterside Capital Corp., guaranteed the $1.8 million bank loan at the end of 2007.

"That's what board members are supposed to do," Stanton said. "If the mission cannot be condensed to the point where it's financially possible, we could sell the vessel and I think it would bring in more than is owed. Have Alan and Bob made a bad business decision? I don't think so."

Board members said the recession that hit in 2008 hurt fundraising. An expected $1.5 million for endowment seed money didn't materialize.

Fundraising efforts are on hold while board members craft a plan with the Nauticus Foundation. A new business plan is needed before asking people for money, Stanton said.

A Nauticus Foundation spokesman declined to comment.

It's likely the Virginia will have a scaled-back budget of about $650,000, and the focus will be on youth sailing, King said. Most trips would be in the Chesapeake Bay, to save money and increase local visibility.

Retired Adm. Jack Kavanaugh, the former executive director of the USS Wisconsin Foundation and a new member of the schooner board, said that, to raise money, the Virginia needs a compelling and positive new narrative.

"What story are you going to tell?" he said. "You need a story."

Aaron Applegate, (757) 222-5122, aaron.applegate@pilotonline.com