Scheffer, who lost two fingers on his right hand in an accident at the mill, says he plans to stay in the county and try to support his wife and three children. Now enrolled in a state-funded training program in nearby Panama City, he's learning how to repair electronics such as computers and stereos. Once retrained, however, it's likely that he will have to look outside Gulf County for a job, too: Aside from the Gulf Correctional Institution in Wewahitchka, the paper mill was the only major employer in this rural county of 14,000 on the Panhandle coast. With the county's limited economic infrastructure, any turnaround is probably years away. "Now, it's almost like the last one left needs to turn out the lights," Scheffer says.
History
If Scheffer is Gulf County's present, St. Joe Co. was its past. For decades, the Jacksonville-based company, then called St. Joe Paper, operated its vast holdings -- 366 of 578 square miles, or 63% of the county's land -- as a giant pine tree farm to supply timber to its mill. Built in 1937 on St. Josephs Bay, the mill produced mainly linerboard, the corrugated paper used to make boxes. Over the years, St. Joe's dominance kept Gulf County's economy one-dimensional -- either by default or by intent. "St. Joe kept the city -- and the county -- in a virtual lock; it wouldn't sell any land to anybody else, wouldn't let any other companies come in," says John Reeves, head of the local papermakers union. "This place is a company town."
In time, the mill's ownership changed, but not the economy. When St. Joe moved to reinvent itself as a real estate developer, [Florida Trend, August 1998], one of its first moves, in 1996, was to sell the mill to Florida Coast, a joint venture of Smurfit-Stone Container Corp. and BoxUSA, a subsidiary of Four M. Corp.
St. Joe got $328.8 million in cash and a $10 million senior subordinated note from Stone Container and BoxUSA for the mill and 16 box-assembly plants around the eastern U.S. St. Joe sold the note on the secondary market a couple months later for $10.4 million, leaving some wondering if the company saw what was coming.
At first, local hopes rose that Florida Coast could take advantage of Smurfit-Stone's and BoxUSA's size and global networks to prosper. The new owners also updated some of the plant's old equipment. But within a year, the plant lurched into a death spiral. First, Florida Coast shut it down for nearly five months, as competition from more efficient foreign mills dropped the price of linerboard from $380 a ton to $310. But toward the end of 1997, prices rose, and workers -- some of whom had already begun training for other jobs -- came back to work wearing T-shirts saying, "I survived the Florida Coast shutdown of 1997." Morale was high, says Ferrel Allen, the mill's manager.
Then came the Asian economic crisis. Foreign papermakers dropped prices again, and with Florida Coast's backers wary of putting more money into the mill, another shutdown was inevitable. On Aug. 15, 1998, the plant closed for what was supposed to be three months. But as the weeks stretched into months, workers and the community realized the mill was a goner. Florida Coast missed a mortgage bond interest payment of $10.5 million, and Smurfit-Stone and BoxUSA declined to dig into their own wallets to help.
The death of the paper mill has left every business sector in the county grieving. The tiny Apalachicola Northern Railroad, which hauled pulp for the mill, laid off 86 of its 105 employees. The city of Port St. Joe's multimillion dollar wastewater treatment facility shifted 16 of its 24 employees to other jobs.
Rebuilding the economy will take time. St. Joe says it's looking at developing an eco-tourism resort in the county, and has offered to work with the county to provide land for an industrial park and to build new industrial space, says Chris Hine, vice president of commercial and industrial development. Those plans could take years to unfold, however; in the meantime, it'll be tough to attract jobs that pay as well as the paper mill did. Earlier this year, according to Diane Scholz, executive director of the Gulf County Chamber of Commerce, a medical billing company expressed interest in developing a call center in the Wewahitchka Industrial Park. After nearly three weeks of advertising a need for at least 250 workers, less than half that many people applied. "They didn't like the $8-an-hour pay," she says.
Gulf County's plight moved state lawmakers recently to approve a bill to aid counties designated as "rural areas of critical economic concern." The measure includes a plan to boost Gulf County's school board funding, which faces a 28% shortfall in property tax collections, primarily because Florida Coast hasn't paid its tax bill. The legislative aid would help Gulf and other distressed counties lure new business by allowing the governor's office to ease criteria for incentives and permitting.
Bankrupt
Meanwhile, events in Gulf County have further complicated the mill's fate. As bondholders considered declaring the mortgage bond in default, government officials, angry over unpaid taxes and fees, moved to seize the mill and sell it to recoup the lost revenue. The company owes the county $5.1 million in back taxes and owes the city of Port St. Joe $1.5 million in wastewater treatment fees.
In April, Florida Coast filed for Chapter 11 bankruptcy protection, staving off the creditors. "There's not much we can do now," says County Tax Collector Eda Ruth Taylor.
Whether the plant's finances can be reorganized remains to be seen. While some residents hope the mill could reopen, Bruce Nicholson, an analyst with the Bank of New York, advises them not to count on it. In creating Florida Coastal, Stone and BoxUSA may have been after a way to control the amount of linerboard on the market and improve the economics of their other mills, according to Nicholson.
One proposal floated before the bankruptcy filing would have reduced the mortgage note to $100 million and reopened the mill with a smaller workforce and a freeze on wages, Nicholson says. Also mentioned was an employee stock ownership plan that would have essentially sold the mill to the workers, an idea that Scheffer and other laid-off workers view with skepticism. "If they can't afford to run it and make money for themselves, then why would they want to give it to us and let us run it?" he asks.
Scheffer says the people he knows have washed their hands of the mill. "Them filing bankruptcy wasn't really a surprise; all of us figured they'd do it anyway," he says. But Scheffer still finds it hard to let go of the paper mill that anchored the county's economy for 60 years. "I think everyone would like to see it reopen, but with the people who own it, you never can tell.''
Local banker Greg Johnson, treasurer for the Gulf County Economic Development Committee, founded in 1997 to retain existing industry and diversify Gulf's economic base, takes the long view: "Everyone must remain optimistic and keep a positive attitude and express that attitude to potential industries."