The U.S. Navy has quietly restricted development across thousands of acres of water and land near Hood Canal. Last year, the Navy may have gone too far.

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With little public outreach, the Navy has stealthily put thousands of acres of Puget Sound shoreline and upland off-limits to proposed and future development.

Recently released documents reveal the Navy has marked a “sphere of influence” in the western Puget Sound that it can use to block developments — even after they’re well under way — by deeming them threats to national security.

The Navy has clandestinely targeted projects, rating them according to perceived threat level. Meanwhile, area developers say they were unaware their work was being monitored.

Last year, the Navy was so worried about a proposed pier bringing barges into Hood Canal that it managed to restrict a narrow, 70-mile strip of seafloor to stop it. The state hired two appraisers, who independently valued the strip, some 4,804 acres of public land, at $1.68 million. But to pay Washington state that amount, the Navy first needed approval from Congress.

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To get around the lawmakers, the Navy reappraised the lease in-house, valuing the seafloor acreage at $720,000, according to a Seattle Times review of hundreds of pages of Navy and state documents.

The state Department of Natural Resources (DNR) agreed to the new price despite state law that requires the agency to obtain fair-market value for this “restrictive easement.”

“Why would anybody develop in the (Navy’s) overall area of influence if they knew that the Navy would do anything in their power to stop it?” asked Dan Baskins, a project manager at Thorndyke Resource, a Poulsbo developer.

The company had purchased the land and was developing the 1,000-foot pier when it learned that the Navy’s appraisal maneuver, with DNR’s approval, put the kibosh on the project. The company has sued the Navy and DNR to try to overturn the restriction.

Several other developers of multimillion-dollar proposals only learned the Navy had termed their projects “high-priority” encroachment threats after being told about it recently by a Times reporter.

Why would anybody develop in the (Navy’s) overall area of influence if they knew that the Navy would do anything in their power to stop it?” - Dan Baskins, project manager, Thorndyke Resource

The Navy said that the pier, on Hood Canal shoreline in Jefferson County, would have affected acoustic and magnetic research taking place 12 miles away in the Dabob Bay, a key U.S. location for military testing. Liane Nakahara, a Navy spokeswoman, said protection of the bay “is critical to the national defense.”

“Many of the real-estate transactions are considered business sensitive and are not communicated to the public,” Nakahara said of why the Navy did not seek broad public input on its purchases. “All of the easements the Navy purchased were from willing sellers who were offered fair-market value supported by appraisals.”

Megan Duffy, a DNR deputy supervisor, said her agency had no comment on the nearly $1 million reduction in price the Navy had to pay the state.

Fair-market value

It’s a classic land-use dispute. But this time, the anti-development crowd doesn’t come by kayak. It owns aircraft carriers and nuclear subs.

No one disputes the Navy’s need to operate in the western Puget Sound. Naval Base Kitsap, the third-largest Navy base in the U.S., supports about half of Kitsap County’s economy.

But since the base became home to nuclear submarines in 1977, Kitsap County has doubled to some 250,000 residents.

Over time, the Navy considered commercial development along the narrow Hood Canal and other areas a problem. In a 2010 report, for example, the Navy described recreational-boating traffic and the redevelopment of downtown Bremerton as high-priority problems within its “sphere of influence.”

The Defense Department sets aside money to buy or lease areas near bases to stop development that could affect the military’s mission. Since 2013, Naval Base Kitsap has purchased control of 5,149 acres of upland for $7.9 million and 4,804 acres of western Hood Canal seafloor for $720,000. The Navy is in the early stages of pursuing another restriction on Hood Canal’s eastern side, Nakahara said.

The Navy’s 70-mile Hood Canal restriction got its start a couple of years before its purchase last year, when the Navy discussed its plan with the Washington DNR.

According to notes from 2012 by DNR Supervisor Leonard Young, “Navy is considering an easement to block Pit-to-Pier,” a nickname for Thorndyke’s pier, three miles southwest of the Hood Canal Bridge, where 20-ton barges would be loaded with sand and gravel on their way to California and elsewhere.

For several years, the pier developers had assured the Navy the new commercial pier would not impact its operations. But the Navy thought otherwise, according to records obtained by The Times from the Thorndyke lawsuit and through public-records requests.

In late April 2013, DNR readied a news release about its planned lease to the Navy that included the sentence: “The Navy will pay DNR fair-market value for the restrictive easements to safeguard the Navy’s operations at Naval Base Kitsap from encroachment.” But Michael Brady, a Navy real-estate coordinator, in an email, said to cut that sentence from the release.

Matthew Randazzo, special assistant to the state’s Commissioner of Public Lands, was also on the email chain. “We will discuss in person, not via email,” he replied to Brady.

The disappearing “fair-market value” reference was a prelude to what would happen later.

In October 2013, the Navy and DNR signed off on a 198-page independent appraisal putting the price on the restriction: $1.68 million. One Navy official called the price “much lower than I expected,” according to emails.

As it turned out, the Navy would need congressional approval at that price. Navy emails show officials worried the value could not be lowered.

But by mid-June 2014, the congressional obstacle had vanished. The Navy had a new appraisal saying the easement was worth $720,000. That judgment came despite one of the two independent appraisers saying the value should remained unchanged and a U.S. congressman expressing concern with the project, according to Navy records.

Shortly before the $720,000 valuation was set, Mark Worthen, the Navy’s chief facilities appraiser, emailed advice to his subordinatesin Washington state about when the rules “get bent a little.”

“When issues arise and you are uncomfortable with a gray area,” Worthen wrote, “I will write you a ‘get out of jail card free.’ ”

In a 2010 report, the Navy described recreational boating traffic and the redevelop- ment of downtown Bremerton as high-priority problems within its "sphere of influence."

The next month, Washington Commissioner of Public Lands Peter Goldmark signed the easement documents despite the state’s obligation to only sell a lease for its “fair-market value.”

Reached by phone, Worthen declined to explain his “get out of jail” comment, citing pending litigation. Other state and Navy officials declined to comment.

Targeting a proposed marina

Far south of the proposed 1,000-foot pier — but still in last year’s pit-to-pier easement on Hood Canal’s western shore — sits Black Point, in Brinnon, Jefferson County, the site of a proposed large, high-end marina redevelopment.

Thanks to Navy secrecy, the marina developers did not know their project was termed a high-priority threat.

The Statesman Group, a national real-estate developer, wants to create the Pleasant Harbor Marina Resort: 1,000 housing units with nearly 300 boat slips, with residences starting at $690,000. The group has spent $22 million on the project so far and has started building.

Statesman plans to rely on foreign investors for funding, part of the Department of Homeland Security Immigrant Investor Program. It rewards investors with visas for putting money into new projects.

The Navy, which has monitored the project since at least 2007, said it was worried about foreigners traveling near the naval base by boat or seaplane, documents show. One slideshow suggests the Navy may have contacted U.S. Citizenship and Immigration Services (USCIS) about the developers’ application to provide visas to investors.

Garth Mann, president and CEO of Statesman, first learned of the Navy’s actions when a reporter contacted his company. “The Navy made assurances that they have no intention of preventing commercial and resort activity … ,” Mann said in an email.

“Public be damned”

Other developers received such assurances. Baskins, Thorndyke’s resource manager, said the Navy wrote that the pier project was “not incompatible” with its operations. But later, the Navy quietly sought the restriction.

In late 2013, the state opened up a required public-comment period for the Hood Canal easement that aimed to block the pier. The Navy documents show it held one public meeting: in front of the Jefferson County Board of Health. The public-comment period was closed three weeks after it opened.

Developers in Washington must publicize their projects with signs, notice to neighbors and local media advertisements, said David Johnson, a land-use planner for Jefferson County Community Development. The Pit-to-Pier developers, for instance, held more than 60 public meetings with the Jefferson County Planning Commission, Board of Commissioners and other local groups, Baskins said.

The Navy is not legally required to seek public input when restricting development, so it chooses not to, spokeswoman Nakahara recently said.

“It’s like, ‘We’re going to go ahead and do this and public be damned,’ ” Johnson, Jefferson County’s point-person on pier development, said of the Navy’s posture.

If buying easements fails to stop development, the Navy still has another plan that it considers “sufficient to fully abate the encroachment threat,” according to an April 2014 Navy report.

But that plan is blacked out in the documents. Nakahara called it “privileged and national-security information.”