Fish Co-Op Laments Grant That Got Away : Finances: State money intended for the Terminal Island cannery has been transferred to Rebuild L.A. The city says the company was too financially troubled to remain eligible for the funds.

For 65 years, the Fishermen’s Cooperative of San Pedro has weathered miserable economies and miserly seas, foreign competition and quotas on catches.

But now, the cooperative finds itself facing a potentially crippling threat from a less likely quarter: the post-riot reconstruction of Los Angeles.

At the request of Los Angeles Mayor Tom Bradley’s Office of Business and Economic Development, a $450,000 state grant intended for the cooperative has been transferred to the city rebuilding effort.

The city agency asserts that the Fishermen’s Cooperative has too many financial problems to remain eligible for the grant, earmarked for the co-op’s Terminal Island cannery.

But the rerouting of the grant--and the manner in which it was carried out--is being fought not only by the fishermen, but by Harbor area Councilwoman Joan Milke Flores. The councilwoman insists that the money is vital to reopening the cannery, which closed May 15, laying off some 200 workers.

“I’m outraged,” Flores said last week. “It’s the difference between having a cannery operating and not operating. It’s that vital.”

Added Tom Creehan, the co-op’s general manager: “The city of Los Angeles has just had a brutal, man-made disaster in the riots. But (the fishermen’s cooperative has) had a slow, persistent natural disaster that has gone on for three or four years . . . and this money was intended to help us out.”

Four years ago, a $500,000 state grant was awarded to the co-op to assist its cannery, United Food Processors Ltd. But a series of conditions attached to the grant--and the co-op’s own financial struggles--led to delay after delay in releasing the funds to the fishermen. (The grant now stands at $450,000 because $50,000 was taken by the city to administer the funds.)

Anticipating the grant, the co-op launched a $1-million project in 1990 to build a new cold storage facility vital to the cannery’s ability to compete. But after borrowing money to complete that project, the co-op’s financial condition deteriorated to the point that it was no longer eligible for the grant, according to Wilfred Marshall, director of Bradley’s economic development office.

Marshall said that because the state grant could not be released to the co-op if its financial condition worsened, he concluded in February that the funds should not be forwarded. He said that with Los Angeles searching for post-riot funds, he then recommended that the grant money be transferred to the rebuilding effort--a move that was approved last month by the Los Angeles City Council.

But last week, Flores angrily accused Marshall of a sleight of hand in transferring the funds, noting that the money was only identified by an account number when the matter was brought before the council. Moreover, Flores complained, Marshall never shared his plan with her or anyone in her office.

“We had been talking to (Marshall’s) office for months and telling them how important this (grant) was . . . and the next thing I heard was that the money was transferred to the Rebuild L.A. account,” Flores said.

While Marshall insists that he notified Flores’ office of the action, he declined in an interview to say whom he told. Flores and her staff deny Marshall’s claim.

Moving to return the funds to the cannery, Flores recently introduced a motion to reverse the transfer of the grant’s reallocation to Los Angeles’ rebuilding. But that motion has been held up in a City Council committee, pending proof that either the co-op or some other agency can successfully reopen the cannery.

In the meantime, Flores and co-op officials insist that the grant is crucial to the future of the cannery and the cooperative. Already, they noted, the cannery is undergoing a financial reorganization under Chapter 11 of the Bankruptcy Code. And unless the cannery reopens, the co-op may be forced to do the same.

“If the cannery goes, the co-op would also probably have to reorganize,” Creehan said. “The co-op would probably survive, but it would be very touch-and-go.”

While they await the council’s final action on the grant, many at the co-op and the now-closed cannery insist that the money may be the only thing that prevents long-term unemployment for 200 people who for years have earned a wage in the competitive fish-canning industry.

“We want to open the plant. . . . A lot of people are out of jobs, and they call me at home asking when are we going to reopen,” said Ante Medo, plant manager for the cannery.

“We need that money,” he said. “Like yesterday.”