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Picturesque seaside community was once a fishing mecca. But overfishing is forcing harbor city to diversify economic base.

ONCE upon a time after a long day's work, boats loaded with fresh fish would return one after another to Gloucester's bustling harbor. But on this misty evening at Fisherman's Wharf, only an occasional vessel emerges from the foggy horizon, and the only sound to be heard is the idling engine of a nearby shrimp boat.

As New England's fishing industry declines, far fewer vessels are plying Gloucester's harbor waters. Back in the 1950s, this community was home to about 300 active fishing vessels, while today only 170 are based here.

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This scenic Massachusetts port, located 30 miles north of Boston, has relied on the commercial-fishing industry since it was first settled by Europeans in 1623. Now it faces somewhat of an identity crisis as it shifts away from being primarily a fishing port city with a working harbor to a community with an increasingly diversified economy.

With a population of 28,000, Gloucester has much to offer. Rich in history and the arts, it attracts millions of tourists every year. (Cultural scene, left.) It's a diverse seaside community in the heart of Cape Ann that brings together an unusual mix of people.

``You have a hard-working blue-collar community, on one hand, and, on the other hand, you have a group of artists. Gloucester also has pockets of fairly well-off people,'' says Geoffrey Richon, a member of the Gloucester Arts Council.

Gloucester derives 40 percent of its economic base from the waterfront. But because of overfishing, New England's commercial-fishing industry has declined in the past three decades. Ground-fish stocks of cod, haddock, flounder, tuna, and scallop have been depleted in North Atlantic waters.

NOW strict conservation regulations issued by the Commerce Department that went into effect last month will mean greater hardship. Fishermen must cut back the number of days they spend at sea, and they will face limits on fish-catch size and net-mesh size.

The department estimates that up to 20,000 New England fishing jobs could be in jeopardy in the next few years. Gloucester officials say the city could lose some 400 to 500 jobs in the industry.

``The key is going to be for folks to recognize that this is a different world than it was, certainly, 10 years ago, certainly, as well, 70 or 80 years ago when you would look down Gloucester Harbor, and it was a sea of masts,'' says Mayor Bruce Tobey.

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The city needs to accept that Gloucester's harbor isn't just for fishing anymore, and it needs to make room for cruise liners, pleasure boats, and other tourism-related businesses, he says.

In the '50s, the city was home to some 25 fresh-fish processors. Now, with only three processors left, much of the fish landed in Gloucester is trucked to Boston or New York City for processing. Also, many fishermen who harvested ground fish have switched to lobstering.

Depleted New England fisheries have already forced many out of business here. Tom Favazza, a retired Gloucester fishing-boat captain, says new mesh sizes for fish nets will mean less overall catch. ``A codfish will go right through that, just like that,'' he says, using his fingers to show a large opening. ``I saw the handwriting on the wall. I sold everything.''

Though their situation is bleak, New England fishermen will get some relief through a new $30 million federal aid package announced last month by the Commerce Department. From the $1.5 million allocated to Gloucester will be money to fishermen for debt restructuring. Grants will also be available to fishermen who want to harvest less popular species like mackerel, herring, and squid. Meanwhile, those in the fishing community, especially, are concerned about the future of the city and its working harbor. To boost tourism, Mayor Tobey wants to relax state and local zoning rules to make Gloucester's harbor more friendly to recreational boats and cruise liners.

Though the mayor doesn't foresee Gloucester turning into an exclusive yatching port like Newport, R.I., many are opposing his plan. Critics say it will lead to a gentrification of the city and will squeeze out the fishing community.

``Once we lose commercial and industrial property on the waterfront, we'll never get it back,'' says Joe Testaverde, a Gloucester fisherman. Others say the city's waterfront should be maintained as an industrial harbor and used for biotechnology, pharmaceutics, and other industries making use of a working port.

Gloucester City Councilor Valerie Nelson has lobbied to preserve the working harbor.

``So many ports transition over to [tourism], and the only people that can afford to live there are affluent outsiders, and you lose the solid wage base and soul of the community,'' she says.

Should the fishermen lose their harbor, it won't be easy to change careers, says Tony Verga, executive director of the Gloucester Fisheries Commission.

``I think we need some sort of training program. But the concern in the fishing community is: `I don't want to learn computers. I don't want to work in an office,' '' says Mr. Verga.

City leaders are, nevertheless, looking in new directions. Empty storefronts don't help in this city, which had an unemployment rate last month of 11.7 percent compared to a state jobless rate of 6.7 percent for the same month.

Some are counting on growth in manufacturing and tourism. Over the past 15 to 20 years, several medium-sized and small manufacturing companies have sprung up. Whale-watching companies, restaurants, and other tourism-related industries also provide jobs. One of the larger companies is Varian Ion Implant Systems, a semiconductor firm that employs 600.

Gloucester is also home to Gorton's - one of the country's major frozen-fish processors - an employer of approximately 700. But Gorton's processes only frozen fish that is not landed in Gloucester but is trucked here from other places.

Since the 1970s, the city's manufacturing and tourism industries have grown, while fishing has declined, says Michael Costello, executive director of the Cape Ann Chamber of Commerce.

``A lot of diversification has already occurred,'' says Mr. Costello. ``A lot of economic change has happened in Gloucester that a lot of people don't recognize.''

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