Tuesday, July 20, 2010

Long Beach Port Balks at Earlier Funds for City

The five-member governing board for the Port of Long Beach has approved a $12.4 million transfer of port profits to the City of Long Beach, but fell short of approving an accelerated payment plan requested by City Hall that would have required the port to make a second $10 million payment at the same time.

The transfer, based on 10 percent of the port's profits from their last audited fiscal year, must be requested each year by City Hall and approved by the Harbor Commission. The transfer was originally approved by city voters in the early 1980s as an emergency bulwark against temporary financial problems in the city. In 1995, following a devastating one-two punch of a general decline in the national economy and the closure of the Long Beach Naval Station and Shipyard – a major source of direct and indirect jobs for the city – city officials began requesting the 10 percent to boost city revenues. The city council has made the request every year since. Since 1995, the Port of Long Beach has transferred nearly $150 million to the city.

While the city's semi-autonomous Harbor Department, which manages the port for City Hall, has the option to deny the request, it has never done so in the past. State law mandates that the port money going to the city must be retained in a separate Tidelands Fund that can only be used in the tidelands and port areas. However, by diverting funds that would be spent in the tidelands areas for services such as police, fire and maintenance, the city can offset general treasury funds that might otherwise be spent there. The adjacent Port of Los Angeles, managed by a similar Los Angeles City Hall department, has a similar port-to-city fund transfer procedure.

Because the 10 percent transfer is based on the port's independently audited financial reports, there is a lag time of more than a year between when the port makes the profits and the transfer to the city based on those profits. For example, the most recent transfer was actually based on profits during the port's 2008-2009 fiscal year. The Long Beach City Council wants to see the transfer made in a more "real time" manner. Earlier this year, the Long Beach City Council, on the recommendation of the City Auditor, requested two transfers for this year, both to be due on Oct. 1. The first would be based on the audited port financials for fiscal year 2009 with the second based on the port's unaudited financials for 2010.

Port commissioners approved the first payment but balked at making the second on Oct. 1. Instead, the commission said it would attempt to complete its audit for 2010 by January 2011. This would allow the second payment to be made to the city about three months ahead of time instead of the accelerated six-month schedule the city requested.

Commissioner Mike Walter was the lone "no" vote in the board decision. Walter said he was concerned about the payments at a time when the port holds $735 million in bonded indebtedness and faces additional obligations to upcoming development and environmental projects.

The port board must now take up the matter for a final vote at a future meeting.

The port decision also adds some confusion to already decided City Hall actions. Immediately after approving the accelerated port transfer schedule earlier this year, the Council moved to spend nearly all of the second payment by approving $9.5 million in Tidelands funds to repair about 20 percent of the Naples Seawall. The man-made Naples community, bisected by a canal, is protected from the ocean by a concrete seawall that lines canal and ocean front property. The city has said that about 900 feet of the seawall surrounding Naples is danger of failing in the very near future and needs immediate repair.

The Council approved the motion with the caveat that the $9.5 million can only be spent on the seawall repairs if the Harbor Commission approves the accelerated Tidelands transfer. It remains unclear if the port commission's decision on the second transfer meets the "approved" criteria set out by the City Council.