The five-member governing board for the Port of Long Beach on Monday approved a City Hall request for the transfer of nearly $17 million in port funds to the city and agreed to draw down the port's ample cash reserves to pay for the majority of the amount.
The annual transfer, which is permitted under the city charter, is based on 5 percent of the port's previous fiscal year operating revenue.
The $16.9 million transfer for FY2012 was formally requested by City Hall on July 5. The transfer has been opposed by six port industry trade associations.
The port board approved transferring the funds in a 4-1 vote, but added the caveat that it be made in four equal quarterly payments over the city's 2012 fiscal year, which starts Oct. 1. Last year, the board approved making the FY2011 transfer in a single lump sum at the request of City Hall.
Originally conceived as an emergency financial boost for the revenue-strapped city more than 15 years ago, the annual port-to-city transfer has been requested by City Hall and approved by the port ever year since. Monday's vote was the first time since the port began making the annual transfers that a port commissioner voted "nay" to a transfer.
The transfer funds, under state law, must go into the city's Tidelands Operating Funds and can only be used within the tidelands (coastal) areas of the city for very specific maritime, maritime-related recreation, and environmental uses. The funds cannot be mixed with the city's general fund or used for general fund purposes.
City Hall claims that the tidelands accounts, which are managed by city officials, are in danger of going broke and that a backlog of more than $300 million in capital improvement projects in the tidelands areas currently exists.
Immediately prior to the board's discussion Monday on the transfer, a related item was also considered.
The port board was informed by the Alameda Corridor Transportation Authority, which operates the 20-mile-long Alameda Corridor cargo rail line servicing the port, that the authority required $2.95 million from the port in FY2012 to cover a debt service shortfall on the $2.4 billion corridor, which opened in 2002. ACTA had expected to ask for another $5 million from the port, but reported that it would not need funds beyond the $2.95 million.
After approving the ACTA funds, the port board turned to the city transfer and how to pay for it. Port board freshman Doug Drummond made a motion that the $16.9 million transfer to the city be made as requested and that the port's FY2012 budget be increased by $11.9 million – the amount of the transfer minus the $5 million ACTA no longer needed from the port but which the port had already budgeted.
Drummond failed to receive a second on his motion, but Commissioner Rich Dines, who along with Drummond joined the board two weeks ago, moved that the transfer to the city be approved with no budget details, to which Drummond offered a second.
Commission President Susan Wise moved for an amendment to Dines motion, calling for the transfer to the city to be made in four equal quarterly installments over FY2012.
"We're moving into a time of uncertainty," Wise said, referencing the weakening national economy and slowing trade numbers. "I want the port to have some flexibility."
Commissioner Thomas Fields agreed.
"I think it only prudent that we follow Commissioner Wise's amendment because we are moving into some perilous times."
Commissioner Nick Sramek pointed out that two weeks ago the port board asked City Hall to provide a prioritized list of tidelands-area projects on which City Hall planned to spend the transfer funds.
Sramek indicated that the request prompted a recent memo to the port board from City Hall, one which – while Sramek did not detail the exact contents – clearly did not include the information the port board had sought.
"The city is asking us for $17 million, I just thought it would be common courtesy to provide us with the information. They said they have it. That they could provide it. And they just choose not to provide it," Sramek said.
Sramek added that he could not support the transfer and ultimately voted no. He pointed out that the port plans to borrow $300 million for capital projects this year, an amount that will rise to $1.5 billion over the next five years.
"It's been different in the past. We haven't had to borrow money like this. We really need to be careful...especially looking at the economic numbers, trade going down and competition going up," Sramek said. "We really need to be careful with what we do with our dollars and make sure they are really channeled in the right areas."
Sramek referenced the city charter language regarding the transfer, pointing out that the port board could reject the transfer request if the funds are needed for capital projects in the port.
"If we are borrowing $300 million this year, that says we need money for capital projects," Sramek said.
Drummond, who initially refused to support Wise's amendment to make quarterly payments, said that the port should make the transfer in one lump sum, as originally requested by City Hall. He argued that if economic conditions worsened and the port needed to make up the $16.9 million of the transfer, the port should just slow down development and spend less on the nearly $630 million budgeted in FY2012 for capital projects.
As comparison, the $17 million for the transfer is equal to the port's entire FY2012 budget amount allocated for installing ship-to-shore electric power at the port's largest container terminal; just over the amount the port plans to spend on all port security projects in FY2012; and, just over what the port plans to spend on a major rail track realignment project.
Drummond added that contemplating changes to the transfer is a "mistake" that will only create "continued bad will with the city."
Members representing two of the opposed industry groups, the Propeller Club and the Pacific Merchant Shipping Association, reasserted their positions to the board, saying that keeping the $16.9 million in the port – where it can create jobs and increase the port's competitiveness – is a more prudent decision.
The final vote by the board approved the transfer in four equal quarterly payments, which port staff said city officials had already indicated would not be a problem. The port board also agreed to draw down the port's substantial cash reserves by $11.9 million to pay for the majority of the transfer, with the rest being made up by the $5 million already budgeted to cover now un-required payment to ACTA. The draw down will still leave the port with more than 600 days of operating funds in the port's cash reserves.
The port FY2012 budget faces approval by the City Council – and a possible wielding of the mayor's budget line item veto power – early next month.
Friday, August 26, 2011
