Tuesday, August 9, 2011

Long Beach Port Holds Off Approval of $17M Transfer to City

The five-member governing board for the Port of Long Beach on Monday put off making a decision on a City Hall request for a transfer of nearly $17 million in port funds to city tidelands coffers for at least two weeks, citing the need for further information from city officials.

The annual transfer, which City Hall can ask for under the city charter, is based on 5 percent of the port's previous fiscal year operating revenue – referred to by some as "off the top."

The transfer was formally requested by City Hall on July 5 and requires the approval of the port commission. The transfer – which would be $16.92 million – is being opposed by six port industry trade associations.

The port board, after a lengthy discussion, decided to wait for additional information from the city and revisit the issue again at its next meeting in two weeks.

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.

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.

While the port board in the past has questioned the transfer, this is the first time there has been a hint that the board may consider not approving the transfer.

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.

During Monday's meeting, Commission President Nick Sramek pointed out to Assistant City Manager Suzanne Frick that in a City Hall briefing several years earlier this tidelands project list was in the $70 million to $80 million range, but today, totals more than $300 million.

"I am just wondering, where did these projects come from? That is quite a jump," Sramek told Frick.

Frick said that in anticipation of the additional revenue from Measure D, approved by voters in November and which dramatically increased the funds City Hall could take from the port, City Hall conducted an extensive review of the capital improvements needed in the tidelands.

"We did a wholesale assessment of the resources available out there to come up with the new list," Frick said.

Responding to another question by Sramek about which tidelands projects are a priority, Frick said that City Hall has a schedule of tidelands projects set for fiscal years 2011 and 2012, and is in the process of developing a schedule for fiscal years 2013 to 2015.

"Part of the reason I am asking is because this is money that will go to the city in one way or another, and we are trying to balance whether we need the money more or the city does, and how we make sure that we help the city," Sramek said, "So it would help us to have some kind of schedule of the prioritized projects, so we can make sure we are making the right decisions."

Commissioner Rich Dines, who had been sworn-in as a port commissioner at the start of Monday's meeting, asked Frick if the tidelands project list, which Sramek earlier pointed out had more than tripled in just a few years, would grow further.

"This is what we know today," Frick said. "But as with any resource that you have, the longer there is deferred maintenance the more expensive future improvements are going to be. There may be additional things coming up that we are not aware of at the present time."

Dines, in mentioning a $58 million replacement of a public pool center that is on the tidelands list, said that he hoped when the project list is prioritized, City Hall would look closely at the cost of each project on the list and weigh that against the number of jobs each project would create.

Frick said this was a good point.

Commissioner Doug Drummond, also newly sworn-in on Monday, suggested that the whole discussion by the port board was growing too far afield.

Drummond pointed out that the city has the statutory right to ask for the 5 percent transfer and the port board can approve the transfer if the money is not needed by the port.

"How they spend the money in the tidelands isn't our business," Drummond said. "That's their business. We would be very offended if [City Hall] came over here and started asking about our projects."

Drummond also made clear his opinion on the relationship between the port and City Hall.

"We really should be on an avenue of cooperation [with City Hall]," Drummond said. "We have had some misunderstandings, I'll call it that. And it is time to kind of repair that damage – do a lot more cooperatively with the city – and I think we will all benefit in the end."

Sramek pointed out that the reason he was asking about specific projects planned by the city in the tidelands was to make sure that the tidelands funds are being used in the best possible way to create the most jobs for the city.

"I'm trying to make sure that we are getting the right information so we are making the right decisions not just for the port, but for the city," Sramek said.

Elizabeth Warren, executive director of the local trade association FuturePorts, asked the commission to table the decision and eventually deny it. FuturePorts, along with five other local trade associations representing most aspects of the port industry, recently asked the port commission to reject the transfer outright.

"These organization and their members believe that the port has been a good partner with the city providing financial assistance throughout the years," Warren said. "We are concerned about this large amount of money leaving the port and being transferred to the city while the port is undergoing a major capital improvement program."

Michele Grubbs, vice president of the Pacific Merchant Shipping Association, another of the six trade groups who opposed the transfer earlier, said that the PMSA urged the port commission to take more time to study the fiscal impacts of such a transfer in the current economic environment.

Grubbs pointed out that the Port of Long Beach has some of the highest facility lease rates in all of North America and the PMSA members – West Coast-serving shipping lines and terminal operators – expect that the port and the city will administer the port finances carefully to be able to provide the infrastructure and facilities that warrant the high lease rates.

Frick said the port board needs to reach a decision on the transfer by Oct. 1.