10 Mar Commission Meeting Minutes 2-24-2020
PORT COMMISSION OF THE PORT OF EDMONDS MINUTES OF REGULAR MEETING February 24, 2020
COMMISSIONERS PRESENT
Jim Orvis, President
Angela Harris, Vice President (by phone)
David Preston, Secretary
Steve Johnston (by phone)
COMMISSIONERS ABSENT
Bruce Faires (excused)
STAFF PRESENT
Bob McChesney, Executive Director
Marla Kempf, Deputy Director
Tina Drennan, Finance Manager
OTHERS PRESENT
Bradford Cattle, Port Attorney
CALL TO ORDER
President Orvis called the meeting to order at 7:00 p.m.
PLEDGE OF ALLEGIANCE
All those in attendance participated in the Pledge of Allegiance to the American Flag.
CONSENT AGENDA
Item B (February 10, 2020 Commission Meeting Minutes) was pulled from the consent agenda.
COMMISSIONER PRESTON MOVED THAT THE REMAINDER OF THE CONSENT AGENDA BE APPROVED TO INCLUDE THE FOLLOWING ITEMS:
A. APPROVAL OF AGENDA
C. APPROVAL OF PAYMENTS IN THE AMOUNT OF $111,797.19
COMMISSIONER HARRIS SECONDED THE MOTION, WHICH CARRIED UNANIMOUSLY.
APPROVAL OF FEBRUARY 10, 2020 COMMISSON MEETING MINUTES (ITEM B ON THE CONSENT AGENDA)
COMMISSIONER PRESTON MOVED THAT THE FEBRUARY 10, 2020 MINUTES BE APPROVED AS AMENDED BY COMMISSIONER ORVIS. COMMISSIONER HARRIS SECONDED THE MOTION, WHICH CARRIED UNANIMOUSLY.
PUBLIC COMMENTS
Patrick Doherty, Edmonds Economic Development and Community Services Director, said he was invited by Council Member Paine to provide a brief mention about a proposal the City Council will be considering on March 3rd. The proposal would add “hotels” as an allowed permitted use in the Commercial Waterfront Zone, which includes all of the Port’s waterfront property, as well as private properties to the north. Currently, the zone allows offices, retail uses, restaurants, marine-related uses, etc., but it does not allow hotels. The remainder of the downtown zones allow hotels. The proposed amendment was triggered by interest from a potential purchaser of one of the office buildings that was for sale a few years ago. The Economic Development Commission was made aware of the situation, and after further discussion, recommended that hotels should be allowed in that zone because they are part of the puzzle for a complex downtown city and also because of their economic impact. Most people who visit Edmonds come for the day, and many stay over night in Lynnwood where there are a number of hotels. The idea is to capture a fraction of that overnight impact. A day tripper spends between $45 to $85 a day, and overnighters spend around $175 per night. There is currently no pressure from any developer or investor, so this is a good time to consider a code change. It won’t be an easy proposition to convert an existing building to a hotel use, and it may not happen in the near future. But adding hotels to the list of uses would allow it to occur if there is a market demand.
Mr. Doherty summarized that the City Council held a public hearing on the proposed amendment on February 18th, and they could potentially take formal action on March 3rd. They will continue to accept public testimony until they act on the proposal.
James Murray, Edmonds, said he has been a Port tenant for more than 30 years. His boat is currently located in the Dry Storage, and he was present to comment on the ever-changing rules for the tenants to use their boats. He reviewed that, for eight of the ten years his boat has been in Dry Storage, the rules were constant and enforced consistently. About two years ago, some major changes were implemented, primarily to do with the overnight use of B dock. As a consequence, a large group showed up at a Commission meeting to express their displeasure, and the Commission and Port staff worked collaboratively with the tenants to come up with some better solutions. Two takeaways from that meeting were that it was never the Port’s intention to eliminate the ability to pre-launch the night before on B Dock and that some overtime would be allowed for the early morning hours. The overtime disappeared after the first year, and just last year, the intention was to take B dock away from them. They received water service on A Dock, which was long overdue, but the Port implemented a $25 fee for moves that exceeded a certain number. He voiced concern that this added fee is punitive and appears to be aimed at discouraging people from using their boats.
Mr. Murray asked for more consistency in the rules. He would like the Commission to work collaboratively with the tenants going forward, and consider re-establishing at least some of the rules that were previously in place. He said he doesn’t feel appreciated as a tenant of the Port. Tenants spend money in Edmonds, which contributes the economic vitality of the City. He purchased a boat at Jacobsen’s Marine and it is regularly serviced there. He also purchases fuel at the Port. He voiced concern that the Port’s current attitude seems to be “my way or the highway.”
Richard Hanna, Kenmore, said he and his family have been tenants at Dry Storage for more than 35 years. He voiced concern that Dry Storage tenants are getting punished for using their boats too much. The salmon season is only 60 days now (mid-July through mid-September), and that is when many tenants will use their boats heavily. The rest of the year, activity is much lower. He asked if the 21-move limit could be averaged throughout the year. He said fisherman cherish the ability to leave early in the morning and be out fishing when the sun comes up. He asked that the Port revert back to the previous rules that allowed them to leave their boats in the water over night.
Steve Shimamoto, Kenmore, said he has been a tenant in Dry Storage for 15 years. He said he is curious as to what is driving the changes at Dry Storage and if the Port has a long-term comprehensive plan for the marina as a whole. If so, the plan should be available to the public for review. He pointed out that the boats in Dry Storage are a major investment to all the owners, and 21 total moves only allows him 7 opportunities to use his boat per month. From his perspective, this is inadequate. Every time the forklift touches his boat counts as a move (from the dry rack into the water, from the water onto the washdown rack, and then back up on the rack), and that equates to three moves every time he uses his boat. While the Port would prefer in-water tenants, there is not enough space. He prefers Dry Storage because he doesn’t want the additional maintenance associated with keeping his boat in the water. He would like to know how the Port arrived at the 21-move limit, as well as the $25 charge for each additional move. The long-term Dry Storage tenants deserve better treatment.
Mr. Shimamoto observed that tenants who moor their boats overnight on B Dock and don’t leave by 7:00 the next morning are supposed to be charged a guest moorage fee for that night, but the rule isn’t usually enforced. Boats have remained on B Dock unused for days in a row. If the Port is going to make rules, they need to enforce them, as well.
Bob Smith, tenant, said he has been a Dry Storage tenant since 1986. He agreed with the previous speakers. There are fewer than 30 Dry Storage tenants who fish five to seven days a week during the salmon season, and the rules seem designed to penalize them. He is concerned about losing the ability to keep his boat in the water on B Dock, since it is important to be out fishing before it gets light and the Port doesn’t start launching boats until 7 a.m. The rule in place last year seemed to work well for everyone, and he isn’t sure what prompted the Port’s decision to cut back on Dry Storage tenants’ ability to use B Dock for overnight moorage. He said he is also concerned about the limit of 21 moves per month. While it isn’t a big deal for many Dry Storage tenants, it significantly impacts the 30 tenants who fish a lot. He pays $450 a month to keep his boat in Dry Storage, and he wants to be able to use it without having to pay more fees. During the Chinook season, he needs to be able to put his boat in the water the night before. He agreed tenants should be charged if their boats are still moored at the dock the next morning when staff arrives to start launching boats. He summarized that the new rules and launch limits seem to be targeted towards the fishermen who store their boats at Dry Storage, and he is frustrated that the decision was made without soliciting their input.
John Komorita, tenant, said he has been a Dry Storage tenant for five years. He commented that everything was great the first three years, but then the rules started to change. He received a ticket because he didn’t understand the new rules. When he tried to explain, there was no compassion on the part of staff. He voiced concern that no effort was made to collaborate with the tenants on the latest rules. He asked the Commission to reconsider the new rules, particularly the 21-move limit and $25 fee for each additional move ($75 per round trip).
Larry Kiel, tenant, said he is a new Dry Storage tenant. He commented that, as a landlord, loyalty should be important to the Port. In return for loyalty, the Port will get tenants who look out for the Port. The new tenants must understand and respect the rules, and they should be charged if they break them. He suggested that, rather than charging $25 for each touch, the Port could charge a set fee for moving the boat in and out and a washout.
Mr. McChesney commented that it was not the Port’s intent to penalize fisherman by implementing the 21-move limitation. The Port values all of its customers, but they found, through thorough analysis, that it was necessary to recalibrate the business model in order to make it sustainable, fair and transparent. The staff and Commission will take all of the comments under advisement. However, it is important to understand that the theory behind the pricing scheme changes was not to penalize anyone; it was really to establish a stop loss. The Port incurs a cost (equipment and labor) every time a boat is moved.
DRY STORAGE MOBILE OFFICE TRAILER PURCHASE
Mr. McChesney reviewed that the Commission has been briefed several times previously on the mobile Dry Storage office that was manufactured in 1992. It is in a state of disrepair and needs urgent replacement, and $50,000 was budgeted in 2020 to purchase a replacement. Three quotes were requested for a mobile office on wheels (trailer), but only two responses were received. Due to the complexity of the prebuilt, rolling-stock mobile structures, it was difficult to find a standard size floor plan that all manufacturers could meet. Specific Mobile Structures had the appropriate unit at the correct size and layout and at the lowest quoted price. They are a roster vendor, as well. The unit will be manufactured and delivered from Idaho, with an expected lead time for delivery of three months from the date of order. The structure will be placed in the existing location and the old trailer office will be disposed of. He advised that the fiscal impact would be $41,679 plus sales tax of $4,334.63 for a total cost of $46,013.63. He recommended the Commission authorize him to approve the purchase as quoted.
COMMISSIONER JOHNSTON MOVED THAT THE COMMISSION APPROVE THE PURCHASE OF A NEW MOBILE OFFICE TRAILER FOR DRY STORAGE FROM PACIFIC MOBILE STRUCTURES. COMMISSIONER PRESTON SECONDED THE MOTION, WHICH CARRIED UNANIMOUSLY.
PRELIMINARY 2019 ANNUAL REPORT
Ms. Drennan presented the Preliminary 2019 Annual Report, noting that all major transactions that staff is aware of have been recorded. Staff will be preparing the final 2019 Annual Report in the Budgeting, Accounting and Reporting System (BARS) format in the next couple of months. Occasionally during this process, staff finds other transactions that need to be recorded. If there are any changes, staff will notify the Commission when the final 2019 Annual Report is presented.
Ms. Drennan advised that revenues have been trending upwards and expenses have been between $6.5 million and $7.3 million. Net income has also trended upwards over the past five years. Actual revenues exceeded the budgeted revenues and actual expenses were slightly lower than budget. Revenues were $764,000 greater than budget and expenses were $450,000 less than budget. Gross profit for the 12-month period ending December 31st was $8,381,000, which was about $300,000 greater than budget. Net income for the same period was $3,091,000. She highlighted the following:
Marina Operations Revenue
• Fuel Sales revenue was $247,000, which was $47,000 or 24% greater than budget.
• Miscellaneous revenue was $120,000, which was $34,000 or 39% greater than budget. This includes services such as derelict vessel storage, responses to stinking vessels and cleanup activity, billable forklift moves, workboat tows, City reimbursement for using the Port’s stormwater pipe, and Puget Sound Express’ option agreement.
• Guest Moorage revenue was $181,000, which was $30,000 greater than budget.
• Permanent Moorage revenue was $3,638,000, which was $47,000 greater than budget.
• Dry Storage revenue was $756,000, which was $54,000 greater than budget.
• Parking revenue was $108,000, which was $33,000 greater than budget.
• Travelift revenue was $139,000, which was $33,000 greater than budget.
• Workyard revenue was $116,000, which was $22,000 greater than budget.
• Permanent Moorage financial occupancy was 98%, and Dry Storage occupancy was 92%. Permanent Moorage has been relatively consistent at 97% for 2015 through 2017, and 98% in 2018 and 2019. Dry Storage started in 2015 at 92% and dropped to 89% in 2016. It was 87% in 2017 and back up to 92% in 2018 and 2019. The highest she has seen Dry Storage financial occupancy was 94%, and that was before the 2007 recession. There was a Coho fishing closure in 2016 and 2017, and many Dry Storage tenants terminated early because of lack of fishing.
Rental Properties Revenue Actual to Budget
• Harbor Square Property revenue was $2,095,000, which was $12,000 less than budget.
• Anthony’s revenue was $283,000, which was $5,000 greater than budget.
• Edmonds Yacht Sales revenue was right on.
• Harbor Square Athletic Club revenue was also right on.
• Revenue from Harbor Square Athletic Club, Edmonds Yacht Club and POE LLC (Jacobsen’s Marine) was about right on.
• Landing revenue was a little low due to the Port charging a slightly different rate for parking than was budgeted.
Operating expenses before depreciation for the 12-month period were $4,671,000, which was $607,000 or 12% less than budget.
Operating Expenses Actual to Budget
• Economic Development and Tourism expenses were $15,000, which was $14,000 less than budget.
• Employee benefits were $741,000, which was $14,000 greater than budget.
• GASB 68 and OPEB expenses were not known prior the actual year-end calculation.
• OPEB expenses were $41,000.
• Office expenses were $77,000, which is $10,000 less than budget.
• Professional expenses were $148,000 compared to a budget of $273,000. The Port decided not to proceed with the parking feasibility study, which was budgeted at $75,000. In addition, half of the $100,000 in public access improvements budget was not spent.
• Supplies were $235,000, which was $217,000 less than budget. This included $50,000 for the Commission Meeting Room remodel and $25,000 for Administration Building repairs that were not spent in 2019.
• Underground Storage Tank Retirement Obligations is a new requirement for 2019. The Port has to book an expense when there are legally enforceable liabilities associated with the retirement of a tangible capital asset. Since the State Law requires operators of underground storage tanks to decommission them when they are no longer used, the Port needs to accrue the liability. The total liability is $250,000.
• Depreciation was $1,432,000, which was a variance of $177,000 because some of the fixed assets were completely depreciated.
Commissioner Johnston asked if the Underground Storage Tank Retirement Obligation is somewhat analogous to the environmental reserve set aside for remediating Harbor Square at some point in the future. He noted that the Ports obligation for future environmental cleanup is somewhere in the range of $612,500. Ms. Drennan said the two obligations have different rules. The Port is not required to adjust the Environmental Cleanup Obligation unless there is new information, but the Underground Storage Tank Retirement Obligation must be adjusted annually by the Consumer Price Index and new information.
Non-Operating Items
• Interest income was $337,000, which was $126,000 greater than budget.
• Change in Fair Market Value of Investments was $110,000. At year end, the Port must adjust its bond investments to fair market value, but there is no financial cash implication because the Port intends to sell them when they mature or when they are called.
• Net income for the 12-months ending December 31st was $3,092,000, which was $1.2 million greater than budget. The primary reasons for this difference are:
1. Marina gross profit exceeded budget by $312,000.
2. Operating expenses were $684,000 less than budget.
3. Net other expenses/(income) were $230,000 greater than budget.
Marina Actual to Budget
Ms. Drennan advised that marina revenues are trending upwards and expenses are between $4.4 million and $5.2 million. Net income is trending upwards, as well.
• Operating revenues were $6,640,000, which was $510,000 or 8% greater than budget.
• The numbers for Operating expenses before depreciation and overhead were $3,860,000.
• Net income was $1,580,000, which was $822,000 greater than budget.
Rental Property Actual to Budget
Ms. Drennan advised that revenues are generally trending upwards and expenses don’t appear to have a trend. Net income is trending upwards, as well.
• Operating revenues were $12,000 less than budget.
• Operating expenses before depreciation and overhead were $632,000 or $19,000 less than budget.
• Net income was $1,512,000 compared to a budget of $1,192,000.
Commissioner Orvis asked if the repairs to Building 3 would be capitalized in 2020. Ms. Drennan answered yes, but she will have to write off some of the previous asset in order to do that.
Capital Budget to Actual
Ms. Drennan advised that the Port’s 2019 Capital Budget was $502,000, and actual purchases were $964,721. This is primarily because the Port had to purchase the Marine Travelift earlier than anticipated. It was scheduled to be purchased in 2021, but because of the increasing number of repairs and difficulty obtaining parts, the Port elected to move the purchase forward.
¬Investing Summary
Ms. Drennan reviewed that Investing Summary, highlighting the following:
• Port had 29 long-term investments at the end of 2019, and 30 as of January 31, 2020. Port staff has completed a plan to invest long-term all but $3 million.
• The details of the Port’s bond maturity and bonds purchased was attached to the report. A number of bonds were called in 2019 because the current rate was less than what they were paying.
• The Opus Bank money market account was closed in December, and those funds were reinvested in long-term investments.
• The Capital Replacement Reserve is currently at $11,103,149, with part of the reserve in cash and part invested long term.
• The Environmental Reserve is currently at $1,041,435, with part in cash and part invested long term.
• The Port has zero remaining in outstanding debt.
• The debt service reserve CD matured in January 2020 and was invested long term, too.
Ms. Drennan referred to the Balance Sheet, noting that the section below “Other Investments” (Page 14) includes Deferred Pension Outflow, Deferred Other Post-Employment Benefits Outflow, and Deferred Underground Storage Tank Retirement Outflow. Long-Term Liabilities includes the Underground Storage Tank Retirement of $250,000, the Net Pension Liability, Other Post-Employment Benefits, and Environmental Liability.
Ms. Drennan noted that the cash difference between what they started and ended with in 2019 will go into the Capital Replacement Reserve, and the exact number will be calculated during the 1st quarter of 2020.
Commissioner Johnston commented that, in looking at the balance sheets for the Marina and Rental Properties, it appears that Repair and Maintenance expenses were significantly higher in 2019 compared to 2018. He asked if this trend is sustainable. Ms. Drennan responded that she anticipates the trend will continue. The marina is nearly 25 years old, and things will need to be corrected. In addition, the Port will need to do more maintenance at Harbor Square.
ENVIRONMENTAL INFORMATION – LIFEBLOOD VIDEO
Mr. McChesney advised that the Washington State Department of Fish and Wildlife (WDFW) is working with local communities to bring people together around the things that all have in common: a desire for local food, clean water, and more salmon in the streams. He referred to a documentary that explores how the four groups of people (anglers, indigenous tribes, farmers, and scientists) are moving beyond mistrust to find ways to come together for a better future in the Pacific Northwest.
Because Commissioners Johnston and Harris had already viewed the documentary, Commissioner Orvis recommended that the documentary viewing be postponed until after the meeting has adjourned. The remainder of the Commissioners concurred.
As a member of the Southern Region Killer Whale Task Force, Commissioner Johnston commented that these types of communications have really started to take place over the last few years as a result of the task force’s efforts, as well as additional inter-relationships that were developed in and around the task force. It is a positive message, but there are still some challenges that must be faced, such as prioritizing moving forward with salmon recovery and where the money should go.
Ms. Kempf advised that Ron Garner, President of Puget Sound Anglers, forwarded the documentary link to her. She recalled that Mr. Garner has attended previous Commission meetings to provide updates. Fishing is very important to the Port from an environmental and economic perspective. Port staff closely work with the Willow Creek Hatchery and Puget Sound Anglers on locating the fish net pen each year. The fish pen is in the marina right now and fish will be fed and released some time in June. This ties in nicely with all of the efforts being made to restore salmon runs and this video entitled Lifeblood.
Commissioner Preston suggested, and staff agreed, that a link to the documentary should be posted on the Port’s website.
EXECUTIVE DIRECTOR’S REPORT
Mr. McChesney announced that the contractor has begun mobilization for the Harbor Square Building 3 renovation project.
Mr. McChesney recalled that, at the last meeting, Commissioner Preston suggested the Port hire an intern. Staff has posted an intern position at Edmonds Community College and on the Port’s webpage. The intent is to assign the intern to work with the Marketing and Communications Manager.
Mr. McChesney reported that he attended the City of Edmonds Committee of Business Accelerators. The group is in the formative stage and an attempt to form a resource base to existing businesses. He further reported that the Communications Committee has met, and they are moving forward with the spring mailer.
COMMISSIONER’S COMMENTS AND COMMITTEE REPORTS
Commissioner Johnston reported that he attended the Communications Committee meeting on February 11th. The committee is making great headway, and he congratulated Ms. Williams for the work she has done to move projects forward and improve Port communications. He also announced that he would attend the Edmonds Interfaith Climate Action Committee meeting that is tentatively scheduled for March 11th.
Commissioner Harris said she also attended the February 11th Communications Committee meeting, and she agreed with Commissioner Johnston that Ms. Williams is doing great work. She also advised that she would attend the Edmonds Interfaith Climate Action Committee meeting on March 11th. She will attend at least part of the Economic Alliance of Snohomish County’s forecast meeting on February 26th, too.
Commissioner Harris thanked staff for providing the Commissioners an opportunity to view the documentary that explores how the four groups of people (anglers, indigenous tribes, farmers, and scientists) are moving beyond mistrust to find ways to come together for a better future in the Pacific Northwest. One idea that stood out to her is that all groups need to put down the burden of the assumption of what the other side is trying to do and listen to each other more.
Commissioner Preston reported that he attended a recent Edmonds City Council meeting where they talked about amending the Development Code to allow hotel uses in the Commercial Waterfront Zone. He also attended the last Economic Development Commission meeting, where the proposed amendment was discussed. He doesn’t see that allowing hotels would be an issue. Not only would a hotel use have to pencil out financially, but it would also have to meet all of the City codes for parking, etc. He said he supports the proposed change. Citizens provided comments to the City Council both for and against the proposal, and parking was a concern. However, a hotel use would bring people to the area, and parking might not be an issue since it would be located close to the train station.
Commissioner Preston announced that he would attend the Economic Alliance of Snohomish County’s forecast meeting on February 26th.
Commissioner Preston thanked the tenants who attended the meeting and provided feedback regarding the Dry Storage rules.
Commissioner Orvis reported that the Legislature is at the point where bills have to have been presented and passed in one house before they can go on or they will die. The only exception is legislation related to the budget. The economic forecast indicates there will be more money than anticipated, and the legislature is frantically trying to figure out ways to spend it.
Commissioner Orvis announced that Patrick Pierce, the President and CEO of the Economic Alliance of Snohomish County has resigned. April 30th will be his last day. He also announced that he would attend the Economic Alliance of Snohomish County’s forecast meeting on February 26th, as well as the Board of Director’s meeting that afternoon.
Commissioner Orvis advised that the Washington Public Port Association’s Legislative Day is February 28th, but he doesn’t have plans to attend. He felt it was more effective to talk with local legislators in the area rather than trying to set up a short meeting with them on February 28th.
Commissioner Orvis asked the Commissioners to advise Ms. Ebel of the events they plan to attend over the next few months.
ADJOURNMENT
The Commission meeting was adjourned at 8:15 p.m. (Commissioners Harris and Johnston left the meeting, and Commissioners Orvis and Preston and other interested persons stayed to view the documentary.)
Respectfully submitted,
David Preston, Port Commission Secretary