Special Commission Meeting Minutes 4-13-2020

Special Commission Meeting Minutes 4-13-2020


Angela Harris, Vice President
David Preston, Secretary
Bruce Faires
Steve Johnston

Jim Orvis, President (Excused)

Bob McChesney, Executive Director
Marla Kempf, Deputy Director
Tina Drennan, Finance Manager
Renae Ebel, Administrative Assistant
Karin Michaud, Office Manager
Brittany Williams, Manager of Properties and Marketing

Bradford Cattle, Port Attorney


Vice President Harris called the meeting to order at 2:02 p.m.


All those in attendance participated in the Pledge of Allegiance to the American Flag.


Commissioner Preston reminded the Commission that Section 4 of the recently adopted Declaration of Emergency (Resolution No. 20.03) states “This Resolution shall continue in full force and effect until terminated by law or by further Resolution and shall be reviewed as a regular agenda item on the Commission’s agenda until such time as this Resolution is terminated.” He suggested that the agenda be amended to include this review, and the Commissioners concurred.

Mr. Cattle explained that the intent of Section 4 is for the Commission to keep an eye on the Declaration of Emergency and not let it idly stay in place. Commissioner Faires asked if the resolution would lapse if the Commission fails to review it at each meeting. Mr. Cattle answered that it would not lapse, and Section 4 highlights the need for the Commission to stay focused on the resolution.





There were no public comments.


Mr. McChesney reported that the contractor has been in the process of stripping Harbor Square Building 3 down to its sheeting, studs and structural beams. As a result of work to review the underlying issues having to do with structural rot, the contractor has requested four change orders to the original contract. One change order is non-monetary and is a request to extend the contract timeline by 31 days. Staff supports this change order considering the additional work the contractor is being asked to perform. As proposed, the new contract completion date would be August 1, 2020.

Mr. McChesney advised that the other three change orders are related to additional rot replacement (framing, sheeting and beams). There are some lead time items for the glulam beams, and there has been some slowed production as a result of the Covid-19 situation. The windows are expected to arrive on May 3rd and be ready for installation sometime after that. The total of the three change orders is $228,671.37. He provided pictures to illustrate the magnitude of the situation.

Although the change orders equate to almost $230,000, a nearly 30% cost escalation, Mr. McChesney remarked that the payback on the project will still be about 5 years. He is comfortable recommending to the Commission that the project is on the right path and they should go forward with the change orders as presented. He is also relatively confident that they won’t find a lot more damage, but some additional incidental work may be discovered. He recommended the Commission authorize the Executive Director to accept the change orders submitted by AM Exteriors, LLC, in the amount of $228,671.37 for the Harbor Square Building 3 Structural and Exterior Improvements under Contract No. 2019-328. He reported that staff has held weekly project meetings with the contractor, and they continue to perform well.

Commissioner Johnston asked if Mr. McChesney is fairly convinced, at this point, that the four change orders will be sufficient to complete the project and no other significant issues will be found. Mr. McChesney responded that he is relatively confident that will be the case since most of the beams and framing have been exposed. However, he won’t know for sure until the project is finished.

Commissioner Johnston asked if any of the masonry buildings at Harbor Square are a concern at this time. Mr. McChesney responded that a thorough investigation of the other buildings has not been done yet. However, having recently done roof and HVAC replacement on Building 2, he predicts it will require a similar type of remedy at some point. There has been some water intrusion and cracking stucco, but it shouldn’t be as challenging to repair because it is a single-story building. He said he anticipates that Building 2 will be the next target.

Commissioner Preston asked if the contractor has been able to work faster since most of the tenants are absent because of the Covid-19 closure. Mr. McChesney said it is beneficial to the project that most of the tenants are not in the building working. However, production has been somewhat slowed because the contractor is required to follow the Department of Health and Human Services’ stringent safety guidelines. All of their workers have protective equipment and have been trained and tested every day. The contractor is doing well staying on the job and still abiding by the safety requirements.

Commissioner Preston asked how much it would cost to demolish the existing building and replace it with a building that is close to the same design. Mr. McChesney responded that building an entirely new structure that meets all of the energy and code requirements would cost about $5 million. He reminded the Commission that the Port receives about $20,000 each month in revenue ($240,000 a year). The pay back is about 5 years, which he believes is reasonable.



Ms. Drennan reviewed that staff presented the preliminary 2019 year-end financial statements at the February 24th Commission meeting. The financial statements attached to the Staff Report are presented in the format required by the State of Washington and will be submitted to the State Auditor’s Office immediately following the meeting. The 2019 Annual Report was presented to the Finance Committee on March 13th, and it will be available on the Port’s website later in the week.

Ms. Drennan further reviewed that the 2019 Balance Sheet and Income Statement were presented on to the Commission on February 24th. She explained that the Statement of Net Position shows the same information as the Balance Sheet, but may be presented a little differently. The Statement of Revenues, Expenses and Changes in Fund Net Position shows the same data as the Income Statement, but is less detailed than the previous presentation. There were no major changes to the Financial Statement numbers since the February 24th meeting.

Ms. Drennan noted that one item that is not included in the typical quarterly financial statement presentation is the Statement of Cash Flows. This new document is presented on Page 13 of the Financial Statement and shows the sources and uses of cash (inflows and outflows). Operating activities provided net cash of $3.6 million. She emphasized that it is important that organizations regularly produce positive cash flows from operations because this is the daily activity.

Ms. Drennan reported that financial activities provided net cash of $401,000 and activities include proceeds from property tax income, election costs and operating grants. Capital and related finance activities used net cash of just under $2.5 million, and cash flows include purchases and construction of capital assets and principal and interest paid on debt. Investing activities used net cash of $6.2 million, and activities include the maturity and purchase of long-term investments and interest from the Port’s investments. Total cash decreased by $4.7 million in 2019, as the Port increased its long-term investing. Total cash and investments increased by $2.9 million. As per the Cash Flow Model, these funds were moved into the Capital Replacement Reserve to pay for future capital maintenance.


Ms. Kempf reviewed that the proposed Dry Storage rate structure for 2020 was discussed at the September 9, 2019 Commission Meeting. At that time, the Commission approved staff’s recommendations for a new rate structure that would include 21 moves per month in the base rate and an additional $25 per move for every move in excess of 21 moves each month. A communication outlining these changes was sent to Dry Storage customers in November of 2019, and the changes became effective January 1, 2020. She recalled that, at the February 24th meeting, there was public testimony from several Dry Storage customers and their questions were answered in staff’s presentation to the Commission on March 9th. Port staff organized a meeting with dry storage customers on March 10th, and a summary of that meeting was attached to the Staff Report, including the general comments received from those who attended. The summary was also posted on the Port’s website.

Ms. Kempf advised that some of the Dry Storage customers’ comments were answered in the March 9th presentation. The problem that the Port is trying to solve has been clearly outlined, but some comments and questions need further clarification. The end goal is to stop losses and create reserves that will allow the Port to continue to operate Dry Storage well into the future. Although the Port began to see a positive bottom line in Dry Storage beginning in 2014, the net income to date has not produced adequate revenues to cover already incurred debt or even fund necessary future capital expenditures on the equipment that makes and keeps Dry Storage a viable option for users.

Ms. Kempf explained that the bonds, which were essentially a loan obtained by the Port to fund the construction of the Dry Storage facility, were paid off in 2017. Over the life of Dry Storage, the Port needs to generate enough funding to pay for the facility and equipment, as well as the current operating expenses such as repairs, maintenance and staff costs. The Port is a type of government that behaves most closely to a business. The previous “in the hole” matters because the Port needs to make a return on the investment. “In the hole” means the Port hasn’t even recovered its investment, let alone generated funds to pay for current operations and future facility and equipment costs. The Port’s goal is that each cost center is self-supporting. Just as Dry Storage tenants don’t want to subsidize moorage by paying for moorage float replacement and repairs, moorage tenants don’t want to pay for a new Dry Storage forklift.

Ms. Kempf observed that most Dry Storage customers do not move their boats more than 21 times each month. The Port is not interested in restricting active use of boats, but rather continuing to provide services that both meet the needs of the customer and encourage involvement in boating. The Port cannot meet this goal in Dry Storage without either raising rates for everyone or establishing limits on services provided and included in the base rate. She explained that moves are defined as rack to water, water to washdown, washdown to rack and rack to washdown.

Ms. Kempf explained that the Dry Storage Model never anticipated that it would take four moves every time a boat is launched. The calculation anticipated rack to water and water to rack with an occasional move to the washdown. For years, the Port has essentially provided services that have not been covered by the revenues produced by the program. Staff believes this needs to change for the Port to continue providing this valuable service to boaters, fishermen and the marina industry. One school of thought says that extra moves don’t cost anything because the forklift and staff are already there. However, the Port’s costs do increase with increased activity. A forklift that doesn’t move, doesn’t carry the additional cost of fuel, maintenance, repair, and wear and tear. Wear and tear are determined by usage. In the off-peak season, there is usually one staff person at Dry Storage per day, and often, they are working on projects outside of Dry Storage. In the peak months, there is forklift operator overlap, overtime, and up to four staff from other departments are integrated into the Dry Storage operations. The Port hires seasonal staff to manage the docks and operate the hydraulic launchers and relay text and voicemail requests to the operators who often do not get off the forklift for hours at a time. Therefore, it is not accurate to say that extra moves don’t cost anything.

Ms. Kempf advised that staff will review the potential of modifying A/B racks, as suggested at the customer meeting, and repositioning the washdown racks angularly to allow for conversion of some or all of the smaller 22’11” racks to larger size categories, which historically have maintained higher occupancy. The costs and revenues generated by that will determine whether the change will take the Dry Storage operations to a better financial place.

Ms. Kempf acknowledged that some of the tenants affected by the recent changes have been customers of the Port for many years, and she hopes they will remain. It is the reason the Port created the Fuel Rewards Program and the plug installation “quick-move” alternative. These programs provide options for managing moves and reducing costs. In fact, the Fuel Rewards Program came as an idea from a current Dry Storage tenant. The Port listened and responded.

Ms. Kempf summarized that extensive thought, consideration and review went into all the changes that have produced a better bottom line in the Dry Storage program. Without these changes, the Port would not be able to sustain the program and continue to offer the service. It is staff’s recommendation that the Port continue with the Commission-approved 2020 rate structure for this year. Staff will report back to the Commission during 1st Quarter 2021 when financial results for 2020 are finalized.

Commissioner Johnston acknowledged that the Port has heard from a few customers who are unhappy. However, he asked if the general consensus is that the new system works well for the majority of the Dry Storage tenants. Ms. Kempf answered that at least 85% of the current tenants do not move their boats more than 21 times each month.

Commissioner Preston said he is looking forward to seeing how the season goes and having staff report back to see if the new plan is manageable and the tenants are more content.


Mr. McChesney announced that Ms. Kempf will be retiring from the Port in a few months, and she leaves big shoes to fill. The intent is to recalibrate the position from Deputy Director to Marina Manager. They are already receiving applications and will keep the Commission apprised as to progress.

Mr. McChesney reported that the Port’s Infectious Disease Emergency Management Plan is in effect, and the Commission has been well apprised as to how it works. Only one change has been made. When the Port went into full shutdown mode, it put a few businesses in jeopardy. Both Jacobsen’s Marine and Puget Sound Yacht Services appealed for some relief, and the Port was able to accommodate them by opening the Travelift service on Mondays from 8 am to noon. This seems to be working very well, and they don’t anticipate any other changes. He summarized that, from staff’s point of view, the plan is working as anticipated, and it will remain in effect until the stay-at-home order is lifted.

Commissioner Preston said a few people commented to him that they thought the Port was shut down yet they have seen boats being moved around. They questioned why Jacobsen’s Marine and Puget Sound Yacht Services have access to the water, and he didn’t have a good answer. As he thought about it more, he questioned why there shouldn’t be a similar window for tenants to take boats out for repair. Mr. McChesney emphasized that the workyard is closed, and the special accommodation was made to keep Jacobson’s Marine and Puget Sound Yacht Service in business. Staff feels strongly that opening it on a very limited basis was the correct thing to do. In terms of general operations and private boat operators, the Port is closed. The Port doesn’t have the workforce and manpower to be closed and open at the same time. Boaters can still access their boats, and people are going out on their boats. Staff believes the right program is in place.

Commissioner Faires said he supports staff’s position. It is true that the restrictions put in place to close the Port are necessary. The economic effect on an individual is not significant, but the economic effect on businesses that operate out of the Port could be considerable. While the decision is subjective, the Port needs to worry about the economic well being of businesses that operate out of the Port, and the steps that have been taken are appropriate.

Commissioner Preston pointed out that, as per the current plan, a tenant can no longer have a boat removed from the water for a planned repair. He said he isn’t comfortable categorizing the two businesses differently than the other tenants, especially since boating is not considered an essential business as per the Governor’s order.

Commissioner Preston suggested the Port also needs to start thinking about where they can start peeling things to get back to work. The Port operates in an outside environment where people can move around and stay a distance apart. The health situation at the Port is a lot different than an office setting. Commissioner Johnston recalled Mr. McChesney’s earlier comment that lifting the stay-at-home order was going to be the criteria for considering opportunities to reopen the Port. Mr. McChesney agreed that is the Port’s position at this stage. Commissioner Johnston commented that the Port should not be the “point of the spear” for an early opening or early operations. The Port has an obligation to keep its many staff and tenants safe. To the extent possible, they need to keep the Port free from liabilities that might arise from an early opening.

Commissioner Preston suggested that, rather than an early opening, perhaps the Port could give access to a tenant who wants to remove his/her boat from the water. Perhaps staff could be available for this purpose after the Monday opening for the business tenants. Mr. McChesney said he would not recommend this approach. Commissioner Harris agreed with Mr. McChesney. Doing so could lead the Port down a slippery slope, with tenants wanting to do more and more. While most of the Port’s operation occurs outdoors, it also requires support staff who work in office settings. She suggested it would be safest to follow the Governor’s orders.

Commissioner Preston commented that following the Governor’s orders would mean that no special provisions are made for Jacobsen’s Marine or Puget Sound Yacht Service. He said he supports allowing these two businesses to have access, but the policy should be consistent.

Commissioner Faires observed that the Port is working its way through the situation, trying to figure out how to keep everyone safe (staff, public and tenants) and not run tenants out of business. Port staff is in the best position to make these decisions, and he concurs with what staff has done. He said he supports opening the marina when it can be done without endangering the staff and without the liability. The situation lends itself to guidelines but not necessarily the interpretation of black and white rules. Commissioner Preston respectfully disagreed.

Mr. McChesney said the situation is under review and advisement every week. No one knows when the problem will be resolved. The Port’s current plan, the Jacobsen’s Marine and Puget Sound Yacht Service exception notwithstanding, is consistent with how things are out in the general world. He is very comfortable with the Port’s plan at this stage.

Mr. McChesney announced that former Commissioner Mary Lou Block passed away a week ago. She contributed much to the success of the Port. The environment and public access were of particular interest to her. He proposed that the Commission consider placing a memorial plaque and dedication in her name on some public access feature as they move forward with implementation of the Public Access Plan. Perhaps the public plaza would be a suitable place for the memorial.


Commissioner Johnston echoed Mr. McChesney’s sentiments. It was a great honor for him to be appointed to replace former Commissioner Block over five years ago. She left very big shoes to fill. She was a great help to the Port for many years in the cleanup of Harbor Square and other major elements. She was a terrific Commissioner by everyone’s standards, and she will be missed.

Commissioner Preston said it was great to serve with former Commissioner Block. She was the first lady of the Port as a good listener and observer and providing thoughtful comments and ideas.

Commissioner Faires said he supports the effort towards a memorial for former Commissioner Block. She was dedicated to the Port and a fine person. Her experience with the City and the County were a big contribution to the community.

Commissioner Harris said she didn’t get a chance to meet former Commissioner Block, and she wishes she could have. Dedicating a memorial in her name is a great idea.


The Commission meeting was adjourned at 2:48 p.m.

Respectfully submitted,  David Preston   Port Commission Secretary