05 Sep Comm Meeting and Staff Retreat 7-31-23
PORT COMMISSION OF THE PORT OF EDMONDS MINUTES OF SPECIAL COMMISSION MEETING AND STAFF RETREAT
(Via Zoom, Hybrid Meeting) July 31, 2023
Steve Johnston, President
Jim Orvis, Vice President
Jay Grant, Secretary
Angela Harris, Executive Director
Brandon Baker, Director of Marina Operations
Brian Menard, Director of Facilities & Maintenance
Tina Drennan, Manager of Finance and Accounting
Brittany Williams, Manager of Properties and Economic Development
Karin Michaud, Office Manager
Conner Laursen, Moorage & Office Supervisor
Glenn Merryman, Security Supervisor
Renae Ebel, Administrative Assistant
Jordan Stephens, Port Attorney
Dave Teitzel, Edmonds City Council
Selena Killin, Prospective Port Commissioner
Darrol Haug, Edmonds Resident
Roger Pence, Edmonds City Council Candidate
CALL TO ORDER
President Johnston called the meeting to order at 9:00 a.m.
Commissioner Johnston announced that the Commission would move into Executive Session for the following reasons:
• Pursuant to RCW 42.30.110(1)(c) to consider the minimum price at which real estate will be offered for sale or lease, as public knowledge would cause a likelihood of decreased price, and
• Pursuant to RCW 42.30.10(1)(i) to discuss with legal counsel representing the agency matters relating to litigation or legal risks of a proposed action or current practice that the agency is identified, as public discussion of the litigation or legal risks is likely to result in an adverse legal or financial consequence to the agency.
Commissioner Johnston further announced that the Executive Session would start at 9:01 a.m. and last 120 minutes. It would conclude at 11:00 a.m., at which time the Commission would return to the regular Commission meeting with no related announcements or actions taken.
The Executive Session concluded at 11:00 a.m., and the Commission took a 10-minute recess.
The regular meeting resumed at 11:10 a.m.
All those in attendance participated in the Pledge of Allegiance to the American Flag.
APPROVAL OF AGENDA
COMMISSIONER ORVIS MOVED TO APPROVE THE AGENDA AS PRESENTED. COMMISSIONER GRANT SECONDED THE MOTION, WHICH CARRIED UNANIMOUSLY.
APPROVAL OF CONSENT AGENDA
COMMISSIONER PRESTON MOVED THAT THE CONSENT AGENDA BE APPROVED TO INCLUDE THE FOLLOWING ITEMS:
A. APPROVAL OF JUNE 26, 2023 MEETING MINUTES, AS SUBMITTED
C. APPROVAL OF PAYMENTS IN THE AMOUNT OF $2,614,464.58
COMMISSIONER ORVIS SECONDED THE MOTION, WHICH CARRIED UNANIMOUSLY.
Darroll Haug, Edmonds Resident, said that the City of Edmonds is facing several problems that could impact the Port, including the crossing project, wastewater treatment, stormwater treatment, housing and Unocal ownership and use. He reviewed that the original cost of the crossing project was estimated to be $30 million, and the Port pledged $1.5 million. If the Commission were to take a position in the future based on least impact to the Port, he suggested they consider working with Burlington Northern Santa Fe (BNSF) to do an at-grade emergency crossing south of the dog park as part of its two-track system installation. This would be a low-cost solution, and having three crossings would lower the risk of all three being blocked at the same time.
Mr. Haug urged the Commission to increase the tax levy for 2024. There are a number of outreach programs the Port could do to benefit the community and the Port District residents. For example, the Port could work with the Edmonds School District, to fund bike racks at all of the schools.
Charles Malmgren, Tenant, urged the Commissioners to exercise restraint during the 2024 budget process. Last year’s rent increases far exceeded the Port’s costs and pushed the Port’s annual net income to over $3 million. On an annual revenue of about $12 million, this is either impressive or excessive, depending on your point of view. Since none of the elected Commissioners are boaters, a lack of empathy is expected, but it is in no one’s interest to go overboard on raising rents again this year. He pointed out that fishing and easy access to central Puget Sound are primary draws for the Port of Edmonds Marina. Making rents and fees prohibitively expensive can be done short-term, but long-term, will hit the bottom line.
BREAKWATER ENGINEERING CONTRACT AWARD
Executive Director Harris reviewed that the breakwater in mid marina has been in disrepair and needs attention to preserve and repair. The Commission was briefed previously and given three options to pursue. The Commission approved $150,000 to move forward with engineering work for Option 3, which included replacing the damaged lagging and minor steel repair, replacing timbers, and adding a steel strongback channel near the top of the vertical piles to replace the existing cap. The life expectancy of this option is 8 to 15 years, but it will require contractor bids and a Joint Aquatic Resources Permit Application (JARPA). Mitigation will likely be required, as well. To begin the process formally, staff published an information packet on the project with a Request for Qualifications (RFQ) in The Everett Herald and the Office of Minority and Women’s Businesses Enterprises Website (OMWBE) on June 23rd. They also contacted engineering firms listed on the Municipal Research and Services Center (MRSC) engineering roster. Only one response was received. She recommended the Commission authorize her to enter into a contract with CG Engineering in the amount of $87,920 plus tax.
COMMISSIONER GRANT MOVED THAT THE COMMISSION AUTHORIZE THE EXECUTIVE DIRECTOR TO ENTER INTO A CONTRACT WITH CG ENGINEERING IN THE AMOUNT OF $87,920 PLUS TAX FOR THE BREAKWATER STRUCTURAL AND ENVIRONMENTAL ENGINEERING PLANS AND SPECIFICATIONS (CONTRACT 2023-456). COMMISSIONER ORVIS SECONDED THE MOTION.
To clarify for Commissioner Preston, Executor Director Harris said the $87,920 would be for the engineering contract only. Commissioner Grant asked about the total cost of the project. Mr. Menard responded that they don’t yet have an engineer’s estimate, but he anticipates it will cost at least $500,000 to add the steel strongback channel to the breakwater.
THE MOTION CARRIED UNANIMOUSLY.
Commissioner Grant recognized that this project is necessary, but he is concerned that the project was a surprise rather than anticipated. He observed that other port authorities he has worked with look at their structural challenges years in advance and plan funding accordingly. Commissioner Orvis recalled that one reason the Port’s moorage rates were set so much higher was in anticipation of a deteriorating marina. However, they didn’t anticipate failure of the breakwater.
Commissioner Grant reviewed that the current CPI+1% formula for rate increases is not just based on operational needs, but includes putting money away to fund future capital projects. Somehow, they need to do a better job of helping the tenants and others understand this. Commissioner Johnston pointed out that the fixed components of the marina are well over 50 years old and will start to see failure. Ms. Drennan explained that, with the current rate structure, a portion is to cover operational expenses and another portion is to cover the cost of what the tenants are using today. It looks like there is a huge net income, but that money is saved for future repairs/replacement. Commissioner Johnston emphasized that repair and maintenance costs are escalating far beyond CPI+1%.
HARBOR SQUARE ASPHALT REPAIR CONTRACT AWARD
Executive Director Harris reviewed that the 2023 Budget includes $50,000 for asphalt repairs at Harbor Square, and staff identified one area of priority for repair and published a formal bid invitation on July 6th. A pre-bid walkthrough of the project was conducted on July 13th with three companies represented. Staff received and reviewed four bids on July 24th, and the low bidder was Quilceda Paving for a base bid of $25,175. Work will be completed by September 29th, and staff will work with the contractor to minimize disruption to tenants during installation. She recommended the Commission authorize her to enter into a contract with Quilceda Paving in the amount of $25,175 plus sales tax.
COMMISSIONER JOHNSTON MOVED THE COMMISSION AUTHORIZE THE EXECUTIVE DIRECTOR TO ENTER INTO A CONTRACT WITH QUILCEDA PAVING IN THE AMOUNT OF $25,175 PLUS TAX FOR THE BASE BID FOR THE HARBOR SQUARE ASPHALT REPAIR 2023 CONTRACT (CONTRACT 2023-458). COMMISSIONER PRESTON SECONDED THE MOTION.
Commissioner Preston asked about the status of striping in the parking lot, and Mr. Menard answered that they don’t have the time or manpower to do striping this year. Striping was done last year.
THE MOTION CARRIED UNANIMOUSLY.
APPROVAL OF POLICY NO. 3.50.33, CREDIT CARD PROGRAM, POLICY AND PROCEDURE MANUAL
Ms. Drennan explained that since the retirement of Executive Director McChesney, the Port has only two VISA credit cards held under the names of Port staff: one under Brian Menard and the other under Tina Drennan. The cards are held in the Manager of Finance and Accounting’s Office and “checked out” by staff. She explained that online credit card purchases are becoming more common and some vendors only accept credit card payments and won’t extend credit to the Port with an account. In addition, the Port’s bank offers a program that allows authorized Port staff to easily manage credit card limits and authorized users. She recommended that the policy be changed due to accountability issues and inefficiencies.
Ms. Drennan advised that the proposed policy (attached to Staff Report), was reviewed by all the staff who are on the authorization list, as well as Accounts Payable staff. She pointed out that RCW 43.09.2855 requires that the proposed policy change come before the Commission for approval. She recommended the Commission approve the policy as presented.
COMMISSIONER GRANT MOVED THAT THE COMMISSION APPROVE THE ATTACHED POLICY NO. 3.50.33, CREDIT CARD PROGRAM POLICY AND PROCEDURE MANUAL. COMMISSIONER CASS SECONDED THE MOTION.
To answer questions by Commissioners, staff described the security protocol for the various types of credit cards. Commissioner Preston raised a concern about listing specific restrictions and limitations (Section III), since the list may not include everything. Ms. Drennan answered that some things are specifically excluded by law, and the proposed language is consistent with what other ports use.
THE MOTION CARRIED UNANIMOUSLY.
RESOLUTION NO. 23-04 – IDENTIFYING DELEGATED AUTHORITY
Executive Director Harris advised that Resolution 23-04 identifies a progression of Port employees that are authorized to act in place of the Executive Director (Director of Marina Operations, Director of Facilities and Maintenance, and Office Manager). She recommended the Commission approve the resolution to ensure smooth management and operation of the Port in the Executive Director’s absence.
COMMISSIONER PRESTON MOVED THE COMMISSION APPROVE RESOLUTION NO. 23-04 – IDENTIFYING DELEGATED AUTHORITY IN THE ABSENCE OF THE EXECUTIVE DIRECTOR. COMMISSIONER JOHNSTON SECONDED THE MOTION.
To answer Commissioner Grant’s question, Port Attorney Stephens said the $350,000 limit corresponds with the RCW statute and the different procurement thresholds. Commissioner Grant asked if the resolution would be permanent, and Port Attorney Stephens answered that it would apply anytime the Executive Director is unavailable.
THE MOTION CARRIED 4-0, WITH COMMISSIONER GRANT ABSTAINING.
BUDGET WORKSHOP DISCUSSION
Commissioner Grant shared two budget requests:
• Cloud-based maintenance software system. He asked what tools staff currently uses to track Port assets, including the lifecycles of the various components of the marina. Mr. Menard answered that an Excel spreadsheet was started when he came on board to track all maintenance items on a monthly interval. Commissioner Grant responded that the cloud-based maintenance software system would do the same type of thing, allowing for the management of assets, money, communications, work orders, bids, etc. Executive Director Harris explained that she will be working with staff to analyze the software systems.
• Discretionary fund for Commissioner expenses. This fund could be used for things like thank you cards and stamps and printing larger documents. It was noted that document printing could be done in house. Ms. Williams noted that the Port does have cards and stationery, but they could both be updated with the new branding. In addition, Commissioners can drop off Port-related mail and staff can provide the necessary postage.
• Restrooms. He has heard comments that the Port’s restrooms are not very attractive. Mr. Baker acknowledged that they are utilitarian, but they are clean and functional. It was suggested that different paint color and lighting could help soften their appearance.
Commissioner Preston shared the following budget requests:
• Emergency response to the waterfront. He recently had a conversation with Councilmember Teitzel who said his current focus is on emergency response to the waterfront rather than access to the waterfront. There are already resources at the waterfront, so the focus should be on making sure there is enough equipment and trained operators.
• Skimmer. The Port should consider purchasing a skimmer to clean up the water in the marina.
• Memberships. The Port should consider joining the Association of Washington Business (AWB) and Pacific Northwest Waterways Association (PNWA).
• Internships. He recalled previous discussions about creating internship opportunities at the Port, and suggested they give the opportunity more serious thought.
• Web cameras. The current cameras are outdated and need to be replaced and he would like the Port to add a camera at the marsh.
The Commission took a ½-hour break from 12:00 to 12:30 p.m.
CONTINUED BUDGET WORKSHOP DISCUSSION
Ms. Drennan reported that staff has started work on the 2024 Preliminary Budget.
She explained that the Port implemented the Cash Flow Model in 2012, as a method of determining moorage and dry storage rates and planning for future large capital expenditures. Moorage and dry storage rates are calculated to recover the current year’s costs of a tenant’s slip or space, which includes operating costs and present year’s usage of the capital assets to provide the service. The Cash Flow Model estimates future cash and investments based upon projected revenues and expenses and known major capital improvements.
Ms. Drennan advised that the Consumer Price Index (CPI) for June 2023 for All Urban Consumers for All Items in Seattle-Tacoma-Bellevue was 4.6. The Port historically raises moorage and dry storage rates by CPI + 1% annually. She noted that the average increase over the past 10 years is 4.5%. She recalled that on August 8, 2022, Paul Sorensen from BST Associates presented findings that identified the Port’s needs going forward: 1) fund operating expenses, which increase as the docks get older, 2) fund capital repairs and replacement of the marina, and 3) fund other capital improvements (seawall, breakwater, bathrooms, etc.). She shared several examples of how operating, maintenance and capital costs are increasing significantly.
Ms. Drennan reported that the Finance Committee met on July 19th to discuss moorage and dry storage rates and recommended that the Port continue with the rate increase of CPI + 1% for 2024. For the 2025 budget cycle and beyond, the Commission will discuss if the method is sufficient. She shared and reviewed the following items that were attached to the Staff Report:
• Charts that show the proposed 2024 moorage and dry storage rates for each type and size of slip/space and comparing them to 2023 rates.
• A moorage rate survey showing how the Port’s proposed rates compare with other Puget Sound marinas.
• A graph showing the trend in Port financial occupancy rates.
Ms. Drennan concluded that, unless the Commission directs otherwise, staff will show moorage and dry storage rate increases of CPI + 1% in the 2024 Preliminary Budget. This will allow the Port to continue to provide the quality of facilities and services that the tenants value.
There was some discussion about what is included in the Consumer Price Index (CPI) for June 2023 for All Urban Consumers for All Items in Seattle-Tacoma-Bellevue, and it was suggested that it may be artificially low. They discussed how construction costs are spiraling out of control, and that the Cash Flow Model formula of CPI + 1% may not match up with the Port’s future capital requirements.
In reference to Mr. Malmgren’s earlier comment, Ms. Drennan explained that net income is typically between $2 and $3 million per year, but that number doesn’t take into account all of the Port’s capital costs. She shared the scientific thought process that went into the Cash Flow Model when it was created in 2012, pointing out that the model includes lifecycle and replacement estimates for each of the Port’s assets. Using the current formula, there won’t be sufficient funds to meet future needs without other revenue sources, including grants. It was noted that the Finance Committee has discussed all of these issues, and they will be discussed in-depth as part of the next budget process, as well.
Councilmember Teitzel asked if the Commission would consider expanding Port District boundaries, thereby increasing its revenue pool. It was noted that expanding the boundaries would not result in a significant increase in revenue, and it could be challenging to get voters to approve the expansion.
Mr. Baker cautioned that, although occupancy rates are the highest since 2007, if customers feel the rates are out of sync with the value they receive, occupancy can decline. There was a lengthy discussion addressing the growing concern around increasing marina construction costs, permitting challenges, the expense of maintaining marina facilities, and how the rising prices will impact boaters’ abilities to afford moorage. The group agreed to continue the conversation throughout the upcoming budget cycle.
Mr. Baker observed that the operations staff did not receive a lot of complaints about the 2023 rate increase. Ms. Williams added that the Port sends out information to tenants, explaining why rates are increasing and how the revenues are applied to maintaining or replacing facilities. If the Commission moves away from the current CPI+1 formula, it will be crucial to convey the reasoning and methodology regarding how rates are calculated. The Port starts its budget process early so that people have a clear opportunity to provide feedback.
Property Tax Levy
Ms. Drennan advised that the Finance Committee is recommending the Commission increase the property tax levy to the maximum amount to fund the public portion of the North Portwalk and Seawall Project. She reminded them that RCW 53.36.020 limits the Port’s property tax to $0.45 per thousand of property value, and Washington State Initiative 747 caps the property tax increase to 1% per year plus new construction. In 2023, the Commission elected to increase the levy to the maximum amount allowed or about $617,000. Adding a 1% increase to this amount would be approximately $624,000. The actual amount might be higher based on the amount of new construction and refunds.
Ms. Drennan further advised that the Finance Committee recommended allocating the 2024 property tax funds as follows: launcher subsidy ($25,000), North Portwalk and Seawall Project ($388,000), Commission costs ($201,000), and public records requests, tools and training ($10,000). Amounts collected from new construction and refunds would be allocated to the Portwalk and Seawall Project. She briefly reviewed the Staff Report attachments that provide historical context for the property tax levy. She summarized that, unless directed otherwise by the Commission, staff would show a property tax levy of $624,000 in the 2024 Preliminary Budget, with the allocations as outlined.
The Commissioners observed that the Port doesn’t have a lot of ways to increase revenue. The marina is the largest revenue source, followed by real estate. The Port doesn’t have the ability to increase property tax revenue beyond 1% each year. Absent grant funding for capital projects, the Port would quickly use up all of its reserve fund. They indicated support for increasing the tax levy to the maximum allowed as recommended by staff and the Finance Committee, but also recognized the importance of considering all potential options for additional revenue as part of the 2024 Budget discussions.
OVERVIEW OF MISSION STATEMENT, STRATEGIC PLAN, AND COMPREHENSIVE SCHEME OF HARBOR IMPROVEMENTS
• Executive Director Harris provided an overview of the current Mission Statement, Strategic Plan, and Comprehensive Scheme of Harbor Improvements including the Public Access Plan, Master Plan – West Side and Master Plan – East Side, with the recommendation some updates are made – mission, structure and possible refresh to start next year.
• The Commission discussed the recommendations and the possible future updates including to commercial properties given the State’s mandate to add density, particularly near transportation hubs.
• Executive Director Harris introduced this portion of the retreat, first showing a view of capital and other draft plan expenditures and projects, then explaining the rest of the time is for creative thinking and general discussion.
• The Commission discussed the future of the Port of Edmonds and the importance of grants to the Port’s financial planning strategy for the major Seawall Reconstruction and Portwalk project. They brainstormed ideas for other potential revenue opportunities, acknowledging that the Port’s limited land capacity is a major obstacle. They also brainstormed ideas such as more partnership with the City of Edmonds, boating activities/events, public activities/events, looking at the best use for commercial spaces, and the importance of keeping the Port a “destination.” Parking was also a topic, as the more events we bring to the Port, the more parking will become a challenge. Perhaps they could partner with the City and/or State to help address this issue.
WRAP UP DISCUSSION
• Executive Director Harris summarized that, once the budget process has been completed, staff could present proposed structural updates to the Strategic Plan. Using the updated Strategic Plan, staff could establish criteria for identifying priorities and ranking the projects and programs. They could then discuss moving forward with a public process for a revised 10- or 20-year Strategic Plan. Commissioner Cass suggested they should finish the Strategic Plan update in time for it to be included in the City’s 2024 Comprehensive Plan update.
• Executive Director Harris said staff is very mindful of the different grant application requirements, and she provided a high-level timeline of what is coming next. They are looking at a trip to Washington D.C. the week of October 16th, and Commissioners will be invited to attend. The consultant has also provided specifics regarding the letters of support that will be needed, and staff has already started local outreach. She provided a brief overview of other things they are working towards.
• Executive Director Harris reported they are hoping to occupy the Administration & Maintenance Building sometime in September. The Commissioners discussed that just by meeting Building Code requirements, the new building should be eligible for Leadership in Engineering and Design (LEED) Silver Certification.
• Commissioner Grant asked about the public process the City will follow when adopting the draft Waterfront Plan into its Comprehensive Plan. Councilmember Teitzel advised that there would be a number of public hearings on the Comprehensive Plan update. He recalled that he previously provided the Commissioners with a link to the draft Waterfront Plan and invited their comments. Executive Director Harris said she has started conversations with Susan McLaughlin, Director of Planning and Development about how they can work together.
The Commission meeting was adjourned at 3:06 p.m.
Port Commission Secretary