02 Nov Commission Meeting Minutes 10-10-22
PORT COMMISSION OF THE PORT OF EDMONDS MINUTES OF REGULAR MEETING
(In Person and Via Zoom) October 10, 2022
David Preston, President
Steve Johnston, Vice President
Jim Orvis, Secretary
Bob McChesney, Executive Director
Brandon Baker, Director of Marina Operations
Tina Drennan, Manager of Finance and Accounting
Brittany Williams, Manager of Properties and Economic Development
Jordan Stephens, Port Attorney
Neil Tibbott, Edmonds City Council
CALL TO ORDER
President Preston called the meeting to order at 7:00 p.m.
All those in attendance participated in the Pledge of Allegiance to the American Flag.
COMMISSIONER ORVIS MOVED THAT THE CONSENT AGENDA BE APPROVED TO INCLUDE THE FOLLOWING ITEMS:
A. APPROVAL OF AGENDA
B. APPROVAL OF SEPTEMBER 26, 2022 MEETING MINUTES, AS SUBMITTED
C. APPROVAL OF PAYMENTS IN THE AMOUNT OF $1,353,796.87
COMMISSIONER JOHNSTON SECONDED THE MOTION, WHICH CARRIED UNANIMOUSLY.
There were no public comments.
PRESENTATION BY THE CORINTHIAN YACHT CLUB OF EDMONDS
Mr. Baker introduced Carl Harrington, current Commodore of the Corinthian Yacht Club of Edmonds, who was present to provide recap a of the club’s summer activities, share a brief history of the club and its membership statistics, etc.
Carl Harrington, current Commodore of the Corinthian Yacht Club of Edmonds (CYCE), advised that the CYCE has been operating out of the Port of Edmonds since 1980. Corinthian Yacht Clubs are founded as sailing clubs, whereas many of yacht clubs have become more powerboat oriented. The club has about 61 individual and family members. More than half moor their boat in the Edmonds Marina and 26 are local residents of the Port District. The club thinks of itself as an amenity to the Port, offering accessible recreational opportunities for cruising and racing. Some have been members of the club since it was founded in 1980. The club offers several destination cruises each year and has reciprocal moorage with several clubs in the region. They also offer a number of social activities.
Mr. Harrington said that, most important, the club offers sailboat racing, running several series (one in winter, 2 in summer and 1 in fall), with 24 races in total. They also offer an inner-club challenge in conjunction with the Milltown Sailing Association in Everett. The big race is the Foul Weather Bluff, which is a middle-distance race, one of the few left in the Salish Sea cruising area. It is also a 48 North Top 25 qualifier, and participation was up in 2022. The race was moved to Kingston because they were having trouble getting enough moorage in the Edmonds Marina for all the guests and there was no accessible waterfront venue for the awards ceremony. It also gave them a chance to partner with the Kingston Cove Club.
Mr. Harrington advised that the club’s members enjoy many of the amenities offered by the Port of Edmonds, including the workyard with professional services, convenient restaurants and shopping, and meeting space for board and skipper meetings. He said he looks forward to the club continuing to work with the Port to adapt to changes and prosper. He hopes the club can stay in better communication with the Port staff going forward.
Commissioner Preston asked if the club offers sailing lessons for Mountaineers. Mr. Harrington answered that they offer a crew training class at the Seattle Mountaineers facility on Sand Point. They also take individuals out on boats for training and recreational sails and teach racing and some navigation. Commissioner Preston asked if it would be possible for the club to offer similar training to youth and non-youth in the Edmonds area. Mr. Harrington said the lessons are taught by volunteers, and he is concerned about time constraints. The club previously explored opportunities to partner with the Sea Scouts, but they no longer have a troop at the Port of Edmonds. Commissioner Preston said he spoke with faculty at Edmonds-Woodway High School who expressed interest in a youth program for on-the-water boat training, and perhaps someone from the club might be interested in providing this opportunity. Mr. Harrington agreed that a youth sailing program is a great idea and noted that a program is offered at Shilshole Marina.
Commissioner Preston invited a representative from the club to attend Commission meetings on a quarterly basis to stay apprised of what is happening at the Port and advise the Port Commission of the club’s activities. He asked how often the club meets, and Mr. Harrington answered that the meetings are usually the third Tuesday of each month. They are still being conducted virtually via Zoom.
NORTH PORTWALK AND SEAWALL PROJECT UPDATE
Mr. McChesney introduced Dennis Titus from CG Engineering and Steve Quarterman from Landau Associates, who were present to update the Commission on the status of the North Portwalk and Seawall Project and permitting.
Dennis Titus, CG Engineering, reviewed that several years ago, a condition survey found damage to the upper seawall, the timber piles supporting the Portwalk, and the Portwalk, itself. Since that time, they have been working on a replacement plan for both the seawall and the Portwalk. As proposed, the entire Portwalk will be replaced from Arnies Restaurant all the way down to the Administration Building (about 900 feet).
Mr. Titus reviewed that there will be an upper plaza near the existing restrooms to the north, which are owned by the City. The restrooms will remain and a small gathering area will be created. There will be a covered area with removable posts, as well as some plantings to screen the restrooms. There will also be a central plaza in the parking area next to the existing Administration Building, and a new parking area will be constructed where the Administration Building is currently located. The small bump outs on the current walkway will be consolidated to create a much larger bump out (central plaza). This will create a gathering area, with a fairway between N and P Docks. There will be raised seating, planters, artwork, and new restrooms.
Mr. McChesney reminded the Commissioners that the design criteria had to consider permitting constraints and the need to avoid increasing the amount of over-water work. Commissioner Preston voiced concern about eliminating the small seating areas where he often sees people sitting. Mr. Titus advised there would be benches built into the planter boxes along the new Portwalk.
Commissioner Grant asked if there would be more parking than what is currently available. Mr. McChesney said the idea is to have no net loss of parking in that area, and no additional parking would result from the proposed design. Mr. Titus agreed that the number of parking spaces would be very similar to what exists currently. However, the spaces will be available for public use, whereas they are currently utilized primarily by Port staff.
Mr. Titus advised that the design team has been looking at ways to separate the walkway from the drive aisle, which is an issue of concern. There is a large area between Arnies Restaurant and the Edmonds Yacht Club where there is a lot of vehicular and pedestrian traffic. Currently, the pedestrian surface is at the same level as the drive aisle. While the Portwalk would be raised by six inches, there is still some concern that cars will jump the curb.
Mr. Titus noted that there are currently some protrusions onto the Portwalk, and the security gates for the gangways protrude about five feet onto the walkway. On the drive aisle side, the Americans with Disabilities Act (ADA) ramps protrude onto the walkway, too. There are also planters and electrical cabinets. The width for most of the Portwalk will be 16’9”, but the protrusions will reduce this to 8 or 9 feet of walking area in some locations. The idea is to prevent people from having to weave in and out or walk in the drive aisle when there is congestion. The electrical cabinets can’t be moved farther away, as they must be located near the security gates.
Mr. Titus said the design team is considering a few options:
• Option 1 would be to leave the Portwalk as currently designed, with the security gates, electrical cabinets, etc. protruding into the walkway. This would leave the parking lot exactly the same, as well.
• Option 2 would revise the parking lot to angle parking to allow space for the walkway to be expanded along the parking area. There would be a planting strip between the drive aisle and walkway to serve as protection for pedestrians. He reminded them that the goal is to retain the same number of parking spaces, and changing to angled parking would result in a net loss of just three spaces.
Commissioner Johnston asked about the ADA requirement for parking, and Ms. Drennan answered that a minimum of three ADA spaces are required for parking areas with 51 to 71 parking spaces. However, some that were required in the gravel lot were moved to the parking lot in question, and there are currently more than five ADA spaces. These will all need to be replaced in the new lot and/or somewhere else. Mr. Titus agreed to work with Ms. Drennan to consider how the proposed design can best meet the ADA requirements.
Commissioner Preston asked if the electrical panels could be smaller or reconfigured so they don’t take up as much square footage. Mr. Titus said they did consider other options without success.
Mr. Titus shared several renderings of the two options, describing them as follows:
• Option 1. The curb ramps would be offset from the gangways because there isn’t enough space to put them right next to the gangways. The electrical cabinets would be located in the walking path, as they must be close to the gangways to feed the power to the docks. Congestion at the gangways would result from the curb ramp, security gate, and the electrical panels. There would be bollards between the walkway and drive aisle to separate pedestrian and vehicular traffic. All of the planter islands in the parking lot would remain unchanged, as would the water service in the central planter strip that serves the docks on the north side of the marina.
• Option 2. The parking lot would be revised to angle parking, with one-way drive aisles, and planter strips would be placed between the walkway and parking lot for pedestrian safety. The curb ramps would align with the gangways, and the electrical cabinets would be located in the planter rather than the walkway. The only remaining constriction along the Portwalk would be the security gates. The planter along the walkway would separate pedestrians from the parking area, and there would be seating on the water side. The water service would be relocated, and the planter islands would be revised, as well.
Commissioner Grant recognized that the goal is to not increase the portion of the Portwalk that extends over the water. He asked how this would be measured. Mr. Titus said anything beyond the high tide line would be included in the coverage measurement.
Commissioner Preston asked if the electrical boxes could be pushed up against the water side of the Portwalk, right next to the gates. Mr. Titus said the goal was to move them away from the water to create a better view for walkers. Mr. McChesney recalled that, under the existing configuration, all of the switch gear is located inside the gate enclosure, which increases the amount of intrusion into the walkway. In early discussions, they talked about how to get the switch gear out from behind the gates to reduce the amount of clearance inside. That discussion guided the team to the current design. Whether the switch gear needs to remain in the locations shown remains to be seen.
Commissioner Orvis pointed out that, except for the gates, the current design would result in an unobstructed passage along the Portwalk railing.
Commissioner Grant asked if the gates could open on the opposite sides. He observed that, as currently configured, people end up stopping the pedestrian flow when they bring stuff onto and off of the docks. Mr. Titus reminded them that they can’t change the existing gangways. If they are modified, they would have to meet ADA requirements, which means they would have to be quite a bit longer. If they are longer, they would protrude further down the docks. Without moving the gangway, there would be no way to support the door on the left side. Ms. Williams added that the gates would protrude further into the Portwalk if they were switched to open on the opposite side. Mr. McChesney agreed it is an idea worth further exploration.
Mr. McChesney said the intent of the discussion is for the Commission to provide guidance as to which option they prefer. He noted that cost will definitely factor into the decision, and there will be a cost associated with changing from the original design (Option 1) to the angular parking concept (Option 2). However, he felt the additional cost would be marginal relative to the benefits of Option 2.
Commissioner Preston pointed out that the parking lot entrance from Admiral Way would need to be widened to allow enough space for in-and-out traffic flow. Currently, only one car can go in or out at a time and cars end up having to wait.
Commissioner Preston asked how wide the parking lot planting area would be, and Mr. Titus answered 6 feet. Commissioner Preston asked what the minimum requirement is, and Mr. Titus answered that the proposed planter is close to the minimum required. Commissioner Grant asked how much space is taken up by the trees on Admiral Way, and Ms. Williams noted that there are currently parking spaces below the trees. Mr. Titus added that neither of the options would change the planter area along Admiral Way.
Commissioner Harris asked where the water service would be relocated to. Mr. Titus advised that in Option 1, the water service would remain in its current location in a planter strip. In Option 2, it would be relocated to the planter strip on the right side of the parking lot.
Mr. Titus cautioned that he doesn’t have cost estimates, but he noted how the two options were different and how that might impact the final cost of the project:
• There would be a cost associated with moving the water service as shown in Option 2.
• Both options call for grinding, overlaying and restriping the parking lot, so the costs should be about the same.
• There would be an additional cost to move the planters as per Option 2.
• There would be a small additional cost for the planter strip between the parking area and the Portwalk.
• There would be a cost savings on the concrete panels in Option 2. In Option 1, the ramps, electrical panels and planters will all be located on the pre-cast concrete panels, which are unique and have to be fabricated special. With Option 2, the panels would be uniform all the way through.
Mr. Titus summarized that he anticipates that Option 2 would cost about $150,000 more than Option 1, which is minimal given the total cost of the project. From an aesthetic, safety and engineering standpoint, Option 2 would be much better.
Commissioner Preston summarized that the Commissioners had a strong preference for Option 2, with some minor tweaks. They asked that the design team consider different gate configurations and reducing the width of the landscape strip. Mr. Titus reminded them that the landscape strip needs to be at least wide enough to accommodate the electrical equipment. He also reminded them that there would be a significant cost associated with relocating the electrical equipment.
Mr. McChesney advised that the timing of the Administration Building demolition is very tricky. Mr. Titus reviewed that the Port administrative offices will move to the new building when it is completed, and the existing Administration Building will no longer be used for administration or maintenance. However, it houses the only restrooms in the mid marina and it also supports the electrical service for Docks M, N, Guest Moorage and the Fuel Dock. Commissioner Grant asked if the Port is required to keep the restrooms open. Mr. McChesney answered that it is not a requirement, but he believes they provide a necessary service to the public and they want to avoid having to put in portable toilets. Commissioner Grant commented that it is important to not lose track that the Landing lease expires in 6 years, yet it hasn’t been taken into consideration when discussing the project. He noted that the other public restrooms along the waterfront are owned and operated by the City of Edmonds. Mr. McChesney commented that the critical factor is the electrical equipment on the Administration Building rather than the restrooms.
Mr. Titus pointed out that before the Administration Building can be demolished, the Port will need to address what to do with the electrical equipment that is located on the south side of the building. He noted that mandatory Ground Fault Circuit Interrupter (GFCI) upgrades will be required for all power pedestals if the service is relocated. This could be done as part of the Portwalk project or as a separate project before the Portwalk project gets started. He advised that one option would be to build a steel frame to support the service in its existing location, thus avoiding having to bring the entire system up to code. The other option would be to relocate the electrical equipment and bring the entire system up to code at an estimated cost of about $750,000. Commissioner Preston pointed out that the electrical upgrades will have to be done at some point anyway.
Commissioner Grant suggested that, for grant application purposes, the demolition of the building and relocation and upgrades to the electrical equipment should fundamentally be included as part of the North Portwalk and Seawall Project. As an alternative, they could also look at how much it would cost to protect the electrical equipment in its current location so it could be separated depending on funding.
Ms. Williams asked if they could include the entire cost of demolishing the building in the grant application or just the electrical upgrades. Commissioner Grant said he would research further, but he believes the building demolition could be included because it would create public space. Mr. Baker asked if upgrading the electrical service that feeds the docks could be perceived as benefit to the tenants rather than the public, and Commissioner Grant answered no, because it has to be done before the building can be demolished to create the public space.
Commissioner Orvis recalled that in early discussions about the project, there was talk that the City would require the existing Administration Building to be demolished as soon as the new Administration/Maintenance Building is completed. Mr. McChesney said this discussion occurred when talking about credits for the parking study and traffic mitigation. Because the project would simply move Port offices across the street, the Port’s position was that a parking study and traffic mitigation should not be required. The City indicated they would need assurances that as soon as the Port moves into the new building, the old building would be demolished. However, that became moot through the continued process. He estimated there would be a two-year gap between the start of the North Portwalk and Seawall Project and when the new Administration and Maintenance Building would be complete. During that time, the financing plan can be perfected, grant funding can be pursued, and final design work can be completed.
Mr. Titus suggested they consider the pros and cons of demolishing the Administration Building early. Mr. McChesney observed that once it is vacated, the building will become a dark, ugly building that obstructs access to the waterfront. If it is demolished earlier rather than later, it would become bare space that would later be used as a staging area for the North Portwalk and Seawall Project.
Steve Quarterman, Landau Associates, announced that the State Environmental Policy Act (SEPA) review process is finished. The checklist was completed by the Port and a determination was issued. About a year ago, the Joint Aquatics Resources Permit Application (JARPA) was submitted to the United States Army Corps of Engineers. At the end of June, the Corps and National Ocean and Atmospheric Administration (NOAA) Fisheries came out with a Salish Sea Programmatic Biological Opinion, which is a tool for the Section 7 Endangered Species Act (ESA) consultation. Once that was approved the Corps advised that the Port is potentially eligible for coverage under the biological opinion. Part of that process involves demonstrating the project meets project design criteria (PDCs) using that conservation calculator. The calculator is a tool that allows them to develop credits and debits based on various types of project elements. In the Port’s case, the project includes shoreline modifications and repair and replacement of existing structures, so the calculator accounts for removal of the existing piles, creosote in both the piles and bulkhead, and removal and replacement of the bulkhead and the overwater structure (Portwalk). In addition, the Port also gets some credits through the riparian zone by planting native plants in the planter strips in the parking lots.
Mr. Quarterman explained that, using the calculator, he came up with four discount service acre credits or debits needed to compensate for the project, and the Port has the option of purchasing bank credits from the Port of Everett’s Blue Heron Slough Mitigation Bank. There are also opportunities to do things on site, but mitigation banks allow applicants to simply pay a fee to purchase conservation credits without having to incur the added costs associated with developing, implementing and monitoring their own projects. As this appears to be the direction the Port would like to go, he is working with CG Engineering to demonstrate how the project meets the PDCs, such as how stormwater will be treated.
Mr. Quarterman summarized that, at this point, they are in a waiting status with the Corps. With the biological opinion, review and approval is supposed to be more streamlined. The biological opinion states that the Corps endeavors to provide a response within 30 days of receiving the application, but that does not appear to be the reality. The calculator was developed based on the guidance document, which is fairly broad. There is an opportunity for the agencies to review it and make sure they are on the same page with the results and concur on the final answer before any mitigation fees or credits are purchased or money changes hands.
Mr. McChesney asked Mr. Quarterman to share more about the permit process, which started with the JARPA submittal. Again, Mr. Quarterman advised that the biological opinion should streamline the review and consultation process. The agencies will have an opportunity to review the information that was used to populate the calculator, and there may be some back and forth in terms of clarifying why certain assumptions were made. Mr. Baker said that, at a recent class he attended, he learned that a Marine Construction Company submitted applications for two projects and have received one back. The calculator that was sent back was vastly different from what was submitted. He cautioned that they will need to be very careful when reviewing what comes back.
Mr. McChesney asked if it would be fair to estimate that the JARPA process might be completed sometime in 2023. Mr. Quarterman said early 2023 might be a bit optimistic. Assuming they can get information to the Corps in December, it will likely be 90 to 120 days before they receive a response back on the calculator. Best case scenario would be having a permit in hand by mid-2023. Mr. McChesney asked how this would track with the Shoreline Permit. He also asked if, in addition to the JARPA mitigation requirement, the City might impose an additional mitigation requirement as a result of the Shoreline Permit. Mr. Quarterman said he doesn’t anticipate an additional mitigation requirement from the City, as the Shoreline Permit application referenced a lot of information regarding the JARPA and biological assessment the Port prepared at the onset of the project. In the pre-application meeting, the City requested verification of how the ESA consultation would be processed. He indicated that a biological assessment had been prepared, and the City wanted to know if it would be processed under a formal or informal consultation, which relates to the Salish Sea Programmatic Biological Opinion. In general, cities typically take about 120 days to review Shoreline Permit applications once they are completed.
Mr. McChesney asked if the timing of the two permits would coincide with each other. Mr. Titus said the Shoreline Permit application would be submitted in conjunction with Architectural Design Board review, which can’t move forward until the parking lot has been designed. Mr. McChesney asked if he anticipates a time lag between completion of the JARPA and Shoreline Permit processes, and Mr. Quarterman answered no. Mr. McChesney summarized that if the Shoreline and JARPA Permits are received by June 2023, they could move forward with final design and be ready to start construction sometime in 2024. Mr. Quarterman responded that, at this point, it is hard to know if that timeline is realistic because the Corps is not required to issue a permit within a specific timeframe. Mr. Titus commented that the JARPA and Shoreline Permits will continue to move forward, but they will hold off on the Building Permit application until they have a better idea of when the Port wants to start construction. They don’t want to end up with a Building Permit that expires before the other two permits are even issued.
2023 PRELIMINARY BUDGET
Ms. Drennan referred to the 2023 Preliminary Budget that was attached to the Staff report and advised that the Commission reviewed and discussed the budget baseline conditions at their August 8th meeting. They reviewed and discussed the Property Tax Levy and the Economic Development and Tourism expense budgets at their August 29th meeting. The proposed 2023 Preliminary Budget includes the Operating Budget (marina, rental properties, overhead), the Capital Budget, the Projected Cash Flow Schedule, and the proposed rates for moorage, dry storage and marina operations. The Finance Committee met on September 29th to discuss the budget, and their recommended changes were incorporated into the attached documents.
Ms. Drennan advised that this is the first time the 2023 Preliminary Budget has been presented to the Commission and public, and the documents have been available on the Port’s website since September 30th. After this workshop, the Commission may accept public comment about the budget. A public hearing will be held on November 1st, and updated budget packets will be available on the website no later than October 28th. The final budget is scheduled for approval on November 14th and due to the County on November 30th. She reviewed the proposed budget, noting that Pages 1 through 4 describe the Port of Edmonds and the budget process and schedule. The graphs on Page 5 show the revenues and expenses by cost center, Pages 6 and 7 describe the documents that are enclosed in the budget, and Page 8 provides a summary of all the information contained in the budget. The preliminary budget documents start on Page 9. She noted that the Marina, Rental Property and Overhead Budgets all show 2018 actual, 2019 actual, 2020, actual, 2021 actual, 2022 projection and 2023 budget. She reviewed the proposed budget, specifically highlighting the following:
This budget includes permanent water moorage, dry storage, electricity to tenants, environmental fees, fuel and oil products, guest moorage, boatyard and launcher.
• Environmental (Note M2). Staff is proposing to increase environmental fees by the Consumer Price Index (CPI) + 1%. These fees haven’t been increased for quite some time, yet the costs of complying with the Boatyard Permit, monthly testing and reporting, and properly disposing of hazardous waste continues to increase.
• Fuel Sales (Note M4). Although they know approximate numbers as far as gallons sold, this line item is primarily based on the cost of fuel. Because the cost of fuel is so volatile, it is difficult to budget. She tries to make sure there is a difference of about 20% between revenues and the cost of fuel. Commissioner Preston asked what percentage of the total gallons of diesel sold could be attributed to Puget Sound Express (PSE). Ms. Drennan said she doesn’t have an exact number, but it is likely around 40%.
• Guest Moorage Revenue (Note M7). The Port uses a seasonal guest moorage rate structure, and staff is proposing to increase the peak-season rate to $1.85 per foot and the off-season rate to $1.75 per foot. The seasonal rate structure matches the market.
• Permanent Moorage (Note M8). Presented is a rate increase of CPI + 1%, with a 2% vacancy. The CPI is 10.1%, which equates to an increase of between $24 to $128 per slip per month, depending on the size of slip. The moorage rates are attached on Pages 36 and 37. The CPI used by the Port is the “CPI All Items for the Seattle/Tacoma/Bellevue Area for All Urban Consumers.”
• Dry Storage Revenue (Note M10). Presented is a rate increase of CPI + 1%, with an 8% vacancy. This will be a bit of a stretch for staff, but they are optimistic it can be reached. The average increase will be about $36 per space per month. Fishing seasons greatly affect Dry Storage occupancy and those rates are also listed on Page 38.
• Fuel and Oil Expenses (Note M18). About 80% of the budgeted revenues will be cost of fuel and the credit card fee of approximately 3%.
• Business Taxes (Note M22). This item is based on the current year’s projected numbers + 11%. When the Port’s businesses (Dry Storage, Launcher, Workyard, Guest Moorage, etc.) do better the Business and Occupation (B&O) taxes increase.
• Employee Benefits (Note M25). This comment will also apply to the Rental Property and Overhead Budgets. Benefit costs include an increase from 10.25% to 10.39% in the Public Employees Retirement System (PERS) contribution and an increase from 9.6% to 11% for medical insurance premiums. There are also changes in medical premiums due to changes in staff/dependent coverage status.
• Insurance (Note M27). Insurance premiums run from September to August. There was a 19% increase in 2022 due to a combination of increased building material costs and increased revenues. The budget estimates a 20% increase for the premium from September 2023 to August 2024.
• Payroll Taxes (Note M32). The Port won’t know what the payroll taxes will be until January 2023. For budgeting purposes, she estimated that Labor and Industries (L&I) and Unemployment rates would increase by 10% over 2022 rates.
• Repair and Maintenance (Note M35). This includes activities that require the Port to hire a contractor or professional to do the work. Many of the expenses recur every year, and the large expenses have been specifically called out. The main expense will be the electrical feeders between the esplanade and docks on the south end. Commissioner Orvis questioned whether $75,000 would be adequate for the project. Mr. McChesney responded that the feeders in the north marina are okay. He anticipates that the proposed budget will cover the cost of the six feeders that are in need of repair.
• Salaries and Wages (Note M36). The budget includes an increase of 10.1% (CPI), and merit increases per policy. In addition, one part-time security position was changed to full-time, resulting in an increase of $20,000. Through July 31, 2021, salaries and wages were reported and recorded as Marina (63%, an increase of 1% from 2020), Properties (9%, an increase of 1% from 2020), Overhead (27%, a decrease of 2% from 2020) and Capital Projects (1%). These allocations are consistent through all of the cost centers. Commissioner Grant asked if all salaries and wages would be increased by CPI, and Mr. McChesney explained that it has been the Port’s policy to adjust all salaries and wages every year by CPI. The merit component is subject to annual performance review.
• Property Tax Carry (Note M40). There is a $25,000 allocation to the public launch to cover launcher expenses that exceed revenues. Prior to 2022, the allocation was $50,000.
• Overhead Allocation (Note M41). About 66% of the overhead is allocated to the marina. Overhead is something that cannot be directly attributed to one cost center.
This budget includes Harbor Square Property, Anthony’s Restaurant, The Landing, Edmonds Yacht Club, Edmonds Yacht Sales and POE2 LLC. In 2020, the Port had to change their lease accounting to comply with Government Accounting Standards Board (GASB) 87, which effectively treats leases over one year as a financing situation. Prior to GASB 87, the Port could record all of its revenue as lease revenue, and now it must be broken up into lease revenue and interest revenue.
• Harbor Square Lease Revenue (Note P1). She uses a program to calculate lease revenue and interest revenue as required by GASB 87. To compare apples to apples, annual rent for the Harbor Square Properties will be about $2 million, which is broken out in the budget to about $319,000 for interest and $1,708,000 for lease revenue.
• West Side Lease Revenue (Note P3). The same program was used to calculate lease revenue and interest revenue for these leases per GASB 87. The interest for all of the properties was about $196,000 and the lease revenue was about $318,000. Commissioner Grant recalled that the Port mitigated rent for some properties during the pandemic. He asked if that is illustrated in the proposed budget. Mr. Drennan answered no, because that revenue was recorded at the time it was earned. They earned the revenue during the pandemic, and their paying it back is actually a balance sheet transaction. She can provide a status report of these leases in her 3rd Quarter Financial Report.
• Repairs and Maintenance (Note P21). This item includes the Building 3 atrium windows. Per the Generally Accepted Accounting Principles, this project cost could be capitalized if it increases the asset life, but if it is an asset in poor condition that you are trying to return to service level, it must be expensed. In this case, it is an asset in poor condition.
• Election Costs (Note O10). Election costs occur every other year. There are two positions up for election in 2023. Typically, they only have election costs for the general election, but in 2021 they had to have a primary election. The Commissioners asked that the number for 2023 be adjusted to assume there will be both primary and general election costs.
• Commissioner Salaries and Wages (Note O12). The State Legislature determines increases for Commissioner Salaries and Wages, and the last increase was in July 2018. The next increase is scheduled for January 2024. Commissioner Grant commented that the Commission can set its own salaries, but they can’t enjoy them until after the next election.
• Economic Development and Tourism (Note O15). The Commission discussed this budget at an earlier meeting. In a subsequent discussion with the Executive Director, the $10,000 contingency was removed. This change won’t prohibit the Commission from reallocating funding as needed.
• Office Expense (Note O23). There are a few large purchases planned for 2023, one being the IT security software ($46,000). Another is the replacement of 12 workstations that have exceeded their 5-year life ($22,000). Commissioner Harris asked if there are any plans to upgrade marina management software, etc. Mr. Baker answered not at this time.
• Professional Services (Note O25). This budget also includes funding for IT security consultants. Port staff needs some help with a Payment Card Industry (PCI) Standards Compliance Survey, which is mandated by Visa and Mastercard
• Depreciation (Note O34). There hasn’t been a lot of depreciation, if anything, on the Administration Building, but the new building will show a jump in depreciation. From an insurance standpoint, Commissioner Grant asked if there is any increased construction liability the Port needs to protect itself for. Ms. Drennan answered that was done through the contract.
• Other Post-Employment Benefits and Pension (Note O35). She can’t calculate this number until year end. Sometimes it is a negative expense. For example, it was a $900,000 negative expense in 2021.
• Property Taxes (Note O36). The budget includes a 1% increase in property taxes as allowed by law. Total revenue from property taxes will be approximately $616,000. Most of the property tax revenue will be allocated towards the North Portwalk and Seawall Project.
Ms. Drennan referred to Pages 28 and 29, which combine the revenues and expenses into one budget. The proposed net income, with property taxes, would be approximately $2.8 million. Pages 30 and 31 show the 2018 to 2021 actual, 2022 projected and 2023 budget. Typically, accountants budget conservatively, meaning they slightly under budget revenue and slightly overbudget expenses. The intent is that when you get to the end of the year, you may have more money than projected, but you don’t have less.
Ms. Drennan referred to Page 32, which shows how the revenue and expense trends mirror each other. She also referred to the Capital Budget on Page 33, noting that it includes the following projects for 2023:
• CAT Forklift Replacement ($60,000)
• New Administration Building ($5,000,000)
• Furniture, Fixtures and Equipment for New Building ($250,000)
• North Seawall and Portwalk Rebuild Permitting and Engineering Costs ($300,000)
• I Dock Lighting ($25,000)
• Workyard Above-Ground Treatment System ($150,000)
Mr. McChesney explained that because the Port is spending a lot of money on the new Administration/Maintenance Building and the North Portwalk and Seawall Project, they have tried to postpone as many capital projects as possible to reserve cash. For example, they have made a conscious decision not to replace any vehicles this year.
Ms. Drennan pointed out that the workyard above-ground treatment system is a squishy number. Mr. Baker added that, at this time, they are working through the design and making decisions on what route they want to go. Mr. McChesney commented that the Port may not be mandated to do this project until 2024. Ms. Drennan emphasized that the Commission will only be asked to approve the 2023 Capital Budget, and items in the subsequent years were included as placeholders and can be moved when they go through the next year’s budget cycle.
Next, Ms. Drennan reviewed the Projected Cash Flow Schedule on Page 34. She summarized that, by the year 2025, the Capital Replacement Reserve will be in the red or negative. She explained there are three sources for funding capital projects (reserves, bonds and grants), and the spreadsheet shows reserves only. The mix of the three funding sources for the upcoming North Portwalk and Seawall Project is a policy decision to be made at a later date.
Ms. Drennan noted that information regarding the CPI was provided on Page 35, and Pages 36, 37 and 38 show the moorage and dry storage rates at the proposed increase. Commissioner Johnston asked how many Dry Storage tenants remain year-round, and Mr. Baker estimated about 75%. Ms. Drennan briefly reviewed the results of a moorage rate survey (Page 39), comparing the Port’s rate increase in 2022 to other marinas. For 2023, Elliott Bay and Shilshole have both indicated they would likely raise rates by at least CPI. She summarized that the Port’s rates are typically higher than Cap Sante, Everett, LaConner, and typically lower than or equal to Elliott Bay, Shilshole and Anacortes.
Ms. Drennan advised that the proposed 2023 Boatyard and Travelift fees are outlined on Page 40. She shared the results of a survey (Pages 45, 46 and 47) comparing the Port’s Boatyard and Travelift fees to other local facilities. Based on the market and cost increases for the Port, staff is proposing that nearly all of the rates be increased by CPI. Other fee increases are outlined on Pages 43 and 44.
Ms. Drennan provided a chart (Page 48) outlining the 2023 Pay Scale at a 10.1% increase. It also shows the number of staff at each level. The Economic Development and Tourism Expense Budget is outlined on Page 49 and the Tax Levy History on Page 50.
Commissioner Preston noted that the Port has used the same camera technology for 10 years. He proposed that the existing camera be replaced with a live camera and that a new live camera be added at the marsh. He suggested that the marsh camera could be attached to the new Administrative/Maintenance Building. Ms. Drennan pointed out that the Port doesn’t currently have enough bandwidth to support a live camera, so this would be an added expense above the cost of the cameras, themselves. She advised that the cameras would have to be set up on an entirely different internet system than the Port operations. Commissioner Orvis voiced support for exploring the option further.
Commissioner Grant observed that dark fiber is currently available. He suggested they should put together a financial feasibility study for providing a direct connection to the new building. They would need to obtain information from the Washington State Department of Transportation to pinpoint where the fiber cable has been placed. When doing things by the railroad tracks, things have to be multiplied by several percentages strictly because of the vibration and interference from the trains. Not only is dark fiber the fastest internet possible, the Port could benefit from a security standpoint, as well. The Commissioners agreed that the option should be studied further.
Commissioner Grant voiced concern that most of the Port tenants won’t read through all of the budget documents, as they will be primarily concerned about how much their rates will increase. He suggested it would behoove the Port to provide an explanation for the proposed rate increase that clearly articulates the Port’s position. This information could be posted on the Port’s website. He said he shared some ideas with Mr. McChesney, and Mr. McChesney forwarded them to the Finance Committee for consideration. Ms. Williams said staff also attaches a note to the first statement of the year that explains why the rates were increased.
Ms. Drennan advised that a public hearing on the Preliminary 2023 Budget is scheduled for November 1st. It will be advertised in the Port Newsletter, as well as in the local newspapers. The budget is available on the Port’s website for the public to review. Ms. Williams encouraged Commissioners to invite people who have questions to attend the public hearing and provide input.
EXECUTIVE DIRECTOR’S REPORT
Mr. McChesney advised that they are still waiting for the necessary parts to address the electrical problem, and he has been working with Puget Sound Express to address needed repairs on J Dock. He reported that the catwalk on the south side of the Anthony’s Building has been noticed to be in poor condition. Staff met with a representative from Anthony’s last week who agreed to take care of the situation. Their first inclination is to remove it and patch it in. The Port agreed to consider that option, but suggested it may take more from an architectural point of view to remove the catwalk and put something else there. The catwalk was previously used for window washing and is no longer needed.
Mr. McChesney advised that work continues on the new Administration/Maintenance Building, and it is anticipated the foundation slab will be poured on October 31st.
COMMISSIONER’S COMMENTS AND COMMITTEE REPORTS
Commissioner Preston announced that he would attend the October 25th Edmonds Yacht Club meeting, along with Ms. Williams and Mr. Baker, to provide an overview of the North Portwalk and Seawall Project.
Commissioner Grant said it was noted at the Edmonds City Roundtable that the Waterfront Study was delayed a month and rescheduled to October 24th. As Mr. McChesney would not be available to participate in the roundtable, they are seeking another Port representative.
Commissioner Grant announced that the City has released the Preliminary 2023 Budget and he is currently reviewing it. Mayor Nelson is proposing increases in a number of areas, and he anticipates the biggest controversy will be related to the Development Code review. The City has assigned a full-time staff person to work on the code rewrite, but he currently works for the City so there would be no outside consulting.
Commissioner Orvis said he spoke to the State Auditor earlier in the day. He brought up the fact that the Commission knows about the cash box handling on the fuel dock and has decided the risk is acceptable. Also, the auditor originally recommended that the Port hire an outside accountant to review Ms. Drennan’s work instead of Mr. McChesney. He advised that the Commission has reviewed the recommendation and considers that the risk is acceptable. He stressed that while they may see reports that are different than GASB reports, the Commission has worked to modify the reports so they make sense for the public to understand. He advised that the Commission follows Port finances closely and that the Executive Director reports far more than he has to based on the value of the projects he is allowed to sign. He concluded by pointing out that the Commissioners have a good reputation for knowing what is going on at their Port. The Auditor indicated she would work with Ms. Drennan to schedule an entrance conference, and both he and Commissioner Johnston plan to attend.
Commissioner Orvis reported that he attended an Economic Alliance of Snohomish County (EASC) Coffee Chat on Homelessness. The keynote speaker was Greg Colburn, who has written a book and is a professor at the University of Washington. He learned that no one really understands what homelessness is. They have a rule that if you spend more than 30% of your income on housing, you are considered housing challenged. However, that will only work until you get to a certain pay grade. It really only effects people in the lower income brackets. People tend to think that crime and homelessness goes with poor cities, but the lowest homeless rates are in cities that are poverty stricken, and the high homeless rates are in places where population density has become a watch word and there is a lack of housing. He said it was reported that crime rates, drug addiction and homelessness all follow the same kind of lines, and surprisingly, they are not endemic to the poor cities.
Commissioner Johnston said he plans to attend the State Audit Entrance Conference within the next few weeks. In addition, he would attend the Small Ports Conference in Leavenworth next week.
Commissioner Preston reported that he attended the EASC’s Public Officials Meeting where questions were raised about what could be done to help with affordability in the area. He suggested they get rid of prevailing wages for public jobs and eliminate the sales tax on that. Representative Rick Larsen spoke at the event. There is a meeting tomorrow having to do with “seasoned people in the workforce.” People 62 to 70 have a lot of institutional knowledge and can bring a lot to the table because of their experience.
The Commission meeting was adjourned at 9:40 p.m.
Port Commission Secretary