10 Mar Commission Meeting Minutes 2-22-21
PORT COMMISSION OF THE PORT OF EDMONDS MINUTES OF REGULAR MEETING
(Via Zoom) February 22, 2021
David Preston, Vice President
Steve Johnston, Secretary
Angela Harris, President- Excused
Bob McChesney, Executive Director
Brandon Baker, Marina Manager
Tina Drennan, Finance Manager
Brittany Williams, Manager of Properties and Marketing
Bradford Cattle, Port Attorney
CALL TO ORDER
Vice President Preston called the meeting to order at 7:00 p.m.
PLEDGE OF ALLEGIANCE
All those in attendance participated in the Pledge of Allegiance to the American Flag.
COMMISSIONER ORVIS MOVED THAT THE CONSENT AGENDA BE APPROVED TO INCLUDE THE FOLLOWING ITEMS:
A. APPROVAL OF AGENDA
B. APPROVAL OF FEBRUARY 8, 2021 MEETING MINUTES, AS AMENDED
C. APPROVAL OF PAYMENTS IN THE AMOUNT OF $451,865.62
COMMISSIONER FAIRES SECONDED THE MOTION, WHICH CARRIED UNANIMOUSLY.
There were no written comments, and no one participating in the Zoom meeting indicated a desire to comment.
CONTINUATION OF RESOLUTION NO. 20-03 DECLARING LOCAL EMERGENCY AND DELEGATION OF AUTHORITY
Mr. McChesney advised that he hasn’t taken any action under the emergency authority. He suggested it may be time to think about ending the resolution, as it may no longer be necessary for continuing the business of the Port, as the COVID-19 pandemic starts to feel under control and things begin to return to normal, hopefully soon.
Port Attorney Cattle suggested that the resolution should remain in place until the next meeting. In the meantime, he would review the status of the Governor’s proclamations and provide further guidance. Mt. McChesney noted that the recommendation to adopt the resolution during the pandemic came from discussions by the Washington Public Port Association early in the pandemic when no one knew what the future would be. He agreed that the Commission should revisit the issue at the next meeting.
Commissioner Faires observed that the response of masks, social distance and other pandemic protocol has become second nature amongst Port staff. He congratulated the Executive Director and staff for their efforts.
PRELIMINARY 2020 ANNUAL REPORT
Ms. Drennan presented the Preliminary 2020 Annual Report, noting that all major transactions that staff is aware of have been recorded. She explained that, in the process of preparing the annual report in the Budgeting, Accounting and Reporting (BARS) format in the next couple of months, other transactions that need to be adjusted or recorded occasionally come up. If there are any changes, staff will notify the Commission when the 2020 Annual Report is presented.
Ms. Drennan advised that revenues have been trending upward to 2019, with a high of $10.4 million, dropping to $10 million in 2020. Expenses trended up to $7.3 million in 2018 and then dropped to $7.2 million in 2020. Net income trended up to $3.1 million in 2019 and dropped to $2.8 million in 2020. She suggested that the reduction in net income can primarily be attributed to closures and limited activity at Dry Storage due to the pandemic. Mr. McChesney observed that some of the reduction might also be attributed to the write down that came about as a result of the Harbor Square Building 3 Project.
Ms. Drennan said actual revenues were $38,000 greater than budget and expenses were $428,000 less than budget. Gross profit for the 12-month period ending December 31, 2020 was $8.2 million or $152,000 less than budget. Net income for the same period was $2.8 million. She highlighted the following:
Marina Operations Revenue
• The Launcher revenue was $111,000 or $13,000 greater than budget.
• Net Guest Moorage revenue was $207,000 or $30,000 greater than budget.
• Permanent Moorage revenue was $3,778,000 or $51,000 greater than budget.
• Passenger Fees revenue were $9,000 or about $24,000 less than budget.
• Dry Storage revenue was $734,000 or $15,000 less than budget.
• Parking revenue was $92,000 or $11,000 less than budget.
• The Workyard revenue was $118,000 or $20,000 greater than budget.
• Late Fees were $27,000 or about $8,500 less than budget.
• Permanent Moorage financial occupancy was 97%, which was equal to budget. Dry Storage financially occupancy was 77% compared to a budgeted amount of 89% because, starting in April, tenants were charged at the pay-per-move rate because the Port was closed due to the pandemic. Also, tenants in Dry Storage were charged the off-peak rate due to limited hours. Commissioner Preston asked if the actual occupancy per space remained the same, and Mr. Baker answered affirmatively.
Rental Properties Revenue Actual to Budget
• Total Rental Property revenue was $2.5 million or about $200,000 less than budget. This is due to construction credits given to Harbor Square Building 3 tenants while their spaces were disrupted, holding some vacant space open during construction in case the Building 3 tenants wanted to temporarily relocated, lack of revenue from the monthly restaurant and commuter parking, and a reduction in Anthony’s percentage rent from September 2019 to September 2020.
Operating Expenses Actual to Budget
• Operating expenses before depreciation for the 12-month period were about $4.6 million, which was approximately $497,000 or 10% less than budget.
• GASB 68 pension expenses were not known prior the actual year-end calculation. The expense represents the Port’s portion of what isn’t already funded. In this case, the Port’s share went down, so the Port’s expense was actually negative in 2020.
• OPEB expenses are the direct and indirect subsidy to retirees in the medical plan. This expense is also not budgeted because it depends on the State’s activity.
• Repair and Maintenance expenses were $250,000 or about $163,000 less than budget. The budget included $75,000 for gutter repairs on docks, $50,000 for Harbor Square road and parking lot improvements, and $35,000 for Port parking lot repairs. These repairs were not completed in 2020 due to the pandemic and construction at Harbor Square Building 3.
• Supplies were $169,000 or about $206,000 less than budget.
• Depreciation was $1.2 million or about $300,000 less than budget.
• There was a loss on fixed assets, which is primarily the amount of Harbor Square Building 3 that was written off when the Port capitalized the improvements.
• There was a change in fair market value of investments of $267,000.
• Net income for the 12-months ending December 31, 2020 was about $2.8 million, which was about $465,000 greater than budget. The primary reasons for this difference are: gross profit was $152,000 less than budget, operating expenses were about $797,000 less than budget, and net other expenses (income) were about $180,000 less than budget.
Marina Actual to Budget
Ms. Drennan advised that marina revenues trended upwards to 2019, with a high of $6.7 million and dropping to $6.5 million in 2020. Expenses trended up to $5.1 million in 2019 and dropped to $4.5 million in 2020. Net income is trending upwards, as well.
• Operating revenues were about $6.5 million, which was approximately $38,000 less than budget.
• Operating expenses before depreciation and overhead were $2.6 million or $207,000 less than budget.
• Net income was about $2.1 million or $905,000 greater than budget.
Rental Property Actual to Budget
Ms. Drennan advised that revenues are generally trending upwards to 2019, with a high of $2.9 million, but dropped to $2.5 million in 2020. Expenses don’t appear to have a trend. Net income for Rental Properties trended up to $1.5 million in 2019, dropping to $748,000 in 2020. The primary cause of the decrease was lower income property income combined with a loss on disposal fixed assets.
• Operating revenue were about $2.5 million or $214,000 less than budget.
• Operating expenses before depreciation and overhead were about $536,000 or about $81,000 less than budget.
• Net income was about $748,000 or $439,000 less than budget.
Commissioner Preston asked if the net income loss for rental properties would be recovered over the next few years as space in Harbor Square Building 3 is leased out. Mr. McChesney advised that there was a one-time write down of about $450,000, and they expect to recover some of the rental income as the vacant spaces at Harbor Square are leased.
Commissioner Faires asked if Ms. Drennan could provide an educated guess as to the 2020 cash flow. Ms. Drennan answered that total cash and investments increased, but she doesn’t have a number yet.
Statement of Net Position (Balance Sheet)
Ms. Drennan reviewed that GASB 83 requires the recognition for certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources (revenue) or outflows of resources (expenses) based on the payment provisions of the contract. Under newly-implemented GASB 87, the lessee is required to recognize a lease liability and an intangible right-to-use asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources. The Statement of Net Position now shows: Current Lease Receivable for lease payments due within one year, Non-Current Lease Receivable for lease payments due more than one year from the date of the financial statement, and a Deferred Lease Inflow for revenue that will be recognized in a future period.
Capital Budget to Actual
Ms. Drennan reported that the Port’s 2020 Capital Budget was $1,544,000 and actual purchases were approximately $1.6 million. Details are on Page 16 of the Report and projects included: replacement of three HVAC units in the Administration Building, work on the Plaza Trellis that will be completed in 2021, replacement of a server, purchase of a taller scissor lift, replacement of a trailer air compressor, replacement of the Travelift ramp which is also used by Puget Sound Express, replacement of the Dry Storage Office, and major repairs at Harbor Square Building 3.
Ms. Drennan reviewed that Investing Summary, highlighting the following:
• The Port had 26 long-term investments at the end of 2020 and is moving from $500,000 ladder rungs to $1 million ladder rungs.
• The details of the Port’s bond maturity and bonds purchased were attached to the report.
• The Capital Replacement Reserve is currently at $13.7 million, with part of the reserve in cash and part invested long term.
• The Environmental Reserve is approximately $1 million, with part in cash and part invested long term.
• As bonds are being called and maturing in 2021, the Port will first retain sufficient additional cash to pay for a new Administration Building. Once that goal is reached, the Port will invest so that bonds come due approximately when funds will be needed for the North Seawall and Portwalk Project.
NORTH WING WALL ANODE REPLACEMENT 2021-361 CONTRACT AWARD
Mr. McChesney recalled that the Commission has had several discussions over the past year about the Mid Marina Breakwater. A condition survey was done, indicating that if certain repairs were done, the Port could extend its useful life. Specifically, the condition survey revealed that some of the cathodic protection was in failure mode and needed to be repaired as soon as possible in order to slow down the aggressive corrosion that occurs without cathodic protection. He reported that Norton Corrosion reviewed the issue and submitted a cost estimate of over $50,000 to do the necessary work, but the cost was significantly higher than expected. Instead, the Port decided to purchase the 10 anodes, which are proprietary to Norton Corrosion, at a cost of $11,239.50 plus tax, and then bid out the actual installation and repair separately.
Mr. McChesney announced that, following the required bid process, the apparent low bidder for installing the anodes that were purchased separately was Associated Underwater Services, Inc. (AUS) for $7,400 plus tax of $769, for a total of $8,169.60. No action is required by the Commission, but he wanted to report it for the record. Staff plans to move the project forward in the near future. Other routine maintenance on the Mid Marina Breakwater will also carry forward as needed.
Commissioner Faires asked if the anodes on the north wing wall are passive or active with electronics, and Mr. McChesney answered they are active with electronics.
Commissioner Orvis asked staff to explain the discrepancy in the bids that were received. Mr. McChesney responded that staff couldn’t identify any omissions or errors in the bid documents and AUS is happy with their bid.
EXECUTIVE DIRECTOR’S REPORT
Mr. McChesney advised that he attended the City of Edmonds Climate Action Plan meeting via zoom. Everyone recognizes there is a serious problem and they are making progress. However, there is a long way to go to meet the targets of 2050. In order to achieve the goals, it is recommended that new buildings are designed for LEED Certification. The Port has discussed this option with the proposed new Administration Building, but it will drive up the cost of the project. Design and permitting is estimated to cost $120,000, and some of that can be directly attributed to LEED Certification. A contract will be presented to the Commissioners for review and approval on March 8th. He announced that staff would attend a pre-application meeting with the Edmonds Planning Department on February 25th to review the preliminary plans and solicit initial feedback from all of the relevant City departments.
Mr. McChesney announced that the Port’s Maintenance Crew constructed a new trash enclosure and recycling station on the north side of the Edmonds Yacht Club Building. The project went together easily and turned out nice. The plan is to construct another one further north near Arnies Restaurant. Staff’s goal is to move forward with the incidental, easy-to-do projects to improve the public access, and the work will dovetail nicely with the rebuild of the North Seawall and Portwalk Project. While the enclosures might need to be demolished as part of the rebuild, they might also be retained or replicated elsewhere. He commended the Maintenance Crew for their work.
COMMISSIONER’S COMMENTS AND COMMITTEE REPORTS
Commissioner Faires reported that he attended the Edmonds Economic Development Commission (EEDC) meeting on February 17th. They reported on and discussed the six priorities that were identified a few months ago: data collection and analysis, neighborhood districts and business zones, Edmonds business booster portal, waterfront center opportunities, parking and shuttle services, and communications and information. Firdale Village came up in their discussions as being an example of a zone in the City that has been permitted for redevelopment, but the owner hasn’t been particularly interested to this point. There was discussion that this may change in the next year or so. He also reviewed the Port’s activity relative to the North Seawall and Portwalk Project and reiterated that the entire project timeline will depend on the timeliness of the State and Federal permits. He mentioned that a new Administration Building could be constructed in the location that has already been permitted across from Anthony’s Restaurant and agreed to provide more information about the potential project and its financial implications at a later time. He also discussed that the oyster shell canisters the Port uses in their outfall drains have been quite effective from an environmental standpoint, but they don’t know the extent to which they may be applicable to other locations.
Commissioner Orvis reviewed the Washington Public Port Association’s (WPPAs) Legislative Report, which included the following items of interest:
• Senator King unveiled an 8-year transportation proposal, which is a $10 billion package. About $5 billion would go towards highway maintenance and preservation and $2.3 billion would go towards the conversion of fish culverts as ordered by the court. There are five mega projects, including the Columbia River Project, West Seattle Bridge and Hood River Bridge.
• Broadband is still being discussed from two different perspectives. The WPPA got an amendment in the senate bill to bring ports back into the bill for authority to do retail. There is a lot of talk about how important broadband is, but things don’t happen as fast as you might expect.
• The House Appropriations Committee did not adopt the provision that would allow ports to go to $500,000 in public works contracts.
• A bill would prohibit container ports from going to environmental and zero emission infrastructure if it includes automation. The longshoreman union has gotten feather bedding down to a fine art.
• Several bills related to carbon are on the table. The environmentalists really support the low-carbon environmental standard, but it is dependent upon whether or not a transportation bill is approved. A provision is coming forward to increase the gas tax. The proposed carbon tax is favored by the environmental justice people but opposed by a lot of others because it would do nothing for infrastructure or to provide revenue to the State. Proponents are saying that using the revenue to pay off bonds, which the State could use for anything, doesn’t contribute to the additional debt of the state.
• The new Environmental Justice Task Force has a long list of things they are working on.
Commissioner Orvis observed that the Economic Alliance of Snohomish County’s (EASCs) Virtual Coffee Chats are frequently very interesting, and he encouraged Commissioners to participate.
Commissioner Johnston reported that he attended the recent EASC Virtual Coffee Chat on mental health, which outlined ways to identify people who are in trouble (depressed, financially, or otherwise) and provided ways to help care for them. The Port is doing a lot of things right to stay on top of these issues, but many businesses are struggling with the mental health aspects of the pandemic.
Commissioner Johnston announced that the next EASC Virtual Coffee Chat will be on February 23rd, and the discussion will focus on state of the Public Utility District. He also announced he would participate in the EASC’s Economic Forecast event on February 25th, as well as the upcoming WPPA Marina Committee meeting.
Commissioner Johnston advised that the Orca Task Force lapsed at the end of 2020. However, there is good news that the Southern Resident Killer Whales continue to expand, as another baby was born last Wednesday. They are now up to 75 whales, and they are all healthy. Commissioner Orvis noted that removal of the Skagit River Dams is once again a topic of discussion by the legislature.
Council Member Olsen noted that bike lanes are a current topic of discussion at the City Council. She reviewed that when the City went through a high-engagement public process last August, many citizens expressed concern about the loss of on-street parking. After further analysis, it was clear that the City could create bike lanes with just half of the parking spaces being impacted. However, when the project was presented at a recent public meeting, it included an option that would eliminate all of the parking. Not surprisingly, the City has been bombarded with emails because that would clearly be unacceptable. She expressed her belief that the City Council wouldn’t have approved the project if that was going to be the potential outcome. She said she feels bad that the citizens have experienced so much stress, some of which was caused by the City.
Council Member Olsen commented that electric bikes haven’t become as popular in Edmonds as they have in other locations. In addition to uncertain weather, another might be because there are too many hills and you have to be extraordinarily fit. Electric bikes can assist on the hills, and you still retain the fitness benefit of pedaling when you can. She suggested this is something the City should look at more, and perhaps the Port could even offer them as a recreational opportunity for boaters who are visiting the marina.
Commissioner Faires advised that the City Council recently adopted development code amendment that allows hotels on the waterfront. Council Member Olsen added that, because of the setbacks required by the Shoreline Master Program and the City’s height restrictions, the possibility of a hotel project penciling out for profitability is non-existent. Rather than prompting new construction, the City’s expectation is that perhaps some of the larger grandfathered buildings might get converted to hotel uses.
Commissioner Preston reported that he attended a virtual Downtown Edmonds Merchant Association (DEMA) meeting last week, where it was noted that the parklets are looking similar and presenting a nice theme. There is permitting for 20 parklets, and the permits are good for one year.
Commissioner Preston reported that the Communication Committee met last week and asked Ms. Williams to comment briefly on the website update. Ms. Williams advised that an internal committee (Chris Osterman, Brandon Baker, and Brittany Williams) is working to develop the initial plans for updating the Port’s website, and a presentation was made to the Communication Committee (Commissioners Harris and Preston) for feedback. The intent is to utilize the website as a way to further brand the marina. The Port serves a lot of different groups of people, and the website needs to be easier for each of those consumers to use. They have reviewed examples and talked with a website builder about getting bids.
Ms. Williams said the Communication Committee also talked with staff about plans for the spring mailer. It was felt that the timing was good for using the mailer to introduce plans for public access and other major projects. The intent is for it to go out in May or early June at the latest. They also talked about the idea of rebranding the Port a bit to better market to consumers, and staff’s goal is to discuss ideas with the Commission at their upcoming retreat.
Commissioner Preston reported that he attended the State Representatives Town Hall Meeting last week, where numerous items were covered. Infrastructure on roads was one item that was discussed, but no specifics were provided. Representative Jayapal was a guest speaker, and there was a discussion about rent and landlord assistance. It was reported that vaccine distribution was improving in Snohomish County, and was at about 11% last week.
Commissioner Preston reported that the EASC’s Future of Newspapers Event was very good. They talked about investigative journalism and that print and digital is in competition and that people who are over 65 often prefer the printed version. Josh and Phil O’Conner from THE EVERETT HERALD talked about how newspapers could help the divide. He questioned whether this was true because, to him, newspapers have helped to drive the divide. The more bickering, the more papers are sold. However, he agreed it could be accomplished if that is the goal. It was noted that 25% of the newspapers in the United States are gone and will never come back. Senator Cantwell was the guest speaker and commented that 200 counties in the United States have no newspaper.
Commissioner Preston also announced his plan to attend the EASC’s Virtual Coffee Chat on February 23rd, as well as the EASC’s Forecast Event on February 25th.
Commissioner Preston announced that the Commission would recess into an Executive Session at 7:57 p.m. He advised that the Executive Session would conclude at about 8:20 p.m. Port Attorney Cattle advised that the purpose of the Executive Session was to discuss a potential litigation matter. He said the regular meeting would be reconvened and subsequently adjourned at the conclusion of the Executive Session. No announcements would be made and no action would be taken based upon the matter that was discussed in the Executive Session.
The Commission meeting was adjourned at 8:15 p.m.
Port Commission Secretary