01 Sep Commission Meeting Minutes 8-10-20
PORT COMMISSION OF THE PORT OF EDMONDS MINUTES OF SPECIAL MEETING
(Via Zoom) August 10, 2020
Jim Orvis, President
Angela Harris, Vice President
David Preston, Secretary
Bob McChesney, Executive Director
Brandon Baker, Marina Manager
Tina Drennan, Finance Manager
Brittany Williams, Manager of Properties and Marketing
Renae Ebel, Administrative Assistant
Bradford Cattle, Port Attorney
CALL TO ORDER
President Orvis called the meeting to order at 7:00 p.m.
PLEDGE OF ALLEGIANCE
All those in attendance participated in the Pledge of Allegiance to the American Flag.
COMMISSIONER PRESTON MOVED THAT THE CONSENT AGENDA BE APPROVED TO INCLUDE THE FOLLOWING ITEMS:
A. APPROVAL OF AGENDA
B. APPROVAL OF JULY 27, 2020 MEETING MINUTES
C. APPROVAL OF PAYMENTS IN THE AMOUNT OF $967,701.58
COMMISSIONER JOHNSTON SECONDED THE MOTION, WHICH CARRIED UNANIMOUSLY.
Chris Ziobro, Edmonds, said he just bought a 16-foot boat for a good price and he is upset because it will cost him $40 to use the public launch at the marina. He felt it was unfair that the Port charges the same amount for all boats, regardless of size. He pointed out that small boat owners don’t have other options that allow them to self-launch. He asked the Port to consider a lower rate for small boats and asked why the launch rate is the same regardless of size. He suggested that the $40 charge discourages the owners of small boats from using the facility. Mr. McChesney responded that all of the Port’s rates will be reviewed as part of the budget process that is just getting underway. Commissioner Orvis commented that the proposed new rate schedule will be published following the Commission meeting, and the public is welcome to comment.
Commissioner Faires commented that only boats that are trailerable can use the public launch, which doesn’t include 40 to 50-foot boats. He reminded the Commission that the launch is a public amenity that is supported by Port funding. Mr. Ziobro observed that it isn’t really a public amenity if the majority of the public can’t afford to use it.
Commissioner Preston said he had his 15.5-foot boat launched the last two weekends. He chose to use the Edmonds marina because the Mukilteo boat ramp is not very conducive or safe and the Everett and Shilshole boat ramps are too far away. The Edmonds launch is more convenient. He said he adjusted the bunk board on his boat to reduce the rate.
Mr. Ziobro said he likes the Zoom meeting format, since it doesn’t require people to show up in person to listen and participate in the Commission meetings.
HARBOR SQUARE BUILDING NO. 3 STRUCTURAL AND EXTERIOR IMPROVEMENTS CONTRACT #2019-328 ACCEPT AS COMPLETE
Mr. McChesney announced that Harbor Square Building 3 Project is finished. He reviewed that, following a formal bidding process, the Commission directed staff to execute a contract with AM Exteriors, LLC on January 13th for $697,295.50 plus tax, and the budgeted amount was $750,000. Work began on the project on January 15th, and substantial completion was done by August 1st. Twelve change orders were approved by the Commission to address the discovery of additional rot, siding, beams and interior repairs. Staff worked with the contractor to mitigate parking inconveniences and traffic flow at Harbor Square during the project. The retainage amount of $51,218.92 will be held until state agencies have formally released the letters (affidavits of prevailing wage and lien releases, and other administrative and legal formalities) to the Port.
Mr. McChesney summarized that the total cost of the project was $1,024,378.09 plus sales tax of $106,535.32 for a total cost of $1,130,913.41. He recommended that the Commission approve the contract with AM Exteriors, LLC in the amount of $1,024,378.09 plus sales tax for the Harbor Square Building 3 Structural and Exterior Improvements Contract 2019-328 as complete.
Commissioner Johnston recalled that the Commission recently discussed that the total cost would be $1.3 million, but now it appears it will be quite a bit less. He asked if the amount identified by staff represents the final cost of the project, and Mr. McChesney answered affirmatively.
COMMISSIONER JOHNSTON MOVED THAT THE COMMISSION ACCEPT THE CONTRACT 2019-328 WITH AM EXTERIORS, LLC. IN THE AMOUNT OF $1,024,378.09 PLUS TAX FOR THE HARBOR SQUARE BUILDING 3 STRUCTURAL AND EXTERIOR IMPROVEMENTS AS COMPLETE. COMMISSIONER FAIRES SECONDED THE MOTION.
Mr. McChesney clarified that the project cost discussed pertains the AM Exteriors, LLC contract. However, at the last meeting, a portion of the contract ($39,960) was extracted and awarded to Sholten Roofing for the coping work.
THE MOTION CARRIED UNANIMOUSLY.
CONTINUATION OF RESOLUTION 20-03, DECLARING LOCAL EMERGENCY AND DELEGATION OF AUTHORITY
Mr. McChesney reported that there has been no action taken by the Executive Director under the special emergency authority to date.
Mr. Baker reported that Washington State boat sales data for June indicated an increase of 44% over 2019, and AMI’s Nationwide Occupancy Survey also reported that sales were over 2019 levels. This is positive news for the boating industry during a time of great uncertainty.
Mr. Baker reviewed that the Port implemented a variety of operational adjustments as a result of the COVID-19 pandemic:
• All Port operations ceased on March 28th. During the shutdown, guest moorage remained available and the Travelift was limited to one day per week, primarily for servicing Jacobsen’s Marine and Puget Sound Yacht Service.
• On May 17th, Phase I of reopening commenced, and the Port slowly reintroduced its typical offerings. The fuel dock operated with shortened public hours and limited operation days to include Friday through Sunday. Tenants with fuel cards were granted regular access during this time. The public launch system adopted a reservation-only policy that required customers to call ahead to schedule an appointment, and the Travelift schedule increased to three days per week.
• June 1st marked the reboot of the Port operations, and full operations were restored. However, the public launch reservation system was maintained.
• On July 1st, the reservation system was discontinued and V Dock was made available for guest moorage and overflow from dry storage. As a result of the pandemic, the Port was unable to hire a full seasonal workforce, so limited operating hours were continued for 2020.
• The Governor issued a mask mandate and the Port adopted “No Mask No Service” policy for high-touch-point areas to protect the community, staff and boaters.
Commissioner Faires asked how the pandemic has impacted the wait list. Mr. Baker responded that 133 people were on the list at the end of 2nd quarter 2019 compared to 233 at the end of 2nd quarter 2020.
Mr. Baker reported that there were 26 terminations during the 2nd quarter and 26 assignments. Staff saw reluctance among boaters to accept waitlist offers and sign up for moorage. There is a lot of uncertainty about whether people would be able to use their boats and what the season might look like. Of the 223 waitlist applications on file, 32% (72) are existing tenants who remain on the list for slip changes, upgrades, etc. About 68% (151) are non-tenants who wish to moor within the marina.
Mr. Baker advised that the number of boats in Guest Moorage was down by 18% compared to the same time period in 2019. The number of nights decreased from 968 to 761. The Port estimates that approximately 76 nights of guest moorage were lost due to cancelled group reservations.
Mr. Baker reported that insurance compliance for Dry Storage and Wet Moorage was 83%, and registration compliance was at 86%. These numbers are lower than last year. The Port operations window has always been a great opportunity to remind the boaters of the requirements, but the tenants haven’t visited the marina as often this year. Some people aren’t providing the documents electronically. Staff is working to improve the numbers.
Commissioner Faires asked if there is any indication that the total insurance rate is decreasing as a result of the pandemic. Mr. Baker said the way insurance is set up, the Port receives cancellation notices from insurance carriers, and they received 7 or 8 notices that coverage had lapsed or was cancelled for one reason or another. Historically, most of those will come back with a change of coverage. Rather than being an indicator that people aren’t paying premiums, it means that their policies have been revised. When the Port receives cancellation notices, staff immediately reaches out to the tenants.
Mr. Baker reported that Dry Storage had a 92% occupancy rate in 2nd quarter 2020 compared to 99% occupancy in 2019. A total of 50 of the 51 trailer spaces are occupied. Launch activity was down 57% and total boat handling was down 64% during the 2nd quarter. Travelift roundtrips decreased by 33%, and sling time and stall usage were also down significantly due to the reduced schedule associated with the pandemic. Slightly more pressure wash treatments were done during the quarter.
Mr. Baker advised that gasoline sales were down 12% and diesel sales were down 68% largely due to Puget Sound Express not operating during this time. Pay-at-the-pump usage accounted for 59% of the total gallons pumped during the quarter. The survey indicates that the Port’s prices were slightly above other marinas in the area for both diesel and unleaded fuels.
Mr. Baker advised that round trips at the public launch were down 44% and one-way launches were down 16%. The reservation system was in place through June.
Mr. Baker further advised that there were no events to report, as all of the standard marina events that are typical for the spring and early summer were cancelled due to the pandemic.
Mr. Baker said that as the Port moves into 3rd quarter, they are starting to see more activity. He anticipates the next report will be more positive. He commended Port staff for their efforts during this extremely challenging time, especially in Marina Operations where staffing is short. They are very busy and everyone is working hard.
Commissioner Johnston echoed Mr. Baker’s comments regarding staff’s efforts. They have been working very hard. He also commended Mr. Baker on his presentation. The data, as presented, was very easy to follow and very complete.
Commissioner Harris asked if any decisions have been made on future Port events through the remainder of 2020. Ms. Williams said the Port just received notice that Argosy has cancelled its entire season, including the Christmas Ship. Port staff has discussed that Holiday on the Docks would be a safe event the Port could move forward with, but they haven’t reached out to the Edmonds Yacht Club yet. The thought was that dressing up the marina would be a great way to keep things festive at the Port. Budget from events that were cancelled could be redirected towards this effort. The Port is not planning to do a community event on a single night, but people could be invited to come enjoy the lights on their own. She said that the Seattle Boat Show is still moving forward for the time being, but that may change as time goes on. Staff will closely monitor the situation and make a decision on whether to participate or not. It is likely that a decision will be made by November. Commissioner Harris voiced support for the Holiday on the Docks idea. Ms. Williams said staff plans to do the holiday food drive again, too.
Ms. Williams reported that Harbor Square Gross Projected Revenue was down 2.39% or roughly $12,600 compared to the same period in 2019. The end of 2nd quarter found the Port with an occupancy rate of 91.64%, which is down 6.73% from the occupancy rate of 98.37% 2nd quarter 2019. At the end of 1st quarter 2020 the occupancy rate was 94.9%, which equates to a difference of 3.26% compared 2nd quarter 2020.
Ms. Williams advised that there were no new leases in 2nd quarter, but there were 3 lease extensions. One was a tenant in a large space in Building 2 (restaurant and bar) who extended for five years. Commissioner Orvis asked if the restaurant tenant has been operating, and Ms. Williams answered that the restaurant has been operating under the State imposed Phase II occupancy rates. They closed for six weeks, and then offered take-out service until they were able to open for dining as part of Phase II. She noted that there were multiple state-mandated business closures at Harbor Square due to the pandemic.
Ms. Williams reported that there were no tenant improvements, but one lease terminated during 2nd quarter (a Building 4 tenant with approximately 3,000 square feet of space) due to the negative business impact and uncertainty surrounding the pandemic. She said the focus during 2nd quarter was on managing the Building 3 remodel, but they also did window and awning cleaning and landscaping and irrigation repairs. She provided a picture of the completed Building 3, which will be published in the September newsletter.
Ms. Drennan clarified that in both the financial statements and the Harbor Square report, deferrals are not reflected in the revenue numbers. While the revenues will be the same, the cash will be lower because they aren’t collecting from some tenants right now.
Ms. Drennan presented the 2nd Quarter Financial Statements, noting that revenues trended up to 2019, with a high of $4.8 million, but dropped to $4.5 million in 2020. Expenses trended up to $3.5 million in 2019 and dropped to $3.1 million in 2020. The good news is that the revenues dropped, and so did the expenses. Net income has been generally trending upwards. Revenues were $240,000 less than budget and expenses were $574,000 less than budget. Gross profit for the 6-month period was $3.9 million, which was $205,000 less than budget. Net income for the same period was $1.4 million. Highlights include:
Marina Operations Revenue Actual to Budget
• Net Fuel Sales were about $41,984, or about $74,000 or 64% less than budget. In addition to the decrease in volume, the price of fuel dropped and the Port had more expensive fuel in the tanks.
• Miscellaneous revenue was about $21,000 or about $26,000 less than budget.
• Dry Storage revenue was about $310,000 or about $47,000 less than budget. This is primarily due to the pandemic. The Port reduced rents to the pay-per-move rate when Dry Storage was closed and continued the off-peak rate for an additional month.
• Parking revenue was about $37,000 or about $15,000 less than budget. Commuter parking was down significantly as a result of the pandemic.
• Travelift revenue was about $53,500 or about $15,000 less than budget.
• Financial occupancy for permanent moorage was 97%, which is consistent with the budget. Financial occupancy for dry storage was 77%, compared to a budgeted amount of 89%. This is a result of the rate reductions that were put in place early in the pandemic.
Commissioner Faires said he would be interested in knowing how much of the Dry Storage revenue loss was compensated for by a decrease in maintenance and expense costs. Ms. Drennan agreed to provide this information to Commissioner Faires at a later time. However, she doesn’t believe the expenses have decreased at the same level as revenue because the Port recently replaced the forklift, which results in greater depreciation cost. Most of the operating costs will remain the same because the Port continued to pay its staff during the closure.
Rental Properties Revenue Actual to Budget
• Total Rental Property revenue is $1,347,000 or about $34,000 less than budget. This is primarily because tenants in Building 3 received construction credits while their spaces were disrupted. Revenue from restaurant parking was also down, as the restaurants were closed and didn’t need the space.
Operating Expenses Actual to Budget
• Operating expenses before depreciation for the 6-month period were about $2.2 million, which was approximately $420,000 or 16% less than budget. Some of the projects that were budgeted for 2020 have been postponed due to pandemic closures and delays in getting materials.
• None of the Communications budget has been spent to date, but it appears there are future plans for these dollars.
• Economic Development and Tourism expenses were $4,860 or about $10,000 less than budget. This has a lot to do with the pandemic and a variety of cancellations.
• Employee benefits were about $352,000 or about 24% less than budget.
• Professional fees were about $37,922 or about 17% less than budget.
• Repair and Maintenance expenses were about $117,290 or about 89% less than budget.
• Salaries and wages were $991,000 or about $96,000 less than budget based on a timing difference.
• Supplies were about $80,000 or about $107,000 less than budget.
• Travel expenses were $2,453 or about $8,500 less than budget. A lot of the events and seminars were cancelled due to the pandemic.
• Utilities were $205,434, or about $15,000 less than budget.
• Depreciation was $712,580 or about $56,000 less than budget.
• The gain/loss on fixed assets is based on the sale of the Hoist forklift and an adjustment to fixed assets.
• Interest income was $131,907 or about $18,000 greater than budget. Interest rates have now dropped to approximately 0.1%.
Net income for the 6-months ending June 30th was $1.4 million or approximately $179,000 greater than budget.
Marina Actual to Budget
• Revenues trended upward to $3 million in 2019 and dropped to $2.8 million in 2020 and expenses ranged between $2 million and $2.4 million.
• Operating revenues were $238,000 less than budget and expenses were $490,000 less than budget.
• Operating revenues were $2,780,000 or approximately $253,000 less than budget.
• Operating expenses before depreciation and overhead were about $1,178,000 or about $235,000 less than budget.
• Net income was about $742,000 or about $252,000 greater than budget.
Rental Property Actual to Budget
• Total revenues have ranged between $1.2 million and $1.5 million, but are down in 2020 because the property tax income of $42,500 is now coded to Public Amenities instead of Harbor Square. There were also some construction credits and loss of parking revenue.
• Operating Expenses have ranged between $674,000 and $899,000.
• Net income has ranged between $333,000 and $707,000, and the highest year was 2019.
• Revenues are $34,000 less than budget and expenses are $117,000 below budget.
• Operating revenues are $1,345,000, or about $34,000 less than budget.
• Operating expenses before depreciation and overhead were $262,000, which is $46,000 less than budget.
• Net income was $671,000, or about $83,000 greater than budget.
Commissioner Faires asked if staff feels it is timely to revise the estimate of the impact of the pandemic on the Port’s net. Ms. Drennan said she would revise the estimate for year-end as part of the budget process, which will be presented to the Commission in a few months.
Ms. Drennan reported that as of the end of June, there were 28 long-term investments. Previously, the bond ladder rungs consisted of $500,000 investments. However, the Port’s investment portfolio is large enough to begin investing in $1 million rungs. This will be achieved by combining two bonds that mature at similar times or adding funds from the Port’s bank account. To compensate for business tenant rent deferrals, staff is maintaining a cash balance of $4 million, which is an increase of $1 million. Details of the Port’s bond maturity and bonds purchased was attached to the Staff Report. She summarized that the Capital Replacement Reserve is currently $13,650,435, the Environmental Reserve is $1,047,550, and the Public Amenities Reserve is $76,550.
Commissioner Faires asked if the Public Amenities Reserve represents what has been accumulated each month since the first of the year, and Ms. Drennan answered affirmatively.
Commissioner Preston referred to the reduction of Dry Storage occupancy and asked how many tenants the reduction represents. Ms. Drennan responded that she doesn’t track the actual number of tenants. Instead, she tracks by revenue (financial occupancy), which provides a better reflection of the actual occupancy. Mr. Baker said physical occupancy in Dry Storage was at 92% at the end of 2nd quarter 2020 compared to 99% at the same point in 2019.
Commissioner Faires said his guess is that the decrease in dry storage occupancy is due to boats that are trailerable. He asked if staff has any indication related to the size of boats. Mr. Baker said the smaller racks have historically been the most difficult to fill, and that holds true this year, too. There has been less turn over in the larger spaces.
2021 BUDGET MEETING SCHEDULE
Ms. Drennan presented the Budget Meeting Schedule, which shows all of the activities that occur as part of the budget process. She said staff started working on the Operating Budget and Capital Budget beginning in July and will be ready to start discussing them at the August 31st meeting. A Finance Committee meeting is scheduled for August 20th to discuss baseline conditions, property taxes and economic development. Staff will present the preliminary budgets to the Commission at a workshop meeting on October 12th, and the Commission can accept public comments at that time. A public hearing on the draft budget is scheduled for October 26th, and it is anticipated that the Commission will take action relative to the budget on November 9th.
EXECUTIVE DIRECTOR’S REPORT
Mr. McChesney asked for direction on the future of the Sea Scout Program. Over the past few weeks, the Port has received feedback from a customer who is concerned about the two Sea Scout vessels that have been tied up in the holding lanes. Staff has attempted to explain the Port’s support for the Sea Scout Program and youth in boating and advised that the issue is under review, but he would like direction from the Commission. He reviewed that the Port has a long-standing relationship with the Sea Scouts, which is a worthy organization. On the other hand, the Port is struggling with whether or not the program is viable and how to answer the concerns of the customer who has commented more than once about the issue.
Commissioner Faires said he is in favor any effort the Port can make to support the Sea Scout Program as long as it is viable, but it is not the Port’s responsibility to maintain the Sea Scout troop. However, he questioned the Port’s liability relative to the two boats. His understanding is that there is some confusion about who actually owns them and there is no documentation relative to ownership.
Commissioner Preston advised that the Mount Baker Council owns one of the vessels, and the other boat is owned by the Edmonds Yacht Club. He noted that the complaints have come from just one customer. If they remove the boats, they would see a dock that is in disrepair and needs maintenance. He is interested in feedback from the other Commissioners regarding the Port’s continued support of the program.
Commissioner Johnston said he thought the Sea Scouts were being chartered and sponsored by the Edmonds Yacht Club. He asked if the Edmonds Yacht Club has provided feedback. He also asked if the Sea Scouts is a viable entity right now, and if not, is there any way to restore the program to a level where the boats can be maintained and cared for?
Mr. McChesney recalled that the Commission reviewed the Sea Scout Program a few years ago. At that time, things were moving in the right direction, but the Commission made the decision that it would not be appropriate for the Port to be the chartering organization. The Edmonds Yacht Club agreed to become the chartering agent, and the Commission agreed that the Port would continue to provide facilities in exchange for in-kind services. The Port continues to support this arrangement, except it is difficult to get the appropriate documentation for the hours worked as required by the State Auditor.
Commissioner Preston said he reached out to the Edmonds Yacht Club last week and learned that nothing has been happening with the program since the pandemic started. He is waiting to hear back about a time when representatives from the Yacht Club can meet with representatives from the Port, the local Sea Scout Program, and the Mount Baker Council. The current plan is to get rid of the Shark Boat, which needs a lot of repair. The other boat is dirty and has some diesel issues. The plan is to use their money to get the diesel vessel operational. The Mount Baker Council owns the Shark Boat, and other boat is owned by the Edmonds Yacht Club. Ms. Drennan said the Port doesn’t have a current registration on file for either vessel, and the last owner of record for the diesel boat is Carl and Jennifer Craig. There is no current insurance or contract for in-kind services. Commissioner Preston agreed to check into the matter.
Mr. McChesney said he looks forward to meeting with representatives from the Yacht Club, the Mount Baker Council and the local Sea Scouts leadership to discuss the future of the program. This would give him an opportunity to address some of the customer’s concerns, as well.
Commissioner Orvis said he understands that the pandemic has made things difficult for the Sea Scouts, and the Commission has acknowledged its desire to support the program. His only concern is that someone is regularly checking the boats to make sure they are safe to stay in the marina.
Commissioner Faires thanked Commissioner Preston for taking a leadership role in making the program a success. He said he supports the youth activity insofar as it remains viable.
Mr. Cattle agreed that liability is an important consideration. It is also important to make sure that the insurance documentation for both vessels is obtained.
COMMISSIONER’S COMMENTS AND COMMITTEE REPORTS
Commissioner Preston said he recently spoke with people who had just come from a whale watching tour and was informed that it was a good experience. They particularly liked witnessing the orca whales juggling the sea lions. Everyone was thrilled to see nature in action.
The Downtown Edmonds Merchant’s Association and Edmonds Chamber of Commerce are planning to sponsor the annual scarecrow event. They are considering doing a type of Candy Cane Lane on 4th Avenue during the holidays. They are also interested in decorating the downtown area around the theme of a “glittery white wilderness.” He plans to ask the Edmonds Yacht Club to consider incorporating a similar theme for their Holiday on the Docks event.
Commissioner Harris said she continues to attend the Washington Public Port Association (WPPA) virtual roundtable meetings on Tuesdays. She also advised that she and Commissioner Johnston are continuing their work on the Integrated Pest Management Plan.
Commissioner Johnston said he has also participated in some of the WPPA’s virtual roundtable meetings. He said Commissioner Harris has done a great job collecting data related to the pest management topic, and Brittany has provided assistance, as well. Hopefully, they will have a draft Integrated Pest Management Plan for the Commission’s consideration soon. The intent is to incorporate the document into the Port’s Environmental Manual.
Commissioner Faires announced that he would attend the virtual Edmonds Economic Development Commission meeting on August 19th. The primary topic of discussion will be the economic impact of the Covid-19 pandemic.
Commissioner Orvis announced that the Finance Committee will meet on August 20th to discuss the long-range cash flow model, and other budget related items. He also plans to discuss the Executive Director’s authority for signing contracts. The Committee will also have a discussion relative to property taxes. He invited Commissioners to contact Ms. Drennan with any other items they would like to add to the agenda.
Commissioner Orvis congratulated staff on completion of the Harbor Square Building 3 Project. It was a surprise project that was very time consuming. A number of staff members contributed a lot of energy, paying attention to the details that allowed the project to be successful. He is proud of what they accomplished.
Commissioner Orvis commented on how crowded the docks were last Sunday. He cautioned that when the docks are crowded, it is impossible to maintain separation, and masks are important. Unfortunately, the Port doesn’t have the authority to enforce the mask requirement for people using the boardwalk, so it is important that they ensure the safety of the staff. Commissioner Faires noted that the Port can deny service to customers who aren’t wearing masks.
The Commission meeting was adjourned at 8:17 p.m.
Port Commission Secretary