BOARD OF PORT COMMISSIONERS
REGULAR MEETING
WEDNESDAY – April 8, 2009
MINUTES
I. CALL TO ORDER
8:00 A.M.: Chairman Dodge, presiding
Commissioners Present: Lorianna Kastrop; Larry R. Aikins; Secretary Richard S. Claire; Vice Chairman Ralph A. Garcia, Jr.; and, Chairman Richard A. Dodge
Commissioners Absent: None
Staff Present: Executive Director, Michael J. Giari; Special Counsel to Port, Francois X. Sorba; Director of Finance & Administration, Cynthia D. Hampton; Manager of Operations, Donald K. Snaman; Assistant Manager of Operations, Eric Napralla; Accounting Clerk, Linda Hawkins; and, Executive Assistant, Rita F. Artist
Commissioner Kastrop led the Pledge of Allegiance.
II. APPROVAL OF MINUTES
A Motion to Approve Minutes of Special Meeting of March 18, 2008 was made by Commissioner Garcia and Seconded by Commissioner Kastrop. The motion passed by a unanimous voice vote of all Commissioners present at the March 18th meeting. Commissioner Aikins abstained.
III. CLAIMS
A Motion to Approve Claims was made by Commissioner Kastrop and it was seconded by Commissioner Aikins. The motion passed by a unanimous voice vote of all Commissioners.
IV. ORDINANCE
A. ORDINANCE OF THE BOARD OF PORT COMMISSIONERS OF THE CITY OF REDWOOD CITY APPROVING AND AUTHORIZING EXECUTION OF FOURTH AMENDMENT TO LEASE AGREEMENT WITH PABCO BUILDING PRODUCTS, LLC – 1. INTRODUCTION
Click here to view the staff agenda sheet and documents for this item
Executive Director Giari presented the staff report on this item giving a brief history of Pabco Gypsum’s maritime tenancy at the Port since 1993 and saying that Pabco imports gypsum from Mexico to a 1.92 acre site at the Port where most of the gypsum is stockpiled and then trucked to Pabco’s wallboard manufacturing plant in Newark. Giari explained the terms of the Pabco lease agreement and its subsequent amendments. He stated that Pabco has met or exceeded the minimum annual guarantee every year of the lease except for the last lease year ending July 2008 when, due to the decline in demand for construction material, tonnage fell below the minimum annual guarantee. Pabco has continued under the hold over provisions of the lease agreement, which expired July 2008, to pay rent and the minimum annual guarantee despite the low volume of gypsum shipped and a temporary closure of its plant in Newark.
Giari next explained the terms and conditions for the new five year term of the proposed Fourth Amendment to the Pabco Lease Agreement. The rent for the first year would increase to $5,800/month. The minimum annual guaranteed tonnage for wharfage would remain in effect for the first 7 months but for the remainder of the first year and the second year, there would be no minimum annual guarantee. The terms for years 3 to 5 of the lease are to be agreed to prior to the start of the third year.
Al Mueller, President of Pabco Building Products gave a presentation on Pabco Gypsum, a subsidiary of Pacific Coast Building Products, which included the background of their company, the economic conditions that they face currently in their business, and a modernization project that is in process in their Newark plant. Mueller commented that Pabco has had a long and successful partnership with the Port since 1993 and introduced Charlie Colman, Plant Manager of Pabco’s Wallboard Plant in Newark and the gypsum terminal at the Port; and, Pat Fulton, Project Manager for the modernization project at the Newark plant.
Mueller explained that Pacific Coast Building Products, founded in 1953, is a privately owned family company headquartered in Sacramento, CA. Pacific Coast Building Products is organized in four major subsidiaries, which includes Pabco Building Products, LLC. Pabco manufactures clay bricks in Sacramento and Utah; asphalt shingles in Tacoma, WA; clay pipe, clay roof tile and architectural terra cotta in Lincoln, CA; and a gypsum wallboard plant in Newark, CA. Mueller presented graphs including the U.S. demand for gypsum wallboard, which peaked in 2005; Total Tons thru Port of Redwood City, which peaked at 378,828 short tons in 2005; and various slides showing the modernization of the Newark wallboard plant.
Mueller agreed with an earlier comment by Mike Giari that the driver for the gypsum wallboard business (drywall) is residential housing. Pabco experienced a growth in business due to increased housing starts until 2006, at which time the market collapsed. Mueller commented that there is the need for the proposed amendment to be tailored to these economic conditions.
Commissioner Aikins commented that in Year 3 of the amendment, there is no guarantee of any tonnage coming into the Port and stated that if there were no tonnage, there would be a cost to the Port of $200,000 less in two years of lease income than we received in 2008. Aikins said there is a lot of concession being asked of the Port in terms of reduced lease income for valuable one-of-a-kind property with nothing in the future to count on. Aikins asked if there was some kind of provision that could be made on Pabco’s part to offset that loss. Giari explained that in order to compensate a loss of the guaranteed minimum annual tonnage, Pabco has agreed to an increase in rent paid to the Port in years one and two.
Chairman Dodge asked Giari about projections over the next five years and Giari explained the uncertainty in the demand for construction materials made it difficult to reach an agreement on what would be an equitable rent and minimum annual guarantee. Giari said the objective in Year 2 is to get the value of the land up to the average of what it is at the Port for industrial land. The wharfage rate would then be on a pay-as-you-go basis and would be charged at the Tariff rate of $1.34 per metric ton.
Commissioner Claire commented that the Port gave Pabco a 50% discount on wharfage fees previously and said that if the building industry picks up, the Port will have an opportunity to recapture lost revenue if Pabco is paying $1.34 per metric ton for gypsum brought through the Port. Claire stated that the Commissioners would have the opportunity at the end of Year 2 to determine whether or not to reinstate the minimum annual guarantee. Claire commented that at this point in time, unless Staff knows of any other use for Pabco’s property, he is in agreement with the proposed amendment.
Commissioner Dodge asked what Pabco’s intentions were at the end of this lease and Mueller answered that Pabco intends to continue to import gypsum from Mexico through the Port of Redwood City as they have since 1993.
Commissioner Kastrop expressed her concern that two years from now, given the uncertain state of the economy and slow recovery, that terms for years 3, 4, and 5 are left hanging and will still be difficult to reach.
Commissioner Garcia asked Mueller at what point would it be more economical for Pabco to ship their gypsum from their Las Vegas plant. Mueller responded that since 1993 it has been in our mutual best interest to ship through the Port.
Executive Director Giari explained that the rent and wharfage in year 2 could bring in $20,000 per month for 2 acres of land. In addition to that, Pabco generates revenue from dockage, linesmen, and other uses related to a maritime use of the waterfront. The Port strives to use the Port’s property to the maximum extent possible for maritime transportation.
A Motion to Approve the Introduction and Waive the Reading Thereof was made by Commissioner Claire and it the Motion was seconded by Commissioner Garcia. The Motion passed by a unanimous roll call vote of all Commissioners.
V. PUBLIC COMMENT:
None
VI. MATTERS OF BOARD INTEREST:
Chairman Dodge reported that he and Commissioner Aikins recently attended the Journal of Commerce’s Marine Highway Conference, which opened with the following comment: “The marine highway is the longest hatching public policy no brainer in history.” The industry needs to bring all the individual proponents into a cohesive unit in an organized manner. Issues such as funding, the Harbor Maintenance Tax, the Jones Act, environmental concerns, etc. need to be addressed in a systematic way. A new organization, The Marine Highways Cooperative, sponsored by The U.S. Maritime Administration, seeks to bring all parts of the industry together. Their goal is to promote the beneficial use of our nation’s waterways to reduce traffic, improve air quality, improve highway safety, reduce hazardous cargo risks, conserve energy and improve the utilization of the intermodal transportation system. Dodge recommended that Port staff research this organization and the cost to join.
Chairman Dodge commented that on the issue of funding and subsidies, it seems there is money available from numerous sources, including the Dept. of Transportation, who has $1.5 billion available for shovel ready projects. Dodge and Aikins discussed the potential role of the Port of Redwood City in the Marine Highway system with Alex Yeros of the Broe Group, parent of Eco Transport. This company is planning a container barge service between the ports of Oakland and Stockton starting in a few months. Yeros has agreed to a meeting in the near future to explore our options further. Dodge said that the Port needs to evaluate its future role in the Marine Highway. Current projections call for close to gridlock traffic on the LAX/SFO corridor by 2020 and some predict fuel prices to again rise to the $4.00 range. Dodge recommended the Port begin a basic reconnaissance study to determine if we should be stepping up our Marine Highway initiatives.
Chairman Dodge concluded by saying that he is convinced the Marine Highways will become an integral part of our country’s intermodal transportation system. It is not a question of “if” but of “when”.
Commissioner Aikins commented that until traffic has reached capacity limitations, people are not going to feel the real urgency of this situation. We are already pretty much at limitations for rail traffic using the LA/LB to Bay Area corridor. Trucks will be the main competition to Marine Highway transportation. As soon as fuel prices rise again to $4.00+ per gallon, then the economics will make sense. The market will eventually dictate that shipping by sea is the practical way to go. If the Federal Government stepped in with subsidies to offset the cost of using trucks on highways and provided funds to marine highway shippers, the process of diverting truck traffic would be accelerated.
Commissioner Garcia commented that he could understand the frustration of the Marine Highways Conference attendees. Garcia said that visiting various departments of the Federal Government while attending an AAPA Spring Conference in Washington, D.C. showed him how difficult it was to move anything new through the Government. The individual departments do not efficiently work together toward a common goal.
Commissioner Kastrop asked if there had been any discussions on how to get the Harbor Maintenance Tax waived on domestic shipping by way of legislation. Dodge explained that bills have been introduced. There are some that are not anticipated to make it because there is not enough of an outcry and because the Federal Government views it as a reduction in tax revenue. If Cap & Trade becomes reality, companies will be able to get credits for shipping by barge.
Chairman Dodge asked Giari to come back to the Commission with a recommendation as to how a basic reconnaissance study can be performed to determine if it is worthwhile for the Port to move forward with Short Sea Shipping and how Redwood City would fit into the Bay Area distribution system.
Executive Director Giari responded that there have been studies done by MARAD and other ports in Northern California. The Strategic Maritime Business Plan, which the Port did in 2008, identified Marine Highway Short Sea Shipping as a definite niche that the Port of Redwood City should pursue. Studying the current market conditions with a reconnaissance study would be a good way to start.
In connection with what Commissioner Garcia said previously, Commissioner Kastrop commented on another matter of Board interest by saying she also attended the AAPA Spring Conference in Washington, D.C. It was her first visit and she found it very worthwhile. Kastrop appreciated that Kathy Beaubien and Peter Friedmann of Lindsay, Hart, Neil & Weigler, LLP did a great job of preparing the Port Commissioners for their meetings. Kastrop said the Port of Redwood City had a compelling story and that we did a great job of presenting the Port’s projects with the maintenance dredging and the beneficial reuse of dredged materials for environmental projects.
Commissioner Kastrop next commented on her attendance at South Bay Opening Day of Boating Season, organized by the Sequoia Yacht Club, on Saturday, April 4th, saying that it was a beautiful California day with lots of excitement and participation by boaters and various agencies such as the Fire Department, Police Department, Coast Guard and Port staff. Vice Mayor Howard was the Grand Marshall of the Boat Parade and had many nice comments to make. Howard recommended that we try to attract more attendance by the general public in future years.
VII. EXECUTIVE DIRECTORS REPORT:
Executive Director Giari reported as a follow up to the meetings in Washington, D.C. that the announcement of economic stimulus projects to be undertaken by the U.S. Army Corps of Engineers in the S.F. Bay Area has not been announced as yet. It was due in the middle of March but as of yesterday, Giari had not heard anything about the chosen projects.
Secondly, we have drafted a letter from Congresswoman Eshoo and Congresswoman Speier to send to the Army Corps of Engineers Headquarters and the U.S. Fish & Wildlife Service Restoration Office, both in Washington, D.C. The purpose of the letter is to talk about the success Redwood City has had to date using dredged material with the Bair Island Restoration Project and to urge both agencies to work harder and in a more coordinated fashion to continue to use the dredged material on Bair Island for that purpose.
Giari commented that staff is following up with the Maritime Administration based on the meetings we had with them on the Marine Highway.
Giari thanked Commissioner Kastrop for bringing up South Bay Opening Day of Boating Season and said it was a very successful event. There has been press coverage both before and after the event about the tall ships, The Lady Washington and the Hawaiian Chieftain, visiting the Port. Their presence and participation in the Boat Parade added much to the event. Opening Day, as well as the visit by the tall ships, was in the Port’s newsletter and was on the Port’s website. We also placed advertisements in the local, daily free newspaper promoting both the tall ships and South Bay Opening Day. Staff will discuss ways in which to further promote future Opening Days.
Chairman Dodge commented that when meeting with Congresswoman Speier, his 14-year old granddaughter was invited to join the Port’s delegation. She was visiting Washington, D.C. with her 8th grade class, from which she was excused to join the Port Commissioners to see another aspect of how government works.
VIII. ADJOURNMENT:
At 9:37 a.m. Chairman Dodge requested that the Commission adjourn to its next regularly scheduled Meeting of April 22, 2009. A Motion to Adjourn was made by Commissioner Garcia and it was seconded by Commissioner Claire. The motion passed by a unanimous voice vote of all Commissioners.
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