BOARD OF PORT COMMISSIONERS
REGULAR MEETING
WEDNESDAY – November 22, 2006
I. CALL TO ORDER
8:00 A.M. Chairman Castle, presiding
Commissioners Present: Commissioner Ralph A. Garcia, Jr.; Vice Chairman Lewis D. Miller; and, Chairman John J. Castle
Commissioners Absent: Commissioner Larry Aikins; Secretary Richard A. Dodge;
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; Manager of Economic Development, Steven Wright; Assistant Manager of Operations, Eric Napralla; Executive Assistant, Rita Artist
Commissioner Garcia led the Pledge of Allegiance.
II. APPROVAL OF MINUTES
Due to a lack of quorum of Commissioners present at the November 8, 2006 meeting, Chairman Castle deferred approval of the minutes for that meeting to the next Port Commission meeting.
III. CLAIMS
A Motion to Approve Claims was made by Commissioner Garcia. It was seconded by Commissioner Miller and the motion passed by a unanimous roll call vote of all Commissioners present. Commissioners Aikins and Dodge were absent.
IV. ORDINANCE
A. ORDINANCE OF THE BOARD OF PORT COMMISSIONERS OF THE CITY OF REDWOOD CITY APPROVING AND AUTHORIZING EXECUTION OF LEASE AGREEMENT WITH THE UNITED STATES OF AMERICA (USGS; Wharf Area) – PUBLIC HEARING
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Executive Director Giari stated that since Items IV-A and IV-B are related, both items would be explained at this time. The Ordinances were introduced at the Port Commission meeting of November 8, 2006. Subsequently, the Notices of Public Hearing were published in a local Redwood City newspaper on November 10th and the Ordinances were published in a local Redwood City newspaper on November 18th.
Chairman Castle opened the Public Hearing for Items IV-A and IV-B concurrently. No comments were made by the Public. A Motion to Close the Public Hearing was made by Commissioner Garcia and it was seconded by Commissioner Miller. The motion passed by a unanimous roll call vote of all Commissioners present. Commissioners Aikins and Dodge were absent.
A Motion to Adopt the Ordinance of the Board of Port Commissioners of the City of Redwood City Approving and Authorizing Execution of Lease Agreement with the United States of America (USGS; Wharf Area) and Waive the Reading Thereof was made by Commissioner Miller. The motion was seconded by Commissioner Garcia and passed by a unanimous roll call vote of all Commissioners present. Commissioners Aikins and Dodge were absent.
ORDINANCE
B. ORDINANCE OF THE BOARD OF PORT COMMISSIONERS OF THE CITY OF REDWOOD CITY APPROVING AND AUTHORIZING EXECUTION OF LEASE AGREEMENT WITH THE UNITED STATES OF AMERICA (USGS; Land Lease) – PUBLIC HEARING
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A Motion to Adopt the Ordinance of the Board of Port Commissioners of the City of Redwood City Approving and Authorizing Execution of Lease Agreement with the United States of America (USGS; Land Lease) and Waive the Reading Thereof was made by Commissioner Miller. The motion was seconded by Commissioner Garcia and passed by a unanimous roll call vote of all Commissioners present. Commissioners Aikins and Dodge were absent.
V. RESOLUTION
A. RESOLUTION APPROVING AND AUTHORIZING EXECUTION OF AGREEMENT FOR TRACK AGREEMENT AT PORT OF REDWOOD CITY – (UNION PACIFIC RAILROAD)
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Executive Director Giari explained that Union Pacific Railroad (UP) notified the Port that the 1976 Track Use Agreement between the Port and Southern Pacific Railroad (SP) needed to be updated and renewed, changing the name from SP to UP. The track agreement covers matters such as ownership of the track, maintenance responsibilities, and liability, etc.
Commissioner Garcia inquired about charges for track maintenance and inspections. Giari explained that the cost of track inspections is shared between the Port and major track users, Romic Environmental and Basic Chemical Solutions. The cost for maintenance of the track depends upon where the maintenance occurs. Romic and Basic Chemical each pay for maintenance to track that is within their leasehold area. Other users of the track in Port areas are subject to charges by the Port for track usage. The Port’s maintenance of the track is covered by the charges to use the track.
Chairman Castle asked how maintenance to track within Romic and Basic Chemical leasehold areas is performed. Giari replied that the companies are each responsible to contract and make payments for track maintenance within their individual leasehold area. All track maintenance must meet the Federal Railroad Administration’s standards.
A Motion to Adopt was made by Commissioner Miller. It was seconded by Commissioner Garcia. The motion passed by a unanimous roll call vote of all Commissioners present. Commissioners Aikins and Dodge were absent.
RESOLUTION
B. RESOLUTION APPROVING AND AUTHORIZING EXECUTION OF TRACK USAGE AGREEMENT– (ROMIC ENVIRONMENTAL TECHNOLOGIES CORPORATION))
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Donald Snaman, Manager of Operations, explained that the agreement approved under Item V-A is between the Port and Union Pacific Railroad regarding jurisdiction over all track at the Port. Port tenants who use the Port’s tracks for deliveries of railcars by UP need to have Joint Use Agreements between UP, the Port and those tenants. Item V-B and Item V-C are Joint Use Agreements with Port tenants, Romic Environmental and Basic Chemical Solutions.
Chairman Castle inquired about environmental insurance coverage for Romic and BCS. Executive Director Giari stated that both companies are required to have “full pollution” environmental insurance coverage under their lease agreements. The Joint Use Agreements require that they have insurance coverage that meets the same standard as is required of the Port under its agreement with Union Pacific Railroad.
RESOLUTION
C. RESOLUTION APPROVING AND AUTHORIZING EXECUTION OF TRACK USAGE AGREEMENT– (BASIC CHEMICAL SOLUTIONS)
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Items V-B and V-C were handled as one item and a Motion to Adopt was made by Commissioner Miller. It was seconded by Commissioner Garcia. The motion passed by a unanimous roll call vote of all Commissioners present. Commissioners Aikins and Dodge were absent.
VI. MOTION
A. MOTION APPROVING AND AUTHORIZING SPONSORSHIP IN THE AMOUNT OF $______ FOR THE SPONSORSHIP OF THE ARCHIVES COMMITTEE OF THE REDWOOD CITY PUBLIC LIBRARY
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Executive Director Giari commented that Bob Hoffman, a member of the Redwood City Library Archives Committee, addressed the Port Commission at its meeting of November 8, 2006 and requested the Port’s financial support. Staff recommends a contribution in the amount of $1,000 and there are funds in the Port FY 2006/2007 budget for this expenditure.
Robert Hoffman, resident of Redwood City, stated that he was representing the Archives Committee and requesting a contribution in the amount of $3,000 for the publication of a Redwood City History Book. Hoffman stated that the Port is the major factor in Redwood City having the richest history of any city on the peninsula. Commissioner Miller asked about the book’s editor and Hoffman replied that Duane Sandul, The Sandul Company, has been doing a very good job with the editing.
Chairman Castle asked Giari to respond to Hoffman’s request for a $3,000 contribution. Giari explained that the Port supports organizations through sponsorships and donations during the year with the objective of supporting those that give something back to the Port, both in the form of its recognition in the community as well as those that provide information and services to the Port. There is no doubt that the Redwood City History Book will increase community awareness and promote the Port, however, the budget for Fiscal Year 2007 did not anticipate a contribution to the History book. We think we can stretch the budget to include a donation in the amount of $1,000 for this very worthy cause. Giari suggested that Seaport Industrial Association and its members be approached as a possible sponsor.
A Motion to Approve Sponsorship in the Amount of $1,000.00 was made by Commissioner Miller. It was seconded by Commissioner Garcia. The motion passed by a unanimous roll call vote of all Commissioners present. Commissioners Aikins and Dodge were absent.
VII. REPORTS/ PRESENTATION
By: Cynthia D. Hampton, Director of Finance & Administration
A. QUARTERLY FINANCIAL RESULTS – (September 30, 2006 Comparative Results)
This financial results presentation covers the first quarter of Fiscal Year 2007.
Actual tonnage is down 25% compared to last year and down 20% compared to budget. Because approximately 75% of our Operating Revenue is derived from maritime operations, when tonnage drops revenue is expected to drop as well. Though tonnage as compared to budget has dropped 20%, revenues have gone down only 12%. There are several reasons that maritime revenue has not decreased by the same percentage as tonnage – cargo mix, a significant level of fixed revenues such as rents, and minimum usage guarantees. There is very little variance between actual and budgeted revenue in the recreational and commercial revenue segments.
Operating Expense for the operations segment was $11,000 or 2% under budget, and $21,000 or 4% higher than last year. The admin segment was $89,000 or 25% less than budget due primarily to professional services budgeted for but not yet engaged. Total operating expense was $47,000 or 6% higher than last year, but $101,000 or 11% less than budget.
With regard to fiscal year to date Operating Income, it is $621,000 actual compared to last year’s $877,000 and a budget $710,000. Operating income is the difference between operating revenue less operating expense, and this is the number to look at when evaluating the Port’s performance. While those numbers look disappointing, in fact they really aren’t as bad as they look. That’s because the ratio of operating income to operating revenue, which is an important measure of profitability, is 44% for both actual and budget. So while the Port is generating fewer revenue dollars, each revenue dollar is equally as profitable as what was planned for in the budget.
Non-Operating Income fiscal year to date actual is significantly higher than it was for last year and budget due to higher interest rates as well as slower than anticipated capital expenditures. When bills start coming in related to the LBT demolition and other capital projects, our cash reserve account balances will decrease and the amount of interest income generated will decrease as well. Interest expense is right on budget.
Subvention reflects a large swing as compared to last year. Last year the Port made the second of two $200,000 payments to the City over and above normal subvention. Fiscal year to date Subvention is currently on track with budget.
Though operating income was down compared to last year and budget, this year net income after subvention was actually higher than last year because of the additional subvention paid to the City last year.
B. CERTIFIED QUARTERLY INVESTMENT REPORT – (For Quarter Ended September 30, 2006)
Cash reserves continue to build, however, as we pay for the LBT demolition and remediation and some of the other major capital projects, those balances will decline.
Chairman Castle asked how often we evaluate investment opportunities in order to maximize interest earnings. Ms. Hampton explained that the bulk of our funds are invested in LAIF, which invests local agencies’ funds in a huge portfolio professionally managed by the State Controller’s office. We also invest in certificates of deposit.
Commissioner Miller said with regard to the Certification of the Quarterly Investment Report, there is an exception noted that the funds with U.S. Bank exceed the amount prescribed by the Investment Policy and Guidelines. Are the auditors concerned that there is too much money concentrated in U.S. Bank? Ms Hampton explained that it’s a deviation from the City’s investment policy and thus must be disclosed. While the Port falls under that investment policy it doesn’t really fit us very well. The auditors are not concerned about the amount invested with U.S. Bank, which is the trustee for the 1999 Series Bonds.
VIII. PUBLIC COMMENT
NONE
IX. MATTERS OF BOARD INTEREST
Commissioner Miller reported on clean up work at the LBT, stating that large amounts of sludge were found in the pipes during their removal. The composition of that sludge is different from that which was expected and Miller explained that Cleveland Wrecking Service may submit a change order since this was not in the original scope of work.
Executive Director Giari commented that during the past month Cleveland Wrecking has taken down four tanks at the LBT and work is progressing as scheduled. Commissioner Miller has attended progress meetings with Port staff, the contractor and the supervising engineering company, URS. As Miller mentioned, the sludges and liquid waste were removed from the pipes, and both were in greater volume and of a different mixture than was anticipated. To date, the contractor has submitted several change orders for work not included in the original scope of work. One change order is for a permit from the Bay Area Air Quality Management District, which requires that any emission of lead and asbestos be assessed. There is lead in the paint of the tanks and there is asbestos in the lining of the pipes. Another change order was to reconnect electricity to the office building after disconnecting electricity throughout the whole site in order for demolition and remediation to occur. Giari said the change orders have been given to the Port attorney for review.
Chairman Castle reported that he recently attended the Short Sea Shipping Conference in Memphis, TN and found it to be quite interesting. The future is in short sea shipping with small ports and it was brought to everyone’s attention that since there are no new ports being built in the U.S., it is important to follow the potential in short sea shipping.
X. EXECUTIVE DIRECTOR'S REPORT
Executive Director Giari reported that the Port was honored to have a visit earlier this month by Lt. General Carl A. Strock, Commander and Chief of the U.S. Army Corps of Engineers. He and his entourage met with Mayor Pierce, Lt. Col. Kiley of the S.F. District -U.S. Army Corps of Engineers, and Port Commissioner Castle. We particularly want to thank CEMEX for allowing us to go to the top of their silos in order to view operations at the Port and marsh restoration at Bair Island.
Giari next reported on the Golden Guardian exercise that was held last week throughout Northern California It was an emergency preparedness exercise that the Port, the U.S. Coast Guard Auxiliary, Port tenants, Redwood City Fire and Police Departments, and several other outside organizations participated in for more than half a day.
XI. ADJOURNMENT
At 8:53 a.m. Chairman Castle requested that the Commission adjourn to its next regularly scheduled Meeting of December 13, 2006
A Motion to Adjourn was made by Commissioner Miller and it was seconded by Commissioner Garcia. The motion passed by a unanimous voice vote of all Commissioners present. Commissioners Aikins and Dodge were absent.
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