A former Galveston city councilman has renewed calls for a charter amendment increasing the amount the Port of Galveston would pay to the city, after a recent vote to approve a $62 million bond proposition.

“Truthfully, my motivation for starting this again is the bond issue,” Norman Pappous said. “I thought it was unethical for the council to offer citizens the ability to decide on whether money comes out of their pockets, but not allow voters to decide whether money should come out of other citizens’ pockets. Why does the port get special treatment?”

As the councilman for District 4, Pappous in 2016 sought a charter amendment that would have increased the amount the port pays the city each year.

A majority of the city council declined to put that proposed amendment on the ballot, however.

Pappous has created a petition for people to sign asking for a similar charter amendment.

The petition requests the city council to vote to place an amendment on the next charter ballot that would require the port to pay 6 percent of all gross revenues to the city, and that if the port fails to deliver the payment on time, all members of the Wharves Board of Trustees, the port’s governing board, would be removed and replaced by popular vote.

The city’s charter now requires the port to pay the city $160,000 annually from its operating revenue — money that the port has left over after paying for maintenance and operating expenses.

The payment amount was established in 1940, the year the city took control of the port, and hasn’t changed much since. In 2015, the port paid $188,000 to the city.

Pappous, who has worked as a financial adviser and economics professor at Galveston College, said that, adjusted for inflation, $160,000 in 1940 would be $3.7 million paid to the city, in 2015.

Port leaders oppose the idea.

“It doesn’t make sense to begin with, from either a tax or an economic standpoint,” interim Port Director Peter Simons said. “One point is that we are already in a unique situation, unlike a navigation district, in that we have no ability to levy taxes. This would further disadvantage the port, not only requiring us to pay more taxes, but taxes based on gross revenue. No entity or enterprise does things on that basis.”

Pappous argues that the city bought the port in 1945 with the intention that the port would continue to pay property taxes as it had before the purchase.

“The port pays no local, state or federal taxes,” Pappous said. “It can’t even pay 1 percent — it’ll claim poverty. To me, that’s a failed business. I understand leadership says it’s a question of if we want to be in the maritime industry. We have a 75-year history with it. To me, based on the benefits, hell no.”

Port officials have said the organization’s effectiveness should be judged on how many jobs it produces on Galveston Island and the county as a whole, Simons said.

The petition also asks for the city to make a payment of about a third of the amount received from the port to the Galveston Education Foundation.

“I created it late Saturday and it has gotten 20 signatures,” Pappous said. “But over 100 likes. People like the idea, but don’t want to go on record.”

The petition is nonbinding, but if interest in the amendment continues to grow, it’s something Pappous is interested in pursuing further, he said.

“The interest tells me if I do put money into this and others want, we can put it on the next ballot and it will pass,” Pappous said.

The recent $62 million bond proposition passed with a wider margin than many expected. More than 60 percent voted in favor, and about 39 percent voted against.

It marked the first time since 2001 that city officials had even broached voter-approved sale of general obligation debt. The bond sale will allow for designated street and drainage fixes as part of the city’s capital improvement plan, all to take place over five years.

The resulting tax increase from the bond sale will cost the owner of a $215,000 property — the median value in Galveston — an extra $60 a year in property taxes, according to city estimates.

Residents in 2018 would see a 3.5 cent tax increase on every $100 of taxable property value, according to city documents.

Matt deGrood: 409-683-5230; matthew.degrood@galvnews.com

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(30) comments

Don Schlessinger

Agree, Agree, Agree! Mr. Pappous, please tell me where I can go to sign this petition.

Jack Cross

The port has made a lot of improvements in recent years, but for 50 years the port authority let the wharves facilities go to the dogs,

Don Ciaccio

I agree 100% with Mr. Pappous and urge all Galvestonians to sign the petition. To think the Port of Galveston is paying the same amount to the city it was in 1940 is beyond comprehension. It's time to let the VOTERS decide this very important issue. Put it on the ballot! Let Galvestonians make the decision.

Ron Binkley

Woo Hoo........20 whole votes in just a week. I think you have an uphill battle!

Don Ciaccio

Here's the link to sign the petition
https://www.gopetition.com/petitions/galvestonians-request-fair-taxation-grft.html

Lisa Blair

I'm certainly not an expert but I know that the finances of the P of G aren't much more complex than a lot of us realize. There's a lot of debt as the result of building the facilities necessary to bring in the cruise business. The port is not a taxing entity so it is reliant on its revenues. I think we all need a lot more education about how it all works.

Lisa Blair

Oops. ARE much more complex.

Charlotte O'rourke

It is much more complex. Three points:

1). "The port pays no local, state or federal taxes,” Pappous said.

Before putting out a petition, one should make sure that it does materially misrepresent facts.

Anyone interested in the port and its contributions to our community should read the economic impact study.

2). The port's many competitors RECEIVE tax support .... not pay the city. What a competitive disadvantage we will have to overcome against other ports!

3). Sometimes well intentioned people don't know what they don't know with disastrous results.

Charlotte O'rourke

It is much more complex. Three points:

1). "The port pays no local, state or federal taxes,” Pappous said.

Before putting out a petition, one should make sure that it does NOT materially misrepresent facts.

Anyone interested in the port and its contributions to our community should read the economic impact study.

2). The port's many competitors RECEIVE tax support .... not pay the city. What a competitive disadvantage we will have to overcome against other ports!

3). Sometimes well intentioned people don't know what they don't know with disastrous results.

Don Ciaccio

It should be up to the VOTERS to decide whether the POG should pay more to the city. Of course the Port has an economic impact. The question is - should they still be paying the same amount to the city that they were in 1940! That decision should be left up to the voters because our taxes are affected by the amount the Port pays to the city. Let the VOTERS decide.

Norman Pappous

Individuals opposing a stricter fiduciary approach often point to the positive “economic impact” on our community by their favored taxpayer-subsidized entity. This is a dishonest argument for two reasons. Economic impact studies ignore “opportunity cost” - what the resource would produce if put to their highest and best use. [A hypothetical example - if the Port of Galveston (a city resource) were sitting on the world’s largest oil reserves, the economic benefit that the oil field might potentially produce (highest and best use) is ignored when calculating the port’s economic impact.] Secondly, the economic activity of we citizens represents Galveston’s largest local economic impact. Why then are our taxes subsidizing entities that produce a lower economic impact - a practice that restricts economic growth? The answer: Capital cronyism enabled by some elected and, with much greater frequency, appointed officials.

Norman Pappous

Facts:
1. The residents of Galveston are the city’s largest, and most efficient, economic driver and pay local, state, and federal taxes.
2. The Port of Galveston (PoG) is a municipal entity that pays no local, state, or federal taxes.
3. Galveston voted to buy the PoG in 1945 with the promise, by city leaders and the Daily News, that payments (property taxes) to the city would continue as they had in the past.
4. In 1942, PoG payments to Galveston represented 13.2% of the PoG’s gross revenues.
5. In 2014, the PoG payment to the city represented 0.58% of the PoG’s gross revenues.
6. If PoG payments remained at 13.22% of gross revenues, they would have paid the city $3.7 million in 2015. Actual 2015 PoG payment was $188,076.
7. Since 1975 Galveston taxpayers have had their property taxes increase, on an annualized basis, by over 10%.
8. Since 1975 PoG payments to the city have increased, on an annualized basis, by 0.40%. [Note: Taking inflation into account, the actual rate of increase for PoG payments is negative.]
9. PoG revenues have increased with inflation since 1945.
10. If PoG payments to the city had kept pace with inflation, they would have paid the city $2.7 million in 2015. Actual 2015 PoG payment was $188,076.
11. By Charter, the Wharves Board and the PoG do not answer to Galveston’s City Council. Any lasting, permanent change to the PoG’s payments can only be accomplished through a Charter change.

Charlotte O'rourke

Norman, please address your material mistakes - there are more than one - in the petition.

Also, one of your concerns listed is unfairness. I believe that it is unfair to voters to misrepresent facts. Opinions are great, but facts are well facts.

It sounds like you are arguing that entities that the public owns should be taxed because it would have more value privately owned or for a different purpose.

One would assume you also want the Parks Board (city owned), nonprofits (city supported and tax exempt) and UTMB (state owned) to pay the city in lieu of taxes.

I've heard this argument many times in the past. I don't agree with it.

Are all of these - or just the port - going to be voted on for the sake of FAIRNESS and relief from taxation because your taxes are impacted? I didn't see them in your petition.

I'm all for fiscal accountability from all public entities. I am not for killing the public owned port or city or tourism or UTMB through taxation and placing it at a competitive disadvantage.


Norman Pappous

You. or anyone else, can start a petition to address any perceived unfair financial agreement you want to. None of that obviates the Port's broken deal they made with the citizens in 1945.

Norman Pappous

Charlotte - there are no material mistakes. None. The citizens of Galveston were promised that payments from the port to the city would continue as they had. That promise, and it is well documented, has never been kept. You want to address everything other than that - and that is your right. But my point is the Charter language that betrayed what our citizens were promised. It is in black and white for everyone to see. There was no such arrangement with UTMB or the Park Board.

Charlotte O'rourke

Black and white - There is no escalator in the Charter .... that would be a contract with the voters and intent wouldn't be speculation. Contracts should be in WRITING.

It is false that "NO" local, state or federal taxes are paid by the port or its tenants.

It appears you have your own tax exempt entities that you believe are worthy of support, but not others. So much for FAIRNESS.

“Truthfully, my motivation for starting this again is the bond issue,” Norman Pappous said. “I thought it was unethical for the council to offer citizens the ability to decide on whether money comes out of their pockets, but not allow voters to decide whether money should come out of other citizens’ pockets. Why does the port get special treatment?”

LOL

I'm done. We will have to agree to disagree.

Norman Pappous

The tenants are immaterial to this discussion. As a matter of fact, the Port acts like a co-op and I think they should buy the Port and run it officially as a co-op and get it back on the tax rolls. If you think that the representations, in print, by the port and city leaders, did not promise what I say then you have never read the 1945 articles on the vote.

Tim Thompson

GDN journalists, if this gets put on a ballet, could y'all please write a long, in-depth article on all this, the pro's & con's? I know y'all have written on this subject quite a lot in the past but it might be time for a thorough analysis of all this. As I understand it the port is one of the three major economic engines of this island, besides UTMB (which doesn't, as far as I know, pay a TON of taxes) and the tourism industry, which does pay its fair share of taxes.

Charlotte O'rourke

Norman, I'm saying that if a promise was made to voters it should have been written in the charter. It wasn't. I wasn't even alive in 1945 so .....

Pappous: "There was no such arrangement with UTMB or the Park Board."

You are kidding about this statement, right?

Voters approved the city convention center with the Park Board to get property tax relief as HOT funds were supposed to go to the city for any purpose. Instead money goes to the city only for heads in beds purposes, and cannot be used for general fund purposes.

And this vote and broken promise at least occurred in my lifetime.

I hesitate to mention this tax vote only because someone may try to put the Parks Board owing 6% of their gross on the ballot as well.

Bet you still don't want to put the Park Board on the ballot even though, gee, it was a BROKEN promise in the last twenty years?

I am still laughing that the petition calls for giving the funds collected from the city owned port to a nonprofit that you deem worthy.

The city is reviewing assets .... I say let them do their job without putting something on the ballot that hasn't been fully vetted.

Pappous: "There was no such arrangement with UTMB or the Park Board."

False.

Actually, voters approved the convention center with the CITY/Park Board to get tax relief as HOT funds were supposed to go to the city for any general fund purpose. This turned out to be false.

Bet you still don't want to put the Park Board on the ballot. LOL

Tim Thompson

Yes, can somebody please quote the original wording of the 1940 charter, does it give a percentage of the net proceeds or a dollar amount, or words to the effect of "whatever's left after expenses." This is pretty relevant to the current discussion, no?

Jarvis Buckley

Norman like you miss O'Rourke is very wise. She chooses her words
Carefully. On this issue as most folks probably do. I agree with you. One might conclude she has a little conflict of interest. Just saying.....✌️

Norman Pappous

Section 9. Payments to the City. From the annual net income remaining in each fiscal year after payment of all current maintenance and operating expenses the Galveston Wharves shall pay to the City of Galveston the sum of one hundred sixty thousand dollars ($160,000.00) of which amount twenty-five and thirty-nine one hundredths per cent (25.39%) shall be paid over to the Galveston Independent School District and the remainder thereof shall be for general City purposes. All other net revenues of the Galveston Wharves shall be retained thereby for the betterment and extension of this utility to the benefit and advantage of the City, provided, this shall not prevent the Board of Trustees from agreeing and contracting to pay the City at a reasonable and proper rate for such special services furnished by the City to Galveston Wharves as would not customarily be furnished to other businesses or utilities or if so furnished would not be furnished without a charge being made therefor.

(Ord. No. 73-17, § 3, 4-12-73; Ord. No. 96-59, § 15, 6-16-96)

Tim Thompson

Ok, so as it states here, it wasn't a percentage amount like what you're asking for (6%), it's a flat fee, and you make the argument that $160,000 (in 1940 or 1945), in today's money (i.e. adjusting for inflation) would be several million dollars, that is correct but again, that's not the wording of the charter, it does not mention a percentage, so I don't follow your argument that 160k in 1945 dollars should be up adjusted to day's dollar.

Then you say "3. Galveston voted to buy the PoG in 1945 with the promise, by city leaders and the Daily News, that payments (property taxes) to the city would continue as they had in the past. '

and then you say

"4. In 1942, PoG payments to Galveston represented 13.2% of the PoG’s gross revenues.
5. In 2014, the PoG payment to the city represented 0.58% of the PoG’s gross revenues."

So I'm confused, why are you saying the Port is not keeping it's 1945 promise to pay the city "as they did in the past?" Was there another, separate payment besides this 160K amount? Because sure, of course, since the charter document did not specify that payments be pegged to a PERCENTAGE amount, since it stated a flat fee, well of COURSE that money is going to erode over time, due to inflation.

So I'm guessing what you're saying is that the charter document should have be written as a percentage (you suggest 6%), to account for cost of living increases, i.e. inflation. Well, that's obvious, but that's not the same thing as charging that the City is not keeping up with it's obligations according to the charter, to me it seems they are following the letter of the charter, no?

The charter was written in 1940, and it was passed by Council (I assume it wasn't put to a vote by the citizens?), perhaps times have changed, and maybe it needs to be re-written and voted on by the citizens, but again, I don't think it's fair to say the City isn't keeping up their end of the obligation.

Tim Thompson

Sorry, correction on last paragraph, "i don't think it's fair to say the Port isn't keeping up their end of the obligation."

Norman Pappous

Timothy, you should also read the articles that addressed the 1945 vote that would decide if the City would buy the Port. In those article you will see that city leaders, including an editorial in the Daily News, promised that payments from the Port to the City would continue as they had before. It is beyond credulity to believe the citizens voted to buy the port and forgo the payments that it was providing to the City. Revenues and expenses have all increased at the Port on an annual basis - so why not their PILOT (payment in lieu of taxes) payments? Additionally, in 1960 a group of citizens, headed by Kempner and Dibrell, were asked by City Council for a list of recommendations on the port. One of their recommendations? An increase, based on tonnage, of the Port payments to the city. They had three suggestions that they recommended go on a Charter ballot. The City council voted them all down. At the end of the day, if you want the port payments to stay the same - vote against it. But let's give Galvestonians, who own the port, the right to have their say.

Charlotte O'rourke

As you can see from the charter language, there is no port payment escalation clause. Trying to implement new taxes for the port which is financially constrained from a 60 year old recommendation that was REJECTED in the 1960s is a receipe for disaster.

In response to Jarvis, conflicts of interest terminology, legally, pertains to financial conflicts. I don't have a financial conflict. For people that do not know me, I was the first female port commissioner from 1997-2003. I worked at UTMB as a systems analyst, and am now retired.

My husband who is also retired serves currently as a port commissioner doing community service and was a past union president.

Happy Mothers Day to all. I'm signing off and waiting for another interesting topic?

Jarvis Buckley

I never have doubted your dedication to Galveston Ms. O'Rourke not your
wisdom. My comment about conflict of interest was saying basically you may be to close to the forest to see the trees. I do respect your opinions.
As wrong as they may be at times.😀

Charlotte O'rourke

Thank you Jarvis. Civil discourse is always nice.

The inherent bias in this discussion isn't mine, but unfortunately belongs to Mr. Pappous. The petition and his presented "facts" twists itself into a pretzel trying to make it valid and doesn't match the history as written. If he has evidence to suggest otherwise he should post it.

First, property taxes are based on VALUATION of the property and not gros revenues, the charter lists a specific value, outlines the importance of the port to keep the net, and does not mention an escalator, normal tax valuation process, or gross revenues.

By 1940 the private port was in deep trouble trying to compete against new public tax exempt and tax supported ports in the Gulf Coast. And it still struggles today and is at a competitive disadvantage because it pays taxes.

Mr. Pappous also tries to make the case that our city leaders and newspaper are unethical and the public was promised something in 1940 that it didn't receive. It appears to go against the documented history and city charter as written.

Mr. Pappous should just say he wants to treat city managed properties (by nonprofits, Parks Board, and Wharves Board) differently. On port industry he wants to place a tax based on gross revenues. This goes against the state exemption laws so an attorney would have to address whether voters could vot on this. I'm not an attorney so ....? Pappous wants to allow nonprofits and the Park Board managed properties to adhere to normal state exemption laws and not pay a gross tax because according to him .... we, the people of Galveston, were cheated.

Brief history and why I'd don't think our city leaders were unethical or stupid:

"Under the Reconstruction Finance program, headed by Houstonian Jesse H. Jones, federal funds were being loaned at low rates to other port cities to stimulate the capital improvements in their wharves. Though Corpus Christi, Beaumont, Port Arthur, and Houston were embarking on substantial improvements to their municipally owned wharves, they were not burdened with paying taxes or expected to put aside funds for maintenance or shareholder dividends. As a mostly private entity, the Galveston wharves could neither share in those funds nor refuse to continue paying taxes on the wharves' $17 million tax value. In 1938 earnings for the wharves were but $167,442, while taxes paid were $294,591. In the late 1930s the city annually received about $150,000 in tax revenue from the wharves."

"Efforts to interest the railroads in buying the wharves were unsuccessful, and in 1939 they were sold to the city for $6,293,001. The sale was consummated on November 29, 1940, after a citywide vote ratifying the terms."

Jack Cross

Charlotte, UTMB doesn't pay taxes by state law, but it would be a good idea if some of it did.
All of the huge UTMB development on the mainland is for pay. This creates competition with private doctors. UTMB sends all of its poor and indigents to Galveston. Not the mainland. And UTMB treats illegals free, they can't ask them for payment or ask any questions about legal status or residency. In other words foreign citizens have more rights that American citizens. The costs are staggering, not to UTMB but to taxpayers because the state and federal government pays for this. We don't know the costs because the state and federal government keeps it hid from the public. One illegal at UTMB occasionally runs up a bill or over a million dollars, wow how the city and port could used a few of these many millions of dollars. You won't see any of this in the GCDN, but you will see a lot of Trump fact check

Charlotte O'rourke

Jack, yes, UTMB has a state tax exemption. So do nonprofits, city properties, Moody Gardens, etc.

I always thought that these tax exempt entities could agree voluntarily to provide payment in lieu of taxes (PILOT).

However, Norman believes per the petition and online statements that city council (per citizen request or by themselves) can place on the ballot mandatory elections to assess a PILOT based on whatever the citizens or council decides to tax (entity and amount of tax).

Norman's petition focuses on the port as he is convinced that the newspaper and city leaders have lied to the public since 1945 (?).

Norman doesn't believe in taxing UTMB or any other non paying tax entity.

He wants to give 1/3 of this port payment to his charitable nonprofit.

He is seeking a mea culpa from the newspaper, port and city for something he hasn't proved happened.

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