GALVESTON — Facing declining revenues and risings expenses, the Port of Galveston won’t give cost-of-living raises to its 80 or so employees. Not in the first half of the year, anyway. But Friday it will give each of them a one-time salary supplement of $1,000.

The Wharves Board of Trustees, which governs the port, approved the salary supplement Monday by a 7-0 vote. 

Each employee will receive $1,000 gross, although Trustee Benny Holland Jr. had wanted them all to net $1,000. Trustee Edward Walsh III, a certified public accountant, argued net would be far costlier because the port would have to cover both employee and employer payroll taxes. 

Walsh also questioned giving the salary supplements at a time when the landlord port was looking for ways to reduce expenses. 

But after discussion about how much more work port employees faced with five cruise ships sailing from the island beginning this month, Walsh said he thought the salary supplement was fair. 

“It’s a hard one in today’s economic climate,” Walsh said in a separate interview. “I’m always hesitant any time we spend money; I think asking the question about the validity and appropriateness is justified and reasonable.” 

More ships, more work

The port is a utility of the city. State law forbids city governments from giving “bonuses” to employees for past work. And cities can’t give holiday bonuses to employees unless such bonuses are included in the personnel policy at the beginning of the year.

But city governments can give extra pay for expectation of increased productivity. With more cruise ship activity on the island, employees are expected to shoulder a heavier workload without raises or more help next year, officials said. Among other belt-tightening measures, the port will implement a hiring freeze.

“I don’t know if people have an understanding of the additional work that goes in when these bigger cruise ships are here,” Port Director Mike Mierzwa said. 

That added work from all the cruise business cuts across all departments at the port, Mierzwa said. More ships require more contracts, more paperwork, more billing, more people to process, more security and more traffic control, among other needs, Mierzwa said.

Some employees will spend weekends when cruise ships are here helping to make it all work, Mierzwa said. Some are salaried and won’t get overtime. 

“I ask a lot of people to support this activity,” Mierzwa said. “I am fortunate as a port director to have outstanding people work for me without complaint and they deliver down in the trenches.”

Drought damage

The port will pay the salary supplements from money it saved this year by not filling positions, including that of the deputy port director, who earned $177,000. That position belonged to Mierzwa, who was named port director in February with a $220,000 salary. Mierzwa, who has a contract with the port, won’t receive the $1,000 supplemental pay.  

The port earlier this year hired Peter Simons, former director of the Port of Texas City Security Council, to be deputy director. Simons begins working at the island port Monday. Simons’ salary is $158,000.

The port projects operating revenues of $27.4 million for next year, down $445,405, or 1.59 percent, compared with this year.

Operating expenses for next year are expected to be $25.1 million, up $714,275, or 2.93 percent, compared with this year.

A major reason revenues are expected to be down is the reduced number of grain ships calling at the port. Grain exports are expected to be flat next year because of this year’s drought conditions, which resulted in less grain available for export and an abundance of competitively priced grain in other countries, port officials say. 

The port in 2010 received $1.1 million from switching and rail revenues. In 2011, it received $970,000 and this year switching and rail revenues, primarily from lack of grain shipments, dropped another 30 percent to $675,000. 

Rising expenses

Also, some of the rent payments the port receives are tied to the revenues generated by tenants, including by Gulf Copper, which has leased a marine repair facility at 2920 Todd Road on Pelican Island from the port since 2005.

Gulf Copper offers maintenance and repair of vessels and offshore rigs. When it does well, so does the port. Gulf Copper pays the port a base rent of $500,000 a year and it also pays a percentage of revenues. But less drilling activity in the Gulf of Mexico has meant less revenues, which affects the port, Mierzwa said.

Meanwhile, the port expects insurance rates to rise next year along with ship service expenses the port pays directly for the cruise lines operations but is compensated through higher passenger charges, officials said.

Deficit by depreciation

Other increases in expenses are related to depreciation — a reduction in the value of assets because of wear and tear. The port continues to make improvements and Hurricane Ike repairs to its property and facilities, leading to increased depreciation expenses.

On Monday, when discussing the salary supplement, Walsh referred several times to the port facing a deficit. The port expects to end 2012 with a deficit of $768,577 when depreciation is considered. Although depreciation reduces net income on the income statement, it doesn’t reduce the cash account on the balance sheet. From a cash flow point of view, the port will end the year in the positive.

Aside from a hiring freeze and not paying cost-of-living raises, the port also is eliminating all nonessential travel, Mierzwa said.

The port defines essential travel as that related to business opportunities and some required travel for employee training. 

The port’s fiscal year ends Dec. 31.

Reach reporter Laura Elder at 409-683-5248 or laura.elder@galvnews.com.

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(2) comments

Joel Martin

Laura, your reporting gets better and better with each story. Great job.

Dominique Devereaux

I agree! Laura, I ALWAYS enjoy reading your stories [smile]

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