Why is the Port of Galveston proposing to borrow up to $13 million from banks for a cruise-ship terminal expansion? Would it be possible to get the money at a lower interest rate through the bond market?
Those are among the many questions thoughtful people are asking that should be aired today by the city’s Finance Committee.
The port’s governing body, the Wharves Board of Trustees, has asked the city to issue subordinate lien revenue notes to finance improvements.
Some good questions have been asked, and port officials should take them at face value — rather than as criticism — and try to answer them. The port’s business is complicated. People who represent taxpayers and who are being asked to sign documents that involve debt have a responsibility to get clear on the deal.
Here are some of the questions that the Finance Committee ought to take up:
• A group of local banks is proposing to lend the money at 4.4 percent interest. Several people, including City Councilman Norman Pappous, have pointed to recently issued revenue bonds with rates of 2.9 to 3.6 percent. Is there an alternative that would result in a public body paying a lower interest rate?
• Port officials have tried to diversify. Some of their proposals — a plan to build a liquefied natural gas plant, for example — have been publicly opposed. Still, someone has to ask whether the port, despite its best efforts, has reached the tipping point on debt for infrastructure to support the cruise business. In December, Moody’s reaffirmed a Baa1 rating on $24.6 million of the port’s revenue bonds, but lowered the outlook on that debt from stable to negative. The concern was that so much of the port’s business was tied to the cruise lines.
• In 2001, the port listed $10.9 million in operating revenues. It projects $26.9 million this year. The port’s greatest challenge is its aging infrastructure, and it has spent money trying to repair and improve facilities. But the port has added employees — it had 67 in 2001 and listed 87 in 2013 — which added to its operating costs. With revenue growth, would it have been possible to put more funds into capital improvements, avoiding the need to come to the city for help?
Those are not loaded questions. They’re questions, asked by lay people who very much appreciate what the cruise business has done for the island’s economy. The people with the questions don’t fully understand the complicated business of the public port, yet are being asked to sign on to a deal that involves their city’s credit.
Today’s meeting is a good chance to fill everyone in.
At a glance
WHAT: Galveston Finance Committee meeting
WHEN: 2 p.m. today
WHERE: Galveston City Hall, 823 Rosenberg, Room 204