Hard feelings and potential hard times are at the center of a charter amendment that could force the port to pay hundreds of thousands of dollars more to the city each year, Mayor Jim Yarbrough said Thursday.
With little public warning, the city council last week published a list of proposed charter amendments that might be put to voters in November.
Among them is a proposition requiring the Port of Galveston to pay the city either $400,000 or 2 percent of its budgeted operating revenue, whichever is more.
Wharves Board of Trustees, who govern the port, have condemned the proposal, arguing such a requirement could stall progress made over the past two years.
The existing charter requires the port to pay the city $160,000 from its revenue to the city. Had the proposed amendment been in place during this fiscal year, the port’s payment would have been about $860,000, port officials said.
Making progress was the point of the proposal, Yarbrough said at a city council workshop meeting Thursday.
“People are not going to move to change unless their backs are against the wall,” Yarbrough said.
It isn’t the first time the city has talked about looking to the port, a utility of the city, for more revenue to pay for city operations.
A split council in 2016 blocked a proposal that would have required the port pay a percentage of its gross revenues to the city. Yarbrough voted against that proposal twice, at one point saying it would create a “King Kong”-sized opposition group and undercut the city’s negotiating position with the port.
Yarbrough struck a different tone Thursday and outlined two reasons the council should take the question to voters now — timing and financial pressure. By law, the city can hold charter elections only once every two years. There are other parts of the charter the council might propose to change — about how often the council is required to meet and how much the city manager is allowed to spend without the council’s permission.
At the same time, the city faces new financial realities. The combination of a $15.7 million civil judgment against the city over money owed to a Hurricane Ike contractor, increased city contributions to the police pension program and new revenue limits imposed by the Texas Legislature have city leaders talking about possible lean times ahead.
The port’s record-setting revenues are an attractive option for easing some of that pressure, Yarbrough said.
The port this month reported that it had set record revenues in 2018, raising $43.5 million in operating revenues and producing a net income of $8 million. The port is projecting even higher revenues this year, officials said.
Officials credit the revenue increases to the continued growth in the cruise business, an increase in cargo activity and upticks in the port’s lay dockage business from ships docking for short periods to refuel or be inspected.
The port is a public entity and does not pay property taxes to the city, but it does make some payments to the city already. While the charter requires the port to make a $160,000 annual payment, negotiations between the port and city in recent years have increased that amount to $190,000, Port Director Rodger Rees said.
The port pays another $12,000 to the city for the use of the Shearn-Moody Plaza Parking Garage, as a payment in lieu of taxes, Rees said. The port also pays a percentage of the parking revenue from that garage to the city, he said.
Aside from direct payments to the city, the port argues that sales taxes from parking revenues generated another $146,000 for the city, and that it spends about $6.8 million on local vendors annually.
A charter referendum could wait until next May’s local elections, when a new city council will be elected, but Yarbrough noted waiting for May might make the issue even more politically fraught.
Beyond the practicalities, Yarbrough said part of the reason for the charter talk was his frustration over communication between port managers and the city.
Yarbrough prodded City Manager Brian Maxwell to tell the council that the city has had no substantive discussions with the port about its plans for a proposed third cruise terminal, which the port has been negotiating with Royal Caribbean since December 2018.
“There’s still a prevailing attitude that the city’s an afterthought,” Yarbrough said.
Other council members seemed more hesitant about moving forward with the charter proposition, saying it might be more prudent to allow the port to finish its ongoing master plan and its negotiations on the new cruise terminal before calling for a charter change.
Among them was District 2 Councilman Craig Brown, who is running to replace Yarbrough as mayor next year.
“They do have this master plan coming up,” Brown said. “I think that we wait to see what this master plan says. I think that master plan is going to come in. They’re going to identify the projects, they’re going to prioritize them and identify funding and how much it will be. That may have a bearing on how we structure this thing.”
Wharves Board Trustees Elizabeth Beeton and board vice-chairman Albert Shannon attended Thursday’s workshop meeting, and afterward said they don’t support the proposed charter amendment and didn’t appreciate the suddenness in which the proposal appeared.
“This just came out of left field,” Shannon said. “The mayor has been on our board for two years and has never mentioned this additional tax to the port by the city.”
Shannon said he and other board members spent the past few days speaking with members of the city council about the board’s concerns about the charter proposal.
“I don’t think it’s intended to benefit the port, it’s intended to benefit the city,” Beeton said.
Beeton said she believed the amendment was directly tied to the port’s negotiations over the third cruise terminal.
Rees last week met with officials from Royal Caribbean to continue negotiations over the terminal. While no details about the final proposed $100 million cruise terminal have been released, Yarbrough last week said he expected the city to receive some sort of financial benefit from construction of the terminal.
Beeton speculated the proposal, which was added to the council’s agenda about the same time the negotiations were going on, was a way for the city to emphasize its sway over the port.
If the issue does come to a vote, Beeton said she thought it should wait until the May election, when it could be a point of debate between council candidates.
“We need to inform residents about what their menu of options are,” she said.
For his part, Yarbrough acknowledged port officials wouldn’t like the consequences the charter vote holds for the port’s bottom line.
“Anytime you start picking somebody’s pocket, they start getting a little nervous,” Yarbrough said.
The council has until Aug. 19 to decide whether to place an item on the Nov. 5 local election ballot.