GALVESTON

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.

John Wayne Ferguson: 409-683-5226; john.ferguson@galvnews.com or on Twitter @johnwferguson.

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(15) comments

Ron Shelby

Councilman Brown should consider that this change needs to be incorporated as part of the new Master Plan for the port, not after.

Ron Shelby

Of course, the Port could setttle this themselves, without having to go to a binding Charter Amendment by proposing a plan of increase to the city that all might be happy with.

Miceal O'Laochdha

Up until now, I really thought a good deal more highly of Jim Yarbrough than is warranted after hearing of this sneak attack. He has sat on the Wharves Board for these recent years without a word about the beliefs he now expresses for skimming off their improved revenue generation. Then, 2 meetings ago, he announces he is quitting the Wharves Board and sending in Dr. Brown to fill his seat so that Dr. Brown, who is running for mayor, can get some experience on Port issues (watch the video of Hizzoner's announcement to the Wharves Board). Then he sends this little surprise parting gift to his colleagues. Dr. Brown should feel just as sand-bagged by this move as the Trustees do. Use the additional money earned (not taxed) by the Port to repair its collapsing infrastructure. The whole city benefits from that.

Lisa Blair

The Mayor's not demanding that the port pay more. He's asking the citizens who care enough to vote, if THEY want the port to pay more. Sounds reasonable to me. It might inspire the port to get their act together and present their Master Plan. Maybe they can show that ALL of their profit should go towards rebuilding infrastructure. The port's finances are a mystery to most citizens, going from barely breaking even to substantial profits almost overnight.

Ron Binkley

After all these years, the port is finally making some positive decisions and some real money. I say we give them time to finish their master plan before throwing a wrench in the middle of it.

Miceal O'Laochdha

Asking the citizens if they want to pay more would be reasonable if the voters took time to educate themselves on the question and on the effects such a change to the Charter would create. But, will they take that effort? The only possible reason why "The port's finances are a mystery to most citizens, …" is because they don't know to watch the video of (or actually attend) Wharves Board meetings. The last 15 minutes of discussion by the Wharves Board of Trustees on the video of Tuesday's meeting, just prior to adjourning from Workshop, gives some very clear and hard numbers on what this charter amendment would mean in real terms. Or, even better, for those who actually want hard numbers and facts in full detail, take time to read the independent audit for 2018, which a Trustee reminds us is public information on Tuesday's video. Two percent is a small number. But when two percent of gross revenue equals FORTY percent of net revenue, it is a crippling number.

Don Schlessinger

Well said!

Timothy Thompson

Originally the port was THE raison d'etre for G'town even being built on this vulnerable, god-foresaken sand spit (kidding!) in the first place, back then, in the early to late 1800's the Port of Galveston was one of the main ports (certainly on the Gulf Coast), second only to New Orleans, & I would assume that back then it was property of the City and thus paid taxes. Or maybe I'm mistaken, does anybody know? So if it was a tax-payer when did it stop being one, when did it get taken off the tax rolls? Honestly I think it's crazy that the Port doesn't pay taxes, & sorry, I'm with Mayor Yarbrough, the City should profit at least somewhat from the port revenues, which are increasing yearly, due to business (esp. in the cruise ships) being VERY good, which, of course, means more people coming in, which is good, more tourists, more money for local businesses, but also the City needs to spend on infrastructure (fixing streets, water lines, etc.) to keep up with the increase flow of tourists. So why SHOULDN'T the City get some tax money from the Port, which seems to be in a growth phase?

Miceal O'Laochdha

Timothy, This is a good dialog as it brings out facts of which perhaps a lot of average citizens are unaware. The Port was originally a private enterprise; today it is a utility of the City, but a solely SELF-funding utility. It receives no tax funding, such as the Park Board does. It must compete with other Gulf Coast ports (most notably Houston) which are ALL funded by taxpayers, while the POG is not. That is a powerful competitive disadvantage. Galveston does have one competitive advantage in the docks being only one hour from the sea buoy, but that advantage does not extend to sea passages. A ship entering the Gulf at either the Straits of Florida or Yucatan, has a relatively minor course/time difference to the Bar of any port in the Gulf. So the POG starts out behind the eight ball vs. other ports. To complete on this uneven playing field, the Port needs to spend money on severely deteriorated and out-dated piers, dredging, security, as well a fixing roadways, waterlines, sewer lines and drainage, just like the City. But, unlike the City, it must pay for it with money earned, not tax money. Up until just recently, the Mayor was a vocal proponent of directing of tax money TO the Port, not collecting FROM it. We are left to wonder why his position has suddenly reversed itself. The charter amendment described in this story, at 2% of GROSS revenue, will break our Port and the millions of dollars generated by the high-paying working class jobs it supports.

Timothy Thompson

Wait, I'm confused, so the Port of Houston, which is, what, 2nd, or 3rd largest in the country in terms of tonnage, is funded by Houston taxpayers? I don't get it then, why does an entity like that, which surely generates a HUGE amount of profit, get taxpayer money. I guess I don't understand all the inner workings of all of this, esp. why a 2% charge on gross would break the Port, & again, what about my point that the City also has to pay for infrastructure improvement, some of which serves the increase in tourists from the cruise lines. & yes, you're right about the Parks Board also being independent, I guess I just don't know how this goes across the country, with other cities, that have, say, beaches, or lots of parks, or other similar entities that require expenditure and/or taxation to pay salaries, do maintenance, do many other cities have independent ports or, say, Park Boards, like, do New Orleans & Baltimore have separate, independent ports, I mean, I would assume the country's largest port, the Port of Long Beach, it probably an independent entity, not behold to the City of Long Beach, all of this, however, is quite fascinating, who pays for who, who pays their own way, who gets tax dollars, etc. I never understood, for instance, why churches are tax exempt, I don't think that's right, but, like, I do understand when cities or counties or whatever will offer large companies major tax breaks to entice them to come to there, that makes total sense.

Miceal O'Laochdha

OK, let's focus on the local questions for a start. Go to the Port of Galveston website, hover on" "About Us", then click on "Watch Meetings Online", then click on "Port of Galveston", then click on "Wharves Board Workshop, 23 July 19", then scroll down the index to Items G&H and click on that. During the next 16 minutes, you will hear Harry Maxwell explain how 2% of gross revenue would have equaled 40 % of the net revenue in a recent year and how taking a cut off the top (gross revenue) could actually result in a payment to the City that is greater than the total net revenue in a bad year, such as we have had not too long ago. You will hear Richard DeVries explain the figures on the economic impact that the POG has on the community. These figures are taken from an independent survey and report. If you review the Economic Impact Assessment, done by a 3rd party at behest of the IDC and GEDP, you will learn that the average Galveston County maritime worker earns an annual income $20,000 greater than the state-wide average. The POG and associated maritime enterprises have a tremendous financial and taxpaying impact to the community. If their (still modest) net revenue is diverted to the City from the urgently needed infrastructure repairs and upgrades (the City certainly isn’t going to pay for that) then the POG will lose its customer base to better Gulf Coast ports and the Elissa will eventually be the most modern cargo vessel berthing in this port.

Timothy Thompson

Thank you Miceal, you obviously know a lot, I will check out what you suggested!

Bill Broussard

Miceal. There are good arguments on both side des but the real driver here is every subsidy possible for the debt, buildings, salaries and head counts accumulated during mayor Jim’s tenure not unlike the same factors during his years as county judge. I like the man but he has a long trail of living well beyond his means and leaving costly buildings in his wake If he could find a way I’m sure thenpark board

Bill Broussard

Sorry. Don’t know what happened. I was trying to say “ I’m sure the park board would get tapped to help out the debt the administration has obliged us to also” Here’s an idea: if this does go to election, put in language that requires the city to reduce its operating costs in a dollar for dollar match to what the port contributes. We might get ahead if we do that but if spending and debt keep going at the “Jim Rate”. Port dollars and our proposed tax increase will not bail us out!

Wayne Holt

There are certainly knowledgeable folks wading in on this issue but I find something ironic. Between the Port generating so much local prosperity (but barely scraping by on funds to keep up their infrastructure) and the hospitality industry HOT revenue lowering the average property tax bill by over $4000 or so I've heard, it seems like property owners should be enjoying a tax bill that was in the three digits. Instead, there are folks in my building with a $9,000 tax assessment. How does that square with all this extra money sloshing around town that's enriching us?

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