For the second year, Port of Galveston trustees might drastically reduce revenue expectations from their original budget over uncertainty about the future of U.S. cruises during the COVID-19 pandemic.
Port trustees plan to meet next week to discuss adjusting plans for the rest of 2021 to account for the ongoing shutdown.
Trustee Harry Maxwell, chairman of the port’s finance committee, said one of the serious points of discussion will be whether to adjust the port’s expected revenue for the remainder of the year to assume that cruises won’t return at all.
“We’re just going to have to come up with a more realistic budget,” Maxwell said. Maxwell expected that port staff will present multiple scenarios for the remainder of the year, including one that assumes no cruise liners will leave the port in 2021.
Port trustees in November approved a budget forecasting $37.5 million in revenue in 2021. Of that, $15.3 million, more than 40 percent, was supposed to be generated by the port’s cruise business.
The port made a similar financial maneuver last year after cruises were canceled in mid-March, adjusting revenue expectations down by $14 million.
Through the first two months of 2021, the port posted a $68,000 net income loss from operations, according to a finance report published last month. Despite that, officials said the port’s cash flow is actually about $2 million higher than expected at this point this year.
The port had planned for a $1.8 million loss through the first two months of the year.
When setting its budget for this year, the port forecasted a return of cruises by the end of June that would increase through the end of the year.
But recent announcements have confirmed that won’t happen. Royal Caribbean Cruises announced Thursday it will cancel its cruises through the end of June. Carnival Cruise Lines canceled its June cruises earlier this week.
The two companies operate most of the cruises from the Port of Galveston.
To date, 134 cruises scheduled from Galveston this year have been canceled, according to itineraries published before the pandemic. In 2020, the port lost 254 cruises after the March shutdown.
The next scheduled cruise that could leave out of Galveston is a July 1 sailing of the Carnival Breeze. Tickets for that cruise were still being sold starting at $731 on Thursday morning.
Despite increasing pressure from the cruise industry and its supporters, it’s still not clear when cruises will actually resume in the United States. The U.S. Centers for Disease Control and Prevention’s conditional sailing orders, a set of strict rules cruise companies must follow to resume sailing, are set to be in place until November.
Earlier this week, CDC officials said they hoped cruise companies can resume some sailings under the conditional orders by mid-summer.
That hasn’t pleased the cruise industry and its supporters, who say the CDC’s rules are too strict to be manageable. On Wednesday, Carnival threatened to remove all its ships from U.S. waters.
Gov. Ron DeSantis announced Thursday that Florida had filed a lawsuit against the federal government and the CDC. DeSantis said Florida, which had multiple major cruise ports, was being irreparably harmed by the government mandates.
Galveston is Texas’ only cruise port. Port leaders haven’t discussed any sort of lawsuit against the federal government, officials said Thursday.
Instead, port trustees will focus mostly on Galveston’s own financial expectations. With cruises gone, the port’s operations have been buoyed by its cargo business and by revenue from short-term lay dockage, when ships dock for supplies and repairs, Maxwell said.
“Everything else at the port is up,” Maxwell said.
The port has put off some infrastructure projects and hiring during the pandemic. It had 24 open positions as of Thursday, Maxwell said.
But at least one trustee is expected to argue that the port needs to be more austere in its budgeting. Trustee Ted O’Rourke has questioned why the port hasn’t taken the same steps as other U.S. ports, which laid off hundreds of employees in recent months.
O’Rourke also criticized other spending he saw as unneeded in tight financial times, such as a plan to host a drive-in movie night at a parking lot this weekend.
“We need to really tighten our belt throughout the rest of this year,” O’Rourke said. “We should plan for the worst and hope for the best.”
“It’s time to start doing what we need to do to get to the point where we have positive net income,” O’Rourke said.