People in Galveston have come up with several ways to describe how the city council disclosed a charter change proposition that would substantially increase the amount of money the Port of Galveston must pay the city each year.

That the city “sprang” it upon port leaders has been popular, as has been the idea it was a “sneak attack.”

It struck us as a “shot across the bow,” if you want to stick to the old-saw theme, or maybe a “brush-back pitch,” if you’re into baseball.

Yarbrough told The Daily News on Friday there had been two motivations for rolling out the controversial proposition without much discussion and forewarning for the Wharves Board of Trustees and the port’s administrative leaders, both of whom were stunned when they learned about it.

One was to get the attention of Port Director Rodger Rees and his supporters on the wharves board.

Another was to open a discussion about whether the port is contributing enough in direct dollars to the city’s operations and to the direct benefit of its residents; and if not, how much that amount should be.

The proposition, which the council has discussed putting to voters in a November referendum, would change the charter to require the port each year to pay the city $400,000 or 2 percent of its budgeted operating revenue, whichever was more.

The $400,000 would be a substantial increase over the $160,000 a year the charter already requires the port to pay. It’s more than double, obviously, but maybe not unreasonable, and, because it’s a flat rate, at least predictable. What’s causing heads to spin among wharves trustees and on the eighth floor of Shearn Moody Plaza is the 2 percent of budgeted operating revenue.

Had that requirement been on the books this fiscal year, the port would have owed the city more than $800,000, port leaders said.

The idea the port should contribute many more hard dollars to city’s operations isn’t new. Former council member Norman Pappous, for example, argued for years the port should be, and always had been, expected to pay much more than the token $160,000, about 25 percent of which ultimately goes to the public school district.

His argument got traction among some residents, but not much among officials and Yarbrough was among those most opposed to funneling money from the port, which has as many critical needs as the city.

So what has changed enough to have the mayor inclined, as he put it, to advocate for picking the port’s pocket?

One is frustration about unwillingness among port leaders to work constructively or even communicate consistently with the city, Yarbrough said.

“I just can’t get them to cooperate on looking for efficiencies,” Yarbrough said. “So yes, part of it was to get their attention.”

There were numerous concerns with the port’s accounting, contracting and hiring practices, Yarbrough said.

Among them was a spike in the number of voided checks, which had been two or three or four but recently shot up to almost 90 checks totaling more than $2 million, that the port staff had not clearly accounted for, he said.

Another reason is that the financial circumstances of both the port and the city are about to change, one for the better and one for worse, he said.

The port’s finances already had improved under Rees’ leadership, and its revenue might increase by as much as $8 million a year in a deal being negotiated with Royal Caribbean Cruises for a third passenger terminal, Yarbrough said.

Meanwhile, the city faces increased costs for police and fire salaries, police pension contributions and health insurance, he said.

Looming over all that is a state-imposed 3.5 percent cap on the city’s ability to increase revenue.

“That cap won’t affect us much for the first two years, but it will in year three and we have to get pieces in place to deal with that,” he said.

Yarbrough argued the amounts spelled out in the proposition — $400,000 and about $800,000 — would not be debilitating to the port, as some have suggested.

“I don’t know what $162,000 would have been in terms of the tax rate back in 1962,” he said. “I haven’t done the numbers, but it was probably 10 cents; $400,000 would be less than a penny and $800,000 would be a little more than penny.”

The first motive for floating the proposition definitely was successful. The mayor has everybody’s attention. The questions now are whether the city could make better use of a lot of port money than could the port itself, and whether all that could be debated and decided before about Aug. 19, the deadline for calling a charter referendum.

Both of those seem hard to sell in the short time there is to do it, but Yarbrough argues otherwise.

“Put it to the voters,” he said. “If it goes down, it goes down.”

• Michael A. Smith

Michael A. Smith: 409-683-5206; michael.smith@galvnews.com

(13) comments

Don Schlessinger

[thumbup][thumbup]

Steve Fouga

Before I moved to Galveston, I always assumed the Port generated a tremendous cash flow for the city. Otherwise, why have it? Just for jobs? Sure, jobs are important, but if the Port doesn't generate monies above and beyond those needed for its own operation, something is out of balance... [whistling]

Miceal O'Laochdha

"Just for jobs?". I know there is an ever-increasing portion of the Island population that no longer is concerned with jobs, but those jobs are where the "...tremendous cash flow for the city." is generated. Hundreds of waterfront jobs paying $20k above the state average equals hundreds of families paying property and sales taxes, buying cars, trucks, boats, and trailers with mortgages from local banks, buying insurance for those things from local companies, patronizing local businesses daily, contributing to local churches and fraternal organizations, etc. etc. Those workers are our neighbors and their hard work is churning capitol thru the community every day. Generating the monies for its own operations, so the taxpayers do not have to do so like the ports with whom it competes, is the Port's foundation upon which the cash flow of commerce it supports is based.

Steve Fouga

"but those jobs are where the "...tremendous cash flow for the city." is generated." Okay, fair enough, you've answered my question. You're saying the Port, in other words, doesn't make a profit. That's fine, but as someone not involved in the Port business, I'm surprised. I figured a Port would make money.

David Hardee

What the heck is a "VOIDED CHECK"? Please clarify!

David Hardee

• Follow up and simplification on the “Charter item meant to put Port of Galveston's back to the wall, mayor says” By JOHN WAYNE FERGUSON The Daily News on Jul 25, 2019 – and this editorial • Announcing a bureaucratic fight over “who controls the money”. The fight is to get control of money generated by the cruise industry. Both contestants are representing Galveston and hold titles as “public servants”- effectively. The winner will control money that effectively already belongs to Galveston. The bout’s winner will be declared the better of the two to apply Galveston’s money in the way it best serves Galveston and Galvestonians. The only distinction between the contestants is “city” versus “port”. In the city’s corner Mayor Yarbrough and across the ring representing the Port is Director Rees. The rules for the bout will be eventually be settled after a long expensive preliminary fight between the city lawyers versus the port lawyers. This preliminary bout has an unlimited number of rounds and the knock out will come in the court’s decree after legal expenses have consumed their fair share. Galveston tax payers will if: Rees wins - spends the money on the cruise business. If Yarbrough wins – pay pension debt and unpaid bills that courts decreed owed for 11 years to IKE contractors, etc. All event expenses are paid for by the tax payers. Ps – City has a tax rate increase underway. Put this to a vote also.

Jim Forsythe

Voiding a check is a simple process that's necessary more often than you might realize. Many employers require a voided check for direct deposit. Some agencies require it to verify your identity. Other places use it to automatically debit your account for monthly services, making payment convenient. And, of course, there are times when you make an error that requires you to discard a check and render it useless.

Miceal O'Laochdha

Since the first several examples of voided check usages do not require monetary value assigned to them, and since the 90 checks were worth somewhere north of $2 million, I think they must have fallen into that last category.

David Hardee

In this article - these "void checks" refered to as responsible for accumulation of $2,000,000.00 of what (bad debt? or fraud). ................ Yarbrough said "

Among them was a spike in the number of voided checks, which had been two or three or four but recently shot up to almost 90 checks totaling more than $2 million, that the port staff had not clearly accounted for," he said.

Charlotte O'rourke

Trustees review two check registers as part of its internal control oversight - the POG operating account and the GPFC operating account. These registers are posted online. The Finance committee and then the Board are supposed to ensure that all checks and fund transfers from each account are reviewed/approved. Just like your own checkbook the check numbers go up incrementally .... check 1, 2, 3, 4, 5, 6, .... 10. If a check number is missed or skipped from the Check Register there may be an issue. Was the check voided (if yes, it should be on the void report)? If not on the void report, then what happened to that skipped/missed check? Say check 7-9 aren’t on the check register and not on the voided list .... then you would need to determine why? The initial voided report reviewed by the Board listed about $7,000 of voided checks. When a request was made to rerun the report, the new report listed about $2.3 million in voided checks. The first set of data that was reviewed was obviously inaccurate as checks that were voided due to a misprint weren’t on the original report. This was discussed at the last port meeting.

David Hardee

Thank you, Sir! That was very clear. NOT A MONEY PROBLEM! it was a indication that proper control and reconciliation was not being done.

David Hardee

Woops. Thank you, Charlotte O'rourke!

AJ LeBlanc

I respect Mayor Yarborough and Mr. Rees – both are experienced and competent leaders. If they would bring their intellect together in a collaborative manner all of Galveston would benefit. (After all, that’s the end game, isn’t it?) The current set of circumstances, however, seems a bit antagonistic. This is the opposite of what I was hoping for and I’m disappointed in the potential loss of opportunity for Galveston. Both men have the business acumen and interpersonal skills to right this ship. Gents, please, sort this out.

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