With its back to the wall, port tries a new business plan
FROM THE NEWS-LEDGER — MARCH 20, 2013 —
Local leaders say turnaround hasn’t come & it’s time to change business model
By Steve Marschke
With the “B-word” – bankruptcy – returning to conversations about the Port of West Sacramento in recent months, the port’s governing board last Wednesday adopted a business plan that calls for a major change in strategy.
“We’re proposing that the port shift to a different focus – that would be a ‘landlord’ basis,” West Sacramento City Manager Martin Tuttle told the port’s governing commission. The commission then listened to a presentation from city staffer Aaron Laurel detailing a 22-point action plan that called for reducing overhead and maximizing income from the port’s landholdings.
Staffers hope the new plan will stop the bleeding. The port has shown annual deficits of about $821,000 to $1.48 million (33 percent to 43 percent of revenue) during the past six years, often backfilled by one-time land sales and by support from the now-disbanded city redevelopment agency.
“There’s a tremendous financial risk to the city right now, given the port’s financial situation,” said Laurel, an economic development manager for the city.
West Sacramento took over majority control of the port in 2006 – the last time the facility faced bankruptcy fears. The half-century old port was originally created by a governing district consisting of all of Sacramento County plus eastern Yolo County, with most of the governing board members appointed by the City and County of Sacramento. It was called the “Port of Sacramento.” With the port in financial trouble and a lack of regional will and resources to fix the problem, Sacramento agreed to divest most of its interest, and it then became the “Port of West Sacramento.”
[adrotate group=”7″] Laurel told the port commission Wednesday that, despite a number of promising business ventures, the facility’s cargo still lacks diversity (rice shipping is the mainstay) and revenues are still short.
Fixing the problem starts with cutting costs.
“The number-one recommendation in this category is to implement administrative cost reductions,” said Laurel, “and to move staff currently at the port over to the public works department. There is an impact to the City.”
Laurel said the plan would move the duties and costs of some port personnel to the city, and make other changes saving around $600,000 per year.
Another major part of the plan is to stop directly operating the port’s terminals – instead leasing the North Terminal facility to a cargo handler, and exchanging the vagaries of cargo revenue for the stability of a rent check from the new tenant. Staff hope to find a new terminal tenant within the next few months, preserving the port’s role as a rice shipper in the process. Rice handling brings in about $2 million annually.
The strategy also calls for maximizing the potential of other property, including the 270-acre Seaway project in Southport. This is “arguably the Port’s most valuable and promising long-term asset,” said the city staff report. The port will need to work with city government to find ways to upgrade infrastructure at Seaway and other port properties in order to ready it for development, the report added.
The port should also explore marketing some of its unused Delta properties, including Prospect Island and Decker Island, as “habitat mitigation” projects for developers.
Listening to the business plan’s bullet points were port commission members Bill Kristoff, Oscar Villegas and Mark Johannessen (all West Sacramento city council members) along with Mayor Christopher Cabaldon and the commission’s chairman, Yolo County Supervisor Mike McGowan.
Their response was earnest and supportive.
Johannessen noted that the plan calls for continuing to find money to deepen the port’s shipping canal to allow larger ships and heavier loads.
“We’re at 30 feet, and 35 feet is where about 80 percent of the world’s fleet is,” he said. “It’s going to take a sustained effort to do that (deepening).”
Kristoff seconded an effort to diversify cargo, noting that “I know we’ve said it before – but it’s something that can really happen at the port.”
He also approved of the plan to keep working on creating a “marine highway,” connecting this port to other regional ports using containers and barges on the waterways.
The status quo hasn’t been good enough, noted Villegas, who was also supportive of the new strategy.
“This organization – our city, our port – it just doesn’t work,” he said. “We’ve given it our best shot, and it’s clear it doesn’t work.”
Referring to the reorganization around 2006, Cabaldon echoed that point.
“This is extraordinarily serious,” said the mayor. “All of us were, one way or another, involved the last time we had a set of recommendations. . . which didn’t happen. We failed miserably.”
“We are at a point where if we don’t have an option that will work for sure, we are facing the option of closing,” he said.
Cabaldon said that, with or without federal funding, it was “necessary for the long-term certainty of the port” that it find a way to deepen the canal. He urged the board to stiffen the recommendation in the new plan both to find a way to pay for the channel work and to make the “marine highway” real.
Cabaldon also asked staff to see if the former partners in the port – the city and county of Sacramento – would be willing to untie the port’s hands some more by dropping the agreement they negotiated when they gave up control. The agreement includes a number of inconvenient provisions, reported Laurel. It also reserved the right for Sacramento to share in certain newly-generated revenues if they were to occur.
The rest of the commission agreed.
Chairman McGowan noted one other complaint, in an apparent reference to the waiting list new members face when trying to get into the Lake Washington Outboard Club, which leases land at the port.
“Since we’re no longer a regional facility and we’re a local facility, I’d like to revisit why we have non-district residents who are members of the boat club,” said McGowan. “I have some ‘homeboys’ who can’t get in because of somebody from Carmichael.”
The West Sacramento Chamber of Commerce submitted a letter of support for the new port business plan. A representative from the local longshoremen’s and warehouseman’s union expressed concern about preserving union rights as port property was repackaged for lease to a private operator, but did not otherwise oppose it. (Several local unions did fight the transition from regional control of the port to local control around seven years ago.)
The port commission approved the new business plan – with a few modifications – by unanimous vote.
“Hopefully, it’s the last time we have to do a plan like this for many years,” commented McGowan.
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Copyright News-Ledger 2013