Council looks twice at port rate increase

The Nome Common Council will again on March 28 consider a rate increase of 10 percent across the board at Port of Nome. At its last meeting earlier in March, the panel tabled a vote on a revised port tariff document pending more information from Julie Liew, finance director for City of Nome.

Looking over figures provided by Port of Nome administration, a trend analysis on increased expense and revenue items using spending year 2011-2012 as a base year, shows significant raises in personnel and operating costs each year through the approved amended budget for 2015-2016.

For administrative personnel expense, the 2011-2012 base is $281,504. Fiscal year 2012-2013 shows a 35 percent increase in that expense followed the next year, in 2013-2014, by a 61 percent increase in administrative personnel expenses. The year 2014-2015 figures show a whopping increase of 120 percent, followed by the 2015-2016 amended approved budget showing a 104 percent increase in administrative personnel costs.

At the same time, the increase in total expenses from 2011-2012 to 2015-2016 has been 40 percent, compared to increases of personnel costs by over 100 percent.

However, the 2015-2016 approved budget shows a loss of $1,120,050.

Members of the public, who attended the Council meeting March 7, including Ken Hughes, Nome Chamber of Commerce president, took the podium regarding the port rate increase. They said they did not want to see a 10-percent port rate increase make current high prices of consumer goods reach for the sky. Several members of the public and the Council said the presentation of the budgets and spread sheets was not easily understood.

Council members, who were holding a public hearing concomitant with a vote for final approval, decided to table consideration pending return of Julie Liew, finance director.

“To justify a 10 percent increase, to begin with, they need to pull their heads out of their butts and give us a budget that at least a rocket scientist can understand,” Hughes said Monday.

 

Yeah, but —

Joy Baker, port director, issued a “state of the port” report in February that set the table for the rate increase.

The port and harbor facility started operating in 1987 following completion of the causeway. The facility showed revenue from cargo and fuel coming in, with fairly low operating costs, but construction loan payments made the books show a low to negative profit from FY 89 to FY 94. The figures turned positive in 1995 when the City achieved a 10-year moratorium on payments to NOAA on the CEIP loan, leaving only the Farmers Home loan payment. The 10-year reprieve resulted from lack of offshore development after the Causeway construction. This allowed a modest but increasing profit that helped to establish and grow a rainy day fund, or Port Fund Balance for future repairs and maintenance, Baker said.

Through the 1990s, port activity increased gradually allowing light staffing. Port expansion began in FY 2002 and continued through FY 2007 in coordination with U.S. Army Corps of Engineers, Alaska District, with other harbor infrastructure paid by the City of Nome mostly through grant funds from NSEDC and state Economic Development Administration. However, expansion raised revenues, but also operating expenses.

The port paid off the Farmers Home loan in FY 2002, with the NOAA payments not due to resume until FY2009. Sufficient annual profits continued allowing the City to provide matching money for more sheet pile dock and floats in the harbor, as well as the City’s match to the USACE for replacing two federal sheet pile docks on the south and east sides of the harbor, Baker’s report continued.

The port hired two additional employees to handle increased port traffic.

Docking permits increased in 2010. Then the modern day off shore gold rush began in Nome. According to Baker, the number of gold dredges doubled in 2011, and that number tripled in summer 2012. The number of dredges plus support craft has remained constant in the 110-125 range through the 2013-2015 seasons, plus fishing boats, fishing tenders and sailboats entering or finishing the Northwest Passage.

“These factors mandated two more staff in 2012, resulting in increased labor costs, but were directly attributable to the surge in vessel traffic,” Baker reported.

Indeed, since 2012, administrative personnel costs have been on average 80 percent higher than in 2012, subject to when the hire occurred in the 2011-2012 fiscal year.

Increased demand on uplands storage and a backlog of vessels waiting to get into port consumed staff time, Baker said, and the port needed more land, leading to the Port of Nome buying 18 acres at a cost of $1 million, which subtracted from the fund balance rainy day account.”

The land purchase, added to bidding and design costs not covered by grants, plus periodic 25 percent or 50 percent construction grant matches put a strain on the fund balance.

“Therefore, the increased operating costs and significant use of the fund balance dictated a rate increase to maintain fiscal health,” Baker said.

In response, the Port of Nome contracted a study from Northern Economics in February 2013 that advocated a 50 percent rate increase, but conceded a less harsh response would be incremental raises. The Nome Port Commission voted, and received Council approval, to increase rates by 10 percent in 2013 and five percent in 2014 and 2015. The Port Commission voted last month to raise rates by 10 percent this season. That approval is before the Council now.

With increasing traffic driving labor costs, the NOAA bond payment through 2038, more infrastructure to maintain and expansion needed up the Snake River to ease the crowded inner harbor, rates must continue to be analyzed each year, Baker concluded.

Again, lack of offshore development due to falling oil prices put a moratorium on offshore development and development of a deep-draft port expansion. From where will come a moratorium on port expenses?

The Nome Nugget

PO Box 610
Nome, Alaska 99762
USA

Phone: (907) 443-5235
Fax: (907) 443-5112

www.nomenugget.net

External Links