Port of Grays Harbor

Commission Meeting

August 8, 2017

The Port of Grays Harbor Commission Meeting for August 8, 2017 was called to order at 9:01 a.m.

Molly Bold, Westport Business Manager, led the meeting in the Pledge of Allegiance.

Those in attendance at the meeting were as follows:

COMMISSION AND STAFF
Chuck Caldwell - Commissioner
Stan Pinnick - Commissioner
Jack Thompson - Commissioner
Gary Nelson - Executive Director
Arthur Blauvelt - Legal Counsel
Mary Nelson - Director of Finance & Administration
Leonard Barnes - Deputy Executive Director
Randy Lewis - Director of Environmental & Engineering Services
Molly Bold - Westport Business Manager
Alissa Shay - Manager of Business Development
Shannon Anderson - Business & Trade Development Asst.
Kayla Dunlap - Public Affairs Manager
Ross Read - Director of Operations
Lisa Benn - Accounting Manager

VISITORS
Connie Newton - Westport Art Festival
Tanya Lana - Westport Art Festival
Arnie Martin - Grays Harbor Audubon
Linda Orgel - CCH
Bob Esposito - Citizen
Cindy Taylor - Rainier Connect
Jon Davies - BHC Consultants
Shelli Hopsecger - Coast Controls & Automation, Inc.
Vicki Raines - Grays Harbor County Commissioner

Items discussed and action taken where required are as follows:

MINUTES:
1. By motion made by Commissioner Caldwell, seconded by Commissioner Pinnick and unanimously approved, the Commission adopted the Minutes of May 30, 2017 Special Commission Meeting as recorded in the Minutes Book No. 20 on pages 119 through 120 inclusive.

2. By motion made by Commissioner Caldwell, seconded by Commissioner Pinnick and unanimously approved, the Commission adopted the Minutes of July 11, 2017 Regular Commission Meeting as recorded in the Minutes Book No. 20 on pages 121 through 131 inclusive.

3. By motion made by Commissioner Pinnick, seconded by Commissioner Caldwell and unanimously approved, the Commission adopted the Minutes of July 18, 2017 Special Commission Meeting as recorded in the Minutes Book No. 20 on pages 132 through 133 inclusive.

VOUCHERS:
1. By motion made by Commissioner Pinnick, seconded by Commissioner Caldwell, the Commission unanimously approved for payment those Payroll Vouchers issued July 20, 2017 and August 4, 2017, ACH/Wire Transfers No. 99900888 through and including No. 99900900 and General Disbursement Vouchers No. 94813 through and including No. 95037 for payment in the amount of $2,694,790.46.

REPORTS:
Westport Art Festival
Molly Bold introduced Connie Newton and Tanya Lana who spoke about the upcoming Westport Art Festival to be held August 18-21 at the Westport Marina. This year’s theme is “Aligning Light & Shadow” with art inspired by the 2017 Solar Eclipse to occur on August 21. A variety of entertainment will be available throughout the weekend and there are lots of new vendor displays.

Float 15 Damage
Molly Bold reported that the F/V SEAMASTER had operating issues with the vessel that caused it to run into the end of Float 15 on July 31, 2017. This resulted in considerable damage to the float. Initial estimate to repair the damages is $55,000. The vessel does have insurance that will cover the repair costs. Ms. Bold provided slides showing the damage to the float.

Randy Lewis is working with the U.S. Army Corps of Engineers to, hopefully, amend the existing permit for repairs to the same float caused by the F/V LADY LILLIAN submersion last year. Commissioner Pinnick asked about the timing of repairs to coincide with the work already scheduled on the float. Randy Lewis said that it is unlikely the timing would work as we first have to get the permits and by that time, the contractor working on the damages caused by the F/V LADY LILLIAN likely will have finished and demobilized from the site before we have permits in hand for these new repairs.

Mary Nelson stated that the vessel insurance is expected cover the cost of the repairs, however, we have put the Port’s insurance on notice, just in case.

Terminal Maintenance Dredging Summer 2017
Randy Lewis reported that the terminal maintenance dredging summer work with American Construction Company that began July 17 has been completed. Terminal Nos. 1, 2 and 4 were dredged. A total of 43,421 cubic yards of material was removed and deposited at the Point Chehalis Disposal Site. The next round of maintenance dredging will be completed in January or early February under the same contract. A slide show was provided showing pre- and post-dredge bathymetry survey results of each affected terminal.

Jansen Mine Site Visit
Gary Nelson and Kayla Dunlap recapped the July 16-19 visit to Saskatoon, Saskatchewan Canada by the Port’s three Commissioners, legal counsel, Executive Director and other Port staff. Ms. Dunlap used a PowerPoint presentation to show highlights of the trip. The group traveled to Saskatoon to visit BHP Billiton’s office and tour the potash Jansen Project mine under construction. BHP is in the process of evaluating terminal facilities through which their mined potash could be shipped. Grays Harbor is one of the sites under consideration.

Potash, technically known as potassium chloride, is a naturally occurring mineral which is a key ingredient in agricultural fertilizer worldwide, including common household garden fertilizers. It is often buried deep below the earth’s surface and is typically obtained by conventional shaft mining. Canada has the largest known potash deposits in the world.

Public Information Report
Kayla Dunlap stated that the Legislature still has not passed a State Capital Budget so funding of the Westport Marina dredging project and the Westport Marina Boat Launch parking improvements RCO grant funding are on hold, for the time being.

The final Port Public Tours are scheduled for August 23 at 3:00 and 5:30 p.m. Just a few seats are left.

Vessel Activity
Leonard Barnes reported for July 2017, the Port had calls from eight deep water vessels and two barges, which resulted in 149,902 MT of cargo being handled. Year-to-date, the Port has handled 59 ships, 5 barges and 1.4 million MT of cargo. August is shaping up to be another busy month with eight ships already on the schedule.

Public Comment:
None

ACTION/RESOLUTION ITEMS:
Action Item No. 1
Alissa Shay stated that Overstock.com has requested to amend their current lease in order to expand to the first floor of the FlexTech building and add approximately 5 areas of parking located at 100 Technology Way. The purpose of the proposed expansion is to facilitate the hiring of up to 150 additional employees.

All terms of Lease No. 2016-L325 would remain the same, except for the following:
• Amended and restated Lease No. 2016-L325A will begin immediately following signature
• Rent increase will take effect October 1
• Overstock.com responsible for all utilities including water, sewer, stormwater and electricity
• Port responsible for landscaping and HVAC
• Overstock.com responsible for maintenance and repair of the parking lot

Motion to Authorize the Executive Director to enter into Amended and Restated Lease No. 2016-L325A, was made by Commissioner Caldwell and seconded by Commissioner Pinnick. Motion passed with a vote of 3-0.

Resolution No. 2931
Mary Nelson presented, for Commission consideration, Resolution No. 2931, authorizing the Executive Director to submit a proposed amendment to the Washington State Pilotage Board for the Grays Harbor Pilotage District Tariff.

The Port began providing pilotage services on October 1, 2001. The Washington State Board of Pilotage Commissioners has the responsibility to oversee all pilotage activity in the State of Washington and to annually set pilotage tariffs.

As staff considered a tariff recommendation for 2018, shipping projections, pilot boat maintenance requirements, as well as new pilot training and staff expectations through 2018 were considered. The recommendation is for no change to the Grays Harbor Pilotage Tariff except for the Pension Charge which would decrease from $528 to $500 resulting in a 5% decrease. The Pension Charge is used to fund pension payments to retirees of the former Grays Harbor Pilots Association.

The tariff increase would take effect January 1, 2018 if adopted by the Washington State Board of Pilotage Commissioners.

Motion to adopt Resolution No. 2931: Recommending to the Washington State Board of Pilotage Commissioners an Amendment of the Tariffs and Pilotage Rates for the Grays Harbor Pilotage District, was made by Commissioner Pinnick and seconded by Commissioner Caldwell. Motion passed with a vote of 3-0.

Public Comment:
Grays Harbor County Commissioner Vicki Raines thanked the Port Commissioners for approval of the Lease Amendment with Overstock.com. She also commended the dedicated efforts of Alissa Shay in working with Overstock.com to establish the call center at the Satsop Business Park.

Arnie Martin of Hoquiam asked the Port to consider public transportation to the Satsop Business Park site. He suggested a parking lot below the Park could be established from which a bus could transport riders up to the Park.

NEW BUSINESS:
Gary Nelson went over dates for upcoming events:
• August 8th – Shipping Club Annual Golf Tournament and BBQ
• August 9th – Aberdeen School District will be holding a Team Leader Retreat at the Port’s meeting room
• August 17th – Pilotage Commission Meeting
• August 18th – The new Corps of Engineers Commander for Seattle District, Col. Mark A. Geraldi, will be in Grays Harbor to tour Corps operations

Commissioner Stan Pinnick inquired about Corps progress on the Grays Harbor Navigation Channel Deepening Project. Gary Nelson replied that the project was proceeding. Notices are going out to the tribal groups concerning dredging schedules and autumn tribal fisheries.

President Thompson recessed the meeting at 9:53 a.m. for a short break.

At 9:57 a.m., President Thompson reconvened the Regular Meeting.

1. WORKSHOP: 2nd Quarter Port Financial Review
Mary Nelson reported on changes to budget projections based on new information. Following a strong 4th quarter (2016) and first half for 2017, the Port’s financial outlook is positive and the following updates will be added to the 2017 forecast:

• Improve forecasts for Satsop Business Park, Westport Marina and Marine Terminal & Harbor Service operations
• No change in forecasts for Industrial Properties and Bowerman Airport operations
• General Fund ending balance is expected to be $7.2 million

2. WORKSHOP: Financial Strategy
Shelli Hopsecger led a discussion with Commissioners and Staff focusing on how we manage today’s activities so we can fund our future. Another way of looking at it is financing a sustainable port decades into the future under our new normal.

The Port’s financial goal was reviewed: Responsible management of the Port’s financial resources to ensure a positive cash flow, solid bond rating, and preserve cash reserves for strategic investments.

The Port’s ability to invest in capital improvements is limited by the amount of revenue from property taxes, net cash derived from operations, other taxes and other non-operating revenues. Currently the Port is paying off bonds issued in 2011 for the marine terminal rail system and other infrastructure improvements. In 2018, a portion of these bonds will be retired, resulting in additional, non-voted bonding capacity in 2019. The Commissioners and staff were asked, given the Port’s new normal and opportunities for growth, when is a strategic time to issue bonds? Is there a strategic time for voted bonds?

Commissioner Pinnick recognized that the Port’s slow and steady growth and capital investment should continue. Issuing bonds is one of the tools the Port has at its disposal. Strategically, when opportunity arises, then the Port should use its tools to figure out how to fund those needed capital improvements.

Commissioner Thompson expressed concern for maintenance and future capital expenses. He asked that the Port work to identify the amounts needed for maintenance of the Port’s assets (current and deferred projects) in order to factor them into future capital and operating plans. This approach would allow the Port to plan for how to finance future expansion and property acquisition while accommodating existing levels of business.

Commissioners Caldwell and Pinnick both agree that the quarterly financial reviews are an important tool in the responsible management of the Port’s financial resources. The reviews provide an opportunity to fully understand where the Port stands financially and what financial resources are available to move forward.

All Commissioners agreed with President Thompson who stated, “It’s amazing the advancement of the Port and how we’ve grown over the last ten years. Staff is doing a great job.”

There being no further business to come before the Commission, the Regular Meeting adjourned at 11:23 a.m.