Harbor rate hike needed for North Harbor build
The funding for the completion of the North Harbor project is a main area of concern for the Petersburg Harbor Advisory Board. The Petersburg City Council Members and Harbor Board members met Friday afternoon to try to find ways in which to complete the project with funds available.
“We have $7 million and that is the amount for the base bid with two alternatives that will bring the total to $9 million,” Petersburg Harbormaster Glorianne Wollen said. “We are hoping that next year the costs of some of these things may come in a little lower, which has happened in the past.”
The project will go out to bid in January and it will be awarded in February. The problem now is where to get the funds to complete the project by the time February rolls around.
“We won’t know if we will receive any of the state money from the legislature until July,” Wollen said. “I would like to have a bond in place just in case the funding doesn’t come through.”
Wollen also explained that they are looking at mobilization costs and looking several years to get to the other phases and waiting will double the costs. “If we have a bond or loan in place and the state comes through we can cancel the bond or loan, but I believe it is prudent to have some type of funding in place for this project.”
With a simple calculation, a bond of five percent for 15 years, the payback will be approximately $160,000 per year.
“In 2006 we took out a loan for $1.5 million and the payback on that 15 year note was $118,000 annually,” Wollen stated.
The Harbor Board at that time approached the city council with increasing the rates of the Harbor and future approximation stated that the moorage rates of the Harbor should be at $38 per foot by the year 2012. “The council thought that $38 was too much and raised the rates to $34,” Wollen stated. “This is the first year we are running in the red by $88,000.”
Wollen explained that operations and maintenance costs are going up, utilities are increasing and the harbor still has the $118,000 to pay back.
“Raising the rates to $38 would bring in enough money to be flush,” Wollen stated. “The first step would be to raise to the $38 rate and with a bond proposal, we could raise it $10, bringing the rate to $48 which would generate $174,000 that would take care of paying back any bond issued.”
Wollen stated that this is not the avenue the board would like to pursue, but they are left with limited options to complete the project.
“One of the main problems we have is that we have zero saved this year because we have used it all for the North Harbor,” Harbor Advisory Board member Mike Bangs said. “We have nothing for the depreciation and that is another area we have a problem, we have to start putting away for that.”
The State requires for all harbor projects to show 50 percent depreciation if going through the tier process. This depreciation is mandated by the State as money is being received. The City was unable to ask for 50 percent of the project amount, they were only allowed to ask for a match of what the harbor already had which was the $3.5 million.
“We are $2 million shy of what is needed to get this project finished,” Wollen stated. “If we put the project on hold, it will cost us considerably more at a later date.”
Wollen explained there needs to be an avenue to get the money once construction has begun. “Once the bid is awarded in January or February, that is when they start building the floats,” she stated. “We can’t come back in July and say we need 50 more stalls because they have already purchased the materials and ordered the floats by then.”
She also stated that the council has to be very confident in what they want when this bid is awarded.
Petersburg Financial Director Jody Tow explained that any bond issue would have to go before the voters and there is really no time in which to put that into place.
Wollen suggested putting the issue on the ballot for October 2013 but there could possibly be problems with that.
“The interesting thing about putting it on next October’s ballot is there might not be a ballot next October,” City Council member Mark Jensen said. “If the borough passes, the next election will not be until 2014 because the first 10 months really don’t count, we won’t start counting our term until 2014.”
Petersburg City Manger Steve Giesbrecht stated that for the purpose of the harbor project they really cannot wait until next October.
“To support a special election that could cost approximately $50,000 we would still need to raise our rates,” Wollen stated.
A moorage comparison was completed which shows that if Petersburg raises the moorage rates to $48 it will be the highest amount in the Southeast region and if it is raised to $61 it will be the highest in the state.
With many other harbors in the region considering raising rates Petersburg may not remain the highest.
Tow and Giesbrecht brought other options to the table.
“We have enough for the base bid,” Tow stated. “What if you take Alternate A, which is $794,000 and with the $600,000 raw fish tax you will get, we could probably scrape together enough to that and for Alternate B, borrow from the economic development fund which doesn’t have to go to the voters.”
Using money allocated for the crane dock project was also brought as an option.
There were no decisions made regarding the funding of this project, but Wollen was asked to bring a rate increase ordinance to the city council for approval.