By George Cunningham
Port of Long Beach Harbor Commissioners approved a $716 million budget last week that includes the transfer of an additional $12 million to the city Tidelands Operating Fund - a transfer that may never happen, although City Council members have already approved plans on how they intend to spend it.

The members of the Harbor Commission - clearly uncomfortable with the options available to them - debated long and hard about the possibilities before approving a port budget resolution to forward on to Mayor Bob Foster and from there to the City Council for approval. The $12 million transfer was included in that budget, but only as a "placeholder."

The debate had almost every one of the commissioners quoting the excerpt of the City Charter that governs transfer of port revenues to City Hall, to help define exactly what their fiduciary responsibilities are. The City Charter does allow the port to transfer up to 10 percent of its profits to the Tidelands Fund and the port has done so every year in recent memory.

This year, however, is different. The actual transfer of funds usually takes about a year to complete. The port has already promised to pay the city $12.4 million for the 2009 fiscal year on Oct. 1, 2010 which is the beginning of the city's 2011 fiscal year. The City Council, which has a shortfall in its Tidelands Fund, also wants the port to estimate its net earnings for the 2010 fiscal year, take 8 percent of that estimate and pay it immediately at the start of 2011 fiscal year, and then hand over the remaining 2 percent when the final audited results for the year are completed.

The Council also wants the port, when it figures out its net earnings for any given year, not to deduct the 10 percent transfer to the city for the previous year, in its accounting. Although that runs afoul of standard accounting procedures, the legal definition of "net earnings" may be whatever the City Auditor Laura Doud decides it is.

The Harbor Commission voted unanimously against using that accounting method for figuring its contribution to the city.

Even so, if the port is forced to make what amounts to two payments to the city in one year, harbor department staff say that the port will have to either cut capital spending, cut environmental and security programs, draw down its reserve, or do some combination of those options - any of which could run afoul of the City Charter.

The Charter allows the transfer of up to 10 percent of port net earnings to the City Tidelands Operating Fund if the City Council finds the money is necessary to meet its Tidelands Fund obligations and if the transfer is not needed for "Harbor Department operations, including, without limitation, operating expenses and capital projects..."

The question is not whether City Hall needs to learn how to live within its means - as other coastal cities without ports do - although that may be an interesting issue. The question is one of governance. The city does not own the port. Most ports in California - including the Port of Long Beach - are state trusts, operated by cities or other organizations for the benefit of all of the citizens in the state.

That means the Harbor Commissioners have an obligation to operate the port as a trust.

In addition, the City Charter was drafted in a manner to separate the Long Beach Port - which even at the time was seen as a huge asset for providing employment and opportunities for businesses in the city - from the everyday politics of City Hall.

Times change. Some Long Beach civic leaders see the Los Angeles model, where the City Council routinely gets involved in port operations, and where major port contracts must be reviewed and approved at the Council level before they take effect, as a better way to go. Such a model theoretically would give city residents more control over the port through their elected officials.

To amend the City Charter would take a ballot initiative and approval of the electorate - and that may happen - but in the meantime, the current Charter is in effect, and it says that the Harbor Commission may approve such a transfer if it will not disrupt port operations or capital improvements.

Although the official request for the money from the City Council is still being processed, commissioners say it is impossible to act on the request until they officially receive it. And even then, there is no guarantee they will approve the request. Funds to fulfill the city's request were included in the budget only as a placeholder in case the Commissioners decide to approve it.

In order to pay the extra transfer to the city, the port would delay capital improvement projects such as pavement and wharf repairs, Anaheim Street-Santa Fe Avenue intersection improvements, and rehabilitation of the Ocean Boulevard bridge over the Los Angeles River.

The City Council has already voted to allocate $9.6 million from such an accelerated port transfer to repair crumbling seawalls on Naples Island.

Not included in the port budget is a plan by the city manager for the port to chip in another $6 million to help the Aquarium of the Pacific make its bond payment for the 2011 fiscal year. The port has already agreed to contribute $2,068,404 to help cover the bond payment in fiscal year 2009 and $6,008,679 for fiscal year 2010.

That plan would have the Redevelopment Agency reimburse the money to the port from expanded tax revenues, which would be realized due to port improvements. But the Harbor Commissioners all agreed that they do not plan to act on the matter or include it in the budget until they get the formal request, and even then there are a lot of questions that need to be answered.

For instance, is the payment toward the aquarium bonds going to be a final contribution or is it likely to slip into becoming a yearly contribution?

The concern is what does the growing city thirst for port money mean to the port's ability to remain competitive in the market place at a time when shippers' options are growing and investment in new infrastructure is crucial. It promises to be a time of testing for the board members - appointed by the Mayor and confirmed by the City Council - as they balance their obligations to the city in which they live against their duty to the residents of the entire state.

Port Staff Memo

-- The Cunningham Report