2022 Port Budget – Financial Misrepresentation

2022 Port Budget – Financial Misrepresentation-Public Comment – 10/11/2021

To: Port Commissioners

This comment is in regard to the Draft 2022 Port Operational Budget presented at the Commission Work Session of October 4, 2021, Page 6.

For several years, port management has made the representation that the item “Operating Income before Depreciation” means “Cash Earned from Operations.” In my opinion, this correlation or conflation is a material misrepresentation of the port commercial operations to the public. It projects a distorted picture asserting that the port’s commercial operations produce a net positive cash flow. This is simply not true. The reality is that, due to grossly bad capital investments, the port’s commercial operations run a huge cash deficit which must be heavily subsidized by the property tax levy.

The main instrument allowing this distortion has been the reckless use of General Obligation bonds to finance economically non-viable capital investments for the port’s commercial operations including the marine crane, the marina fuel dock, the stormwater treatment plant and the Lacey CBC building.

A General Obligation (GO) bond is one guaranteed by the $40+ billion property tax base of Thurston County. In contrast, a General Revenue bond would be one underwritten and issued on the financial merits of the commercial project itself. The reality is that no sane bond underwriter would have financed the port’s boondoggles based on their own merit. Instead, they were willing to issue General Obligation bonds because they had a no-risk guarantee provided by the huge tax base. Therefore, over the span of several years, port management, sanctioned by the port commission, has squandered public taxes by using GO bonds to finance commercial projects ranging from the bad to the absurd. As a result, the Port of Olympia’s commercial operations require a ridiculous subsidy of over $.50 for every dollar of operating revenue which is far beyond that of other Washington State ports.

The financial presentation (page 6) at the Work Session of October 4^th showed a net “Cash Earned from Operations” of $2.3 million. What is not presented in context is the actual annual cash outlay of $4.6 million for bond principal and interest which is double the alleged “cash earned.” So, I believe that this distorted picture is a material financial misrepresentation. [For reference, look at the August 2020 cash analysis of the mobile crane which showed a real 4year cash flow loss of $1.5 million on this one piece of operational equipment.]

Public entities have legitimate reasons to use General Obligation bonds for projects beneficial to the common good. However, subsidizing private interests at an exorbitant cost to the commons is not an acceptable practice.

I hope that future port commissions will not continue this abusive use of General Obligation bonds to socialize the costs which benefit private interests. In the meantime, I request that this current commission acknowledge the distorted picture which has been presented to the public.

Denis Langhans, Olympia