Keeping up with maintenance and paying off nearly $20 million in construction debt while trying not to deplete its reserves are challenges the San Mateo County Harbor District faced as it approved its budget for the next fiscal year Wednesday night.
How it should spend its money, how to diversify its assets and which projects to put off were key points as it negotiated balancing its budget for the 2014-15 fiscal year. The final vote was 4-1, with Commissioner Sabrina Brennan dissenting.
A main point of contention between the staff, commissioners and the public is the need to draw on more than $2 million of its reserves to cover its estimated $10 million in expenses for the coming fiscal year.
“We are in very very good financial shape and those who say ‘you go into reserves,’ yes, that’s what reserves are for and not only do we have reserves, we have prudent reserves,” Commissioner Jim Tucker said.
The district, which oversees Pillar Point Harbor in Half Moon Bay and Oyster Point Marina in South San Francisco, has about $11.5 million in unrestricted, yet designated, reserves from which the commission can draw to cover its expenses, said General Manager Peter Grenell. Those funds include its emergency reserves, capital improvement and building funds, short-term operating costs and a reserve for employee pensions, Grenell said.
The district also has about $40 million in fixed assets, which includes the harbor and its buildings as well as a vacant lot the district is considering selling, Grenell said.
But members of the public caution against the district drawing from its reserves set aside for employee compensation without a clear outlook on how it would repay it.
The district generates most of its revenue from property taxes and berth fees, however, the commission needs to consider alternative sources, Grenell said.
“The questions of increasing and diversifying the sources of revenue for the district remain absolutely critical. There’s no fooling around here. The fact is, the district needs to try and expand its revenue and diversify its sources so we’re not finding ourselves relying only on rates and fees on the one hand and property tax on the other,” Grenell said.
Most district officials remain hopeful that working with a new consultant to develop a strategic business plan in the coming months will assist in making long-term changes to support its infrastructure and devise new income generators.
The district’s primary responsibilities are to maintain its infrastructure and provide for those who it serves, such as fishermen and visitors. However, with turbulent finances predicted in the coming year, projects such as improving the sidewalks near Pillar Point Harbor businesses are being postponed.
Commissioner Sabrina Brennan said the district does need to be reducing expenses, but the sidewalk project wasn’t a big-ticket item and could have helped generate revenue for local businesses and the district.
“We haven’t been managing what we have. Our facilities are in disrepair due to deferred maintenance over several decades and we’re also not improving things to a point where we can generate new revenue,” Brennan said.
One of the biggest wastes, Brennan said, is the district starting projects by hiring consultants or making plans and then simply abandoning them.
Capital improvement projects that promote safety and support merchants shouldn’t be dismissed, Brennan said.
Some costly repairs are exacerbated due to drought conditions, Grenell said. The cliffs wrapping around Maverick’s Beach, north of Pillar Point Harbor, are eroding and the trail needs to be improved, Grenell said. The district had to front money to complete some of the repairs that in total will cost $355,000. However, Grenell said he expects it will be reimbursed through grants.
Other costly repairs such as fixing burst sewer pipes and pump stations are further examples of costs the district has needed to support, Brennan said previously.
The district has steadily drawn from its reserves to cover costs, yet hasn’t devised a way to increase revenue, local resident John Ullom said. The way the district is doing business isn’t sustainable and deferring necessary maintenance is unwise, Ullom said.
Robert Bernardo, president of the Board of Commissioners, said the budget is complicated and difficult to communicate to the public. But there is a reason districts and cities maintain reserves, Bernardo said.
“The challenge with the term reserves is, if you have too many reserves you’re hoarding and if you have less reserves it’s like the sky is falling,” Bernardo said.
One of the major draws from its funds is the district’s obligation to repay a $19.77 million loan, with interest, which it took out in 1997 from the state’s Department of Boating and Waterways to fund construction at Pillar Point and Oyster Point.
The district must make an annual $1.3 million payment toward the debt and must hold $1.7 million in a restricted account, Grenell said. Officials have said the district should be able to dispose of its obligation by 2018, which should ease the strain on the budget.
Commissioner William Holsinger said he’s confident property values in the county are on the rise and the district can expect to receive more tax revenue in the coming years.
The budget is a dynamic and changing document, Holsinger said, that will likely be modified or amended as the year proceeds.
“I’m not saying we can be complacent, I’m not saying this budget is ideal,” Holsinger said. “But we do have the resources to weather this budget deficit if it truly is a deficit.”
In other business, the Harbor District invited Pillar Point Harbor’s three fish buyer lessees to approach the district and discuss the terms of their leases. In 2012, Pillar Point Harbor began to charge some of the highest fish buying fees in the state and has been at the center of upheaval between the district and those in the commercial fishing industry.
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