Once flush with proceeds, the Port of San Diego’s savings account is projected to nosedive to a far-lower-than-allowed balance by the end of the next fiscal year — or around $27 million less than what is required of the agency’s reserve fund.
The shrinking-savings situation was discussed Tuesday during the agency’s regular monthly meeting after CEO Joe Stuyvesant and CFO Robert DeAngelis presented the board with a preview of the financial road ahead for the fiscal year beginning July 1.
For the upcoming year, the port is forecasting revenue growth of 5.4 percent over fiscal 2021 for a total of $154.5 million. The sum, however, is short $15 million after factoring in routine expenses and major maintenance costs of $169.5 million, meaning the port will need to tap into its operating reserves to make up the difference. As such, by the end of fiscal 2022, the port’s reserve balance will drop to $34 million, despite a policy that requires the agency to keep roughly $61 million on hand for that period, DeAngelis said.
In 2009, the board adopted an operating reserve policy that requires it to maintain a balance at the end of the fiscal year that is equal to six months of budgeted operating and maintenance expenditures. Commissioners can vote to waive the board policy, although doing so repeatedly could jeopardize the agency’s credit rating, said Port Commissioner Dan Malcolm, who represents Imperial Beach on the seven-member board.
“Just to bring this out to the public, this is a very serious situation for the port. ... Normally, the Port of San Diego, we have operated on surplus budgets, fortunately, for the last nine years (before the pandemic), which has allowed us to go into reserves,” Malcolm said. “So we have blown right through our minimum operating reserve.”
Formed by the state in 1962, the San Diego Unified Port District spans 34 miles of coastline from Shelter Island to the border. The district includes tidelands in San Diego, National City, Chula Vista, Imperial Beach and Coronado. It’s a self-funded, non-taxing entity that primarily finances operations by charging fixed-rate and percentage rent to waterfront hospitality, tourism and trade businesses — hotels, restaurants, marinas, shops, cruise lines, cargo operators. Many of its tenants have been forced to close or operate at much-reduced capacity because of state and county public health orders.
Although encouraged by reopening trends and growing consumer sentiment around travel, the port does not expect its financial footing to fully recover until fiscal 2024 or later.
“A year ago the question was, ‘How bad will it get?’ Now it seems the right question is, How quickly will things really get good?’” Stuyvesant told his board.
“We are essentially breaking even now, leveling off, and have been for the past few months. This is primarily due to expense reductions. This preliminary base budget carries forward some of the cost-cutting measures in our commitment to catching up — or at least not falling further behind on deferred maintenance, plus conducting scheduled major maintenance, our commitment to shore power and more broadly to our clean air goals.
This will mean that we are very likely, board willing, to see budget deficits in 2022, ’23 and ’24.”
Staff will revise the 2022 budget calculations and return to the board for approval in May. The port has not included federal aid in current estimates, although the agency is optimistic that it will receive stimulus money.
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Port of San Diego has 'blown right through' years of savings - The San Diego Union-Tribune
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