Ventura County Grand Jury • 2007-2008

Ventura Port District Financial Viability Review

Published: July 23, 2008 22 pages
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Findings and Recommendations 39 findings

F01
The District is an Independent Special District governed by a five member Board of Port Commissioners, serving fixed terms, who are 2 Ventura Port District Finance appointed by the Mayor of the City of Ventura and confirmed by the full City Council. [Ref-03]
No recommendations for this finding
F02
The District is an Enterprise District that operates similar to a private business in that it is predominately self-supporting from operational revenues although it receives some property tax revenue and periodic grant funds. [Ref-01]
No recommendations for this finding
F03
The District’s geographic area, assessed valuation, and population are contained within the City of Ventura; District boundaries encompass the City. The District’s current property holdings consist of 274 acres: 152 acres of land and 122 acres of water.
No recommendations for this finding
F04
The District receives a pro-rata share of the Ventura County general tax levy because a levy was in place when Proposition 13 was added to the State Constitution in 1978. Budgeted FY2007-2008 property tax revenues are approximately 12% of total budgeted revenues. [Ref-03, Ref-08] Federal Involvement
No recommendations for this finding
F05
Under Public Law 909-483, the ACE is responsible for Ventura Harbor entrance and sand trap dredging, as well as necessary offshore breakwater repairs. ACE has funded and performed entrance/sand trap dredging and breakwater maintenance services since 1983. [Ref-03]
No recommendations for this finding
F06
ACE funding is contingent on annual federal budget appropriations. [Ref-03]
No recommendations for this finding
F07
As a consequence of a lawsuit and subsequent judgment known as the “Ellison Judgment”, the District is required to keep the channel from the ocean to the Harbor and the Ventura Keys area open and free of shoaling. The judgment also requires the District to maintain a $3 million reserve fund, currently fully funded, for potential maintenance and/or sand trap bypassing costs. [Ref-01]
No recommendations for this finding
F08
According to the Ventura County Local Agency Formation Commission (LAFCo) October 2007 MSR, “. . . termination of federal entrance and sand trap dredging would have a significant financial impact on the Port District’s financial viability.” [Ref-01] Bankruptcy/Recovery
No recommendations for this finding
F09
The Ventura Port District Public Facilities Corporation was formed in 1992 as a non-profit benefit entity for the purpose of issuing COP debt to purchase bankrupt developer-owned Village improvements located on land leased from the District. [Ref-01]
No recommendations for this finding
F10
The District filed for Chapter Nine bankruptcy protection in August 1993 as a consequence of losing a breach of contract lawsuit. Subsequently, the District was a Chapter Nine debtor until 1998 when the Bankruptcy Court approved a Business Plan that resulted in the sale of $15 million in COP debt. [Ref-02, Ref-03] Ventura Port District Finance 3
No recommendations for this finding
F11
The August 2001 Belknap Study noted, “. . . major threats to the City of Ventura’s economic condition include obsolescence of the Village shopping area, which would require the Port District to make large capital improvements beyond the District’s capability.” [Ref-03]
No recommendations for this finding
F12
The District gained ownership of Village leasehold improvements in the late 1990s as a result of retiring Village related debt through the issuance of COP. Significant savings were achieved by consolidating Village operations into District operations. [Ref-02]
No recommendations for this finding
F13
The COP issued by the District in 1998, along with State Boating and Waterways loans, brought the District’s long term debt (principal only) to approximately $19.2 million, roughly four times the District’s FY 2001-2002 annual budget. [Ref-02]
No recommendations for this finding
F14
The court approved Business Plan provided actions required to achieve and maintain a level of financial viability, provide for maximum payment of creditor debt, and carry out the District’s public purposes. [Ref-02]
No recommendations for this finding
F15
An October 2001 report on the financial viability of the District further noted, “. . . without additional revenue producing improvements, a deteriorating financial condition was likely because of expenses growing at a higher rate than revenues and, current reserves would eventually be usurped, debt coverage ratios would decline and an inability to properly maintain existing facilities would likely occur.” [Ref-02]
No recommendations for this finding
F16
Adoption of most of the Business Plan recommendations by the summer of 2001 resulted in a major improvement in District financial viability. After payment of debt service, a net surplus of $700,000 was realized for FY2000-2001. Addition of this net surplus to the District’s prior year’s reserves increased total reserves to approximately $5 million at the end of FY2000-2001. [Ref-02]
No recommendations for this finding
F17
The August 2001 Belknap Study predicted that District debt service would consume around 20% of the District’s annual revenue until the year 2028. [Ref-03] Port District Parcels 15, 16 & 18
No recommendations for this finding
F18
According to the District’s 2001 financial viability assessment report, the one major recommendation made in the Business Plan remaining unimplemented as of 2001, was the leasing and development of District Parcels 15, 16, & 18. As noted in this report, “. . . the development of these parcels is considered the most important change necessary to insure financial viability of the Harbor” and “. . . the timely implementation (development) of Parcels 15, 16, & 18 should be the most important strategy for the District to implement.” [Ref-02]
Related Recommendations (1)
R02
The Grand Jury recommends that both the City and the District take advantage of every opportunity to facilitate port economic development, particularly the development of District Parcels 15, 16, & 18, and the up-grading/improvement of older District properties. (C-08)
F19
According to the Belknap Study, “. . . the Port District’s future is highly reliant upon future development of Harbor Parcels 15, 16, & 18 and a continuing favorable economy as it relates to tourism and fishing.” [Ref-03] 4 Ventura Port District Finance
Related Recommendations (1)
R02
The Grand Jury recommends that both the City and the District take advantage of every opportunity to facilitate port economic development, particularly the development of District Parcels 15, 16, & 18, and the up-grading/improvement of older District properties. (C-08)
F20
Development of the District’s key remaining open space areas (Parcels 15, 16, & 18) has been delayed more than three years as a consequence of: • a City suggestion to significantly modify original project plans to accommodate a more open “urban plan” concept • California Coastal Commission administration/staff changes and resulting requests for up-dated/additional information
Related Recommendations (1)
R03
The Grand Jury recommends that the California Coastal Commission complete its review and processing of the District’s application to develop District Parcels 15, 16, & 18 as quickly as possible. (C-08) Responses Responses Required: Board of Port Commissioners, Ventura Port District (R-01, R-02) City Council, City of Ventura (R-02) Responses Requested: California Coastal Commission (R-03) References Ref-01 LAFCo Municipal Service Review, Ventura Port District, October 2007 Ref-02 Ventura Harbor Financial Viability Assessment, Williams-Kuebelbeck & Associates, Inc., October 17, 2001 Ref-03 Ventura Port District Study, “A Service Coordination Consolidation Analysis,” Andrew S. Belknap, August 2001 8 Ventura Port District Finance Ref-04 Ventura County Star newspaper article, “Zoning Changes OK’d at Ventura Harbor,” January 24, 2007 Ref-05 Ventura Port District Financial Statement (unaudited), month of June 2007 Ref-06 Ventura Port District Financial Statements, (audited), FY2004-2005, FY2005-2006 and FY2006-2007 Ref-07 Los Angeles Times newspaper article, “Housing Slump is Cutting Tax Bills,” March 28, 2008 Ref-08 Ventura Port District Budget, FY2007-2008 Ref-09 Ventura Port District Finance Department Ref-10 Ventura Port District Administration Attachments Att-01 Statement of Revenues/Expenses and Changes in Net Assets Att-02 Comparative Cash Flow Statement Att-03 Reconciliation of Net Income to Net Cash Flow Ventura Port District Finance 9 (This page intentionally blank) 10 Ventura Port District Finance Attachment-01 Statement of Revenues/Expenses and Changes in Net Assets Ventura Port District Finance 11 (This page intentionally blank) 12 Ventura Port District Finance Ventura Port District Finance 13 (This page intentionally blank) 14 Ventura Port District Finance Attachment-02 Comparative Cash Flow Statement Ventura Port District Finance 15 (This page intentionally blank) 16 Ventura Port District Finance Ventura Port District Finance 17 (This page intentionally blank) 18 Ventura Port District Finance Attachment-03 Reconciliation of Net Income to Net Cash Flow Ventura Port District Finance 19 (This page intentionally blank) 20 Ventura Port District Finance Ventura Port District Finance 21 (This page intentionally blank) 22 Ventura Port District Finance
F21
California Coastal Commission approval of revised Parcels 15, 16, & 18 plans is anticipated by January 2009.
No recommendations for this finding
F22
The anticipated developer of District Parcels 15, 16, & 18 (Sondermann Ring Partners) has committed to pay the City of Ventura $3.25 million to help build a new Port Area (District Parcels 1-20 within District property boundaries) (Port) fire station to improve current emergency response times. [Ref-04] Operations/Finance
No recommendations for this finding
F23
A preponderance of District revenues are derived from marina lease payments and tenant rent in the Village. Historically, 10-15% of District revenues are attributable to a pro-rata share of property taxes received by the District, interest earnings on invested funds, and periodic intergovernmental grants. [Ref-01]
No recommendations for this finding
F24
Currently, all four of the District’s marinas are 90-95% occupied compared to late 1990’s and early 2000’s occupancy in the low to mid 70% range. [Ref-02, Ref-03]
No recommendations for this finding
F25
As District marina leases have been re-negotiated, dredging in lessee water areas has become a lessee responsibility. Currently, the District is responsible for dredging only the Ventura West Marina.
No recommendations for this finding
F26
The District’s FY2006-2007 budgeted net income was $324,100 and was subsequently modified to $490,518. According to the District’s unaudited June 2007 financial statement the actual net income totaled $846,112. [Ref-05]
No recommendations for this finding
F27
District property tax revenues for FY2006-2007 totaled $916,229, an increase of $631,775 and $693,594 over FY2004-2005 & FY2005-2006 respectively, when a majority of the District’s property tax revenues were diverted to the State “Education Revenue Augmentation Fund” (ERAF) to aid with State budget/finance problems. [Ref-06]
No recommendations for this finding
F28
Despite current housing market declines and resulting lowered property assessments, a rise in the overall FY2007-2008 property tax base is anticipated because of new developments, continuing home sales, and annual 2% Proposition 13 increases, which result in higher assessment values. [Ref-07] Ventura Port District Finance 5
No recommendations for this finding
F29
District property tax revenues for FY2007-2008 are budgeted at $925,000. Actual Property Tax apportionments through May 2008 total $958,000. [Ref-09]
No recommendations for this finding
F30
District FY2006-2007 interest earnings totaled $433,926. Based on anticipated lower interest rates and lower interest earnings investment balances, budgeted FY2007-2008 interest revenues were reduced to $320,000. Actual interest earnings through March 2008 total $351,000. [Ref-06, Ref-08, Ref-09]
No recommendations for this finding
F31
Harbor Village FY2006-2007 rent revenues decreased approximately $23,000 as a consequence of losing two restaurant tenants. Fiscal Year 2007-2008 Village rents, however, are anticipated to be significantly improved with the addition of a new restaurant tenant and other positive tenant lease adjustments. [Ref-05, Ref-10]
No recommendations for this finding
F32
The District’s FY2005-2006 Capital Improvement Plan (CIP) budget was $2,425,000 and $2,221,189 was expended. The District’s FY2006-2007 CIP budget was $837,000 and $188,576 was expended. The District’s adopted FY2007-2008 CIP budget is $2,111,000 and District management projects total current year CIP expenditures will be approximately $900,000. [Ref-06, Ref-08, Ref-10]
No recommendations for this finding
F33
According to District management, it is not financially realistic for the District to acquire large marinas in the Ventura Harbor; however, it is potentially feasible to acquire and operate a small marina.
No recommendations for this finding
F34
In recent years, District management explored re-funding the District’s existing COP debt with a larger debt issue to lower its existing interest rate and to generate additional capital funds for marina acquisition and capital projects. The re-funding was not pursued as a consequence of the District not qualifying for a satisfactory bond rating and because potential lenders wanted the District to have additional sources of revenue. [Ref-04] Ventura Port District-City of Ventura Nexus
Related Recommendations (1)
R01
The Grand Jury recommends that the District revisit re-funding its existing COP debt issue in view of its continuing improved financial position. (C-02 through C-07)
F35
According to the 2001 Belknap Study, “From a business standpoint, the Harbor and the overall City of Ventura economy are interwoven.” [Ref-03]
No recommendations for this finding
F36
The Executive Summary of the LAFCo MSR of the District states, “. . . in terms of government structure, the Port District and the City of Ventura should continually look for opportunities for efficiencies gained through active collaboration.” [Ref-01]
No recommendations for this finding
F37
Subsequent to presentation of the 2001 Belknap Study, the City of Ventura and the District entered into a joint service agreement to combine City firefighters with Harbor Patrol Officers on the District’s fireboat. The agreement provides for use of the District’s fire boat to provide fire fighting services for the Port, the Ventura Keys, the Pierpont water areas, and the Ventura Pier. [Ref-01] 6 Ventura Port District Finance
No recommendations for this finding
F38
At a joint 2007 meeting with the Board of Port Commissioners, the Ventura City Council reaffirmed its support of the District and its economic goals.
No recommendations for this finding
F39
In a January 2007 Ventura County Star newspaper article, a Ventura City Councilman stated, “I view this project (the development of Port District Parcels 15, 16, & 18) as absolutely vital to the economic interests of the city and the financial integrity of the harbor.” [Ref-04] Conclusions C-01. The Grand Jury concurs with the LAFCo MSR finding that continued participation of the federal government through its ACE, in the provision of District dredging and breakwater/jetty repair services, is critical to the financial stability/viability of the District. (F-05 through F-08) C-02. Based on District property tax apportionment of $958,000 through May 2008, current year property tax revenues will likely increase to approximately $960,000 or 12% of projected FY2007-2008 revenues. (F-28, F-29) [Att-01, Att-02] C-03. Based on Port District interest earnings of $351,000 through March 2008, current year interest earnings project to approximately $438,000. (F-30) [Att-01] C-04. Based on projected revenues/expenditures, and resulting net assets and cash/cash equivalents as of the end of FY2007-2008, the District appears to be financially stable. Future stability is dependent on multiple factors including: • marina occupancy levels • successful Harbor Village commercial operations • continuing federal government dredging and breakwater maintenance services • no repeat diversion of District property tax revenues • successful development of District Parcels 15, 16, & 18 (F-05 through F-08, F-18 through F-21, F-23 through F-25, F-27 through F-31) [Att-01, Att-02] C-05. Based on projected District revenues and expenditures through June 2008, it is likely that the District’s FY2007-2008 budgeted year-end Surplus/Change in Fixed Assets of $801,515 will be exceeded by approximately $356,500 resulting in a corresponding increase in budgeted Ending Net Assets from $12.87 million to approximately $13.22 million. (F-29 through F-32) [Att-01] C-06. Based on projected operating and non-operating cash flows, as well as projected capital and related expenditures as of June 2008, it is likely that the District’s budgeted negative cash flow of $1,006,485 will be positive by approximately $561,000. This results in a corresponding Ventura Port District Finance 7 $1.57 million increase over the District’s budgeted year-end $3.59 million Projected Unrestricted Cash Balance to approximately $5.16 million. (F-24, F-28 through F-32) [Att-03] C-07. Based on the FY2007-2008 District budget and year-end projections, FY2007-2008 debt service will consume approximately 14% of current year total annual revenue versus, “. . . around 20% until the year 2028,” as anticipated in the 2001 Belknap Study. (F-17) [Att-01] C-08. Successful development and operation of the District represent a “win- win” opportunity in that both the District and the City of Ventura are benefited financially as well as operationally. In particular, the development of District Parcels 15, 16, & 18 should result in the District becoming an increasingly important economic engine for the City of Ventura. (F-18, F-19, F-35, F-38, F-39) Recommendations
No recommendations for this finding

Conclusions 5

No Responses Found 2

Government entities assigned to respond to this report. No response documents have been linked in our database.

San Buenaventura City
Ventura Port District Port Authority