Commission Meeting Portal

Special Meeting on Sep 17, 2009 1:00PM

Minutes for the Port Of Seattle Commission meeting, held on Sep 17, 2009 1:00PM

        Commissioners                                               Tay Yoshitani 
                                                                                              Chief Executive Officer 
                      Bill Bryant 
                      Chair and President 
                   John Creighton                           P.O. Box 1209 
                     Patricia Davis                           Seattle, Washington 98111 
                   Lloyd Hara                             www. portseattle.org 
                   Gael Tarleton                              206.787.3000 

             An audio of the meeting proceedings and meeting materials are available on the Port of
                                        Seattle web site - 
                http://www.portseattle.org/about/organization/commission/commission.shtml 

             (The approximate point in the audio recording for the specific item is identified by
            minutes and seconds; example: 01:30.)  Please note: For the September 17, 2009
            meeting, there are two separate audios 
                     APPROVED MINUTES 
              COMMISSION SPECIAL MEETING SEPTEMBER 17, 2009 
            The Port of Seattle Commission met in a regular meeting at 1:00 p.m., Thursday, 
            September 17, 2009 in the Commission Chambers at Pier 69, 2711 Alaskan Way, Seattle,
        WA. Commissioners Bryant, Creighton, Davis, Hara and Tarleton were present. 
               1.     CALL TO ORDER 
             The regular meeting was called to order at 1:10 p.m. by Bill Bryant, Chair and President. 
               2.     EXECUTIVE SESSION pursuant to RCW 42.30.110 
           None. 
           PLEDGE OF ALLEGIANCE 
               3.     APPROVAL OF MINUTES 
            (Audio part one - 00:01:04) Motion for approval of the minutes of the August 4,
           2009 regular meeting  Tarleton 
           Second  Davis 
           In Favor: Bryant, Davis, Hara, Tarleton (4) 
            Commissioner Creighton was absent from the subject meeting 

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               4.    SPECIAL ORDER OF BUSINESS 
           None. 
               5.    (00:01:35) UNANIMOUS CONSENT CALENDAR 
               a.  Authorization for approval of Outstanding Claims and Obligations for the
              period of August 1 through August 31, 2009 in the amount of $43,116,745.12. 
              b.  Approval of revised Port Commission Meeting Minutes of July 28, 2009 
           Motion for approval of Consent Calendar Items 5a and 5b  Hara 
           Second  Tarleton 
            Motion carried by the following vote: 
           In Favor: Bryant, Creighton, Davis, Hara, Tarleton (5) 
               6.   DIVISION, CORPORATE AND COMMISSION ACTION ITEMS 
               a.  (00:02:12) Authorization for the Chief Executive Officer to issue Change Order
              #094 for "Rental Car Facility (RCF) Unsuitable Soil" in the amount of $900,000. 
           Request document: Commission agenda memorandum dated September 8, 2009 and
            computer slide presentation from Ralph Graves, Managing Director, Capital
           Development Division 
             Presenter: Janice Zahn 
            Ms. Zahn provided background unsuitable soil and contaminated soil which had been
            found at the RCF during excavation work. As part of the computer slide presentation,
            photos were shown of the areas where the unsuitable/contaminated soil was found. She
             noted that a 10% contingency was included in today"s request and noted that this is a time
            and materials change order. Ms. Zahn noted that the contractor will work some
             Saturdays in order to keep the schedule on time. 
            Responding to Commissioner Davis" question as to who previously owned the property,
             Ms. Zahn stated that she could locate and provide that information. 
            Motion for approval of Item 6a  Davis 
          Second: Creighton 
            Motion carried by the following vote: 

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           In Favor: Bryant, Creighton, Davis, Hara, Tarleton (5) 
              b.  (00:11:55) Authorization for the Chief Executive Officer to exercise an option to
              extend a contract for one year for Financial Statement, Single Audit and
              Passenger Facility Charge auditing services of the Port's 2009 operating period
             with Moss Adams in the amount of $577,600. 
           Request document: Commission agenda memorandum dated September 9, 2009 from
            Dan Thomas, Chief Financial Officer and Rudy Caluza, Director, Accounting and
            Financial Reporting. Also provided were copies of two letters to the Port from the
            Washington State Auditor"s Office. 
             Presenter: Mr. Caluza 
             Mr. Caluza stated that today"s request for contract extension was consistent with the
             Request for Proposal (RFP) originally let in 2006, and exercises the first of the two-year
             options. He noted that Moss Adams had engaged the CPA firm of Branch Richards to
             assist in the audit work, thereby benefitting that firm as well as fulfilling the Port"s
             initiative to work with small businesses. He also stated that Moss Adams has agreed to
             reduce their contract by 5% for the 2009 audit over the cost of the 2008 audit in response
             to the Port"s attempt to work with current financial challenges. 
           Commissioner Hara commented on the difference in the pricing between Moss Adams
            and that proposed by the State Auditor"s Office (SAO) in order to do the same or similar
             work, and stated that he believes this will need further discussion in the future.
             Mr. Caluza clarified that the Moss Adams proposed fee for the 2009 audit is a fixed, flat
            fee, regardless of the forthcoming performance audit. He also clarified that additional
             charges to last year"s audit resulted from a request to do additional work following the
            SAO audit, and that the additional fees had been approved by the Commission. 
            Commissioner Tarleton voiced her support of awarding this contract to Moss Adams,
            noting that the process was done with complete compliance and consistency with Port
             policy as expressed in Resolution No. 3605, and prior to that, Resolution 3181. She also
            commented that price and performance are inextricably linked, and noted the timeliness
            of the issuance of Moss Adams" reports. 
           Motion for approval of Item 6b  Tarleton 
           Second  Davis 
           Comments were made by Commissioners Davis and Creighton emphasizing the fact that
             to go out with a new RFP at this point for auditing services would likely cause the Port to
            miss the deadline for the bond covenant, which would not be favorable to the bond
              ratings. 

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           Carol Ehlinger, Audit Manger, SAO was asked by Commissioner Hara to comment on
            the policy of the SAO bidding for work. Ms. Ehlinger commented that the SAO does not
             participate in the RFP process since they have the legal authority within the state to do all
              audits. 
            Commissioner Bryant asked a question of Elizabeth Morrison, Senior Manager,
            Corporate Finance regarding bonds and how the market might look at this issue if the
             Port decided to start the RFP process over again, or if it was decided to just go with the
           SAO proposal. Ms. Morrison replied that investors tend to be more comfortable with
            independent CPA firms and that she does not know whether choosing the SAO would
             create a distinct disadvantage. She stated that staff would want to explain the choice and
             provide some justification of the decision to change auditors. 
            Commissioner Hara reiterated his concern of the price difference between Moss Adams
            and the SAO as well the need for Moss Adams to complete their work in a timely
           manner. He also stated that he would like to see the Audit Committee discuss this topic
            further over the upcoming year. 
            Motion carried by the following vote: 
           In Favor: Bryant, Creighton, Davis, Tarleton (4) 
          Opposed: Hara (1) 
                c.  (00:45:29) Resolution No. 3628, First Reading. Amending Resolution No. 3605,
              as amended; the Master Policy Directive. 
            Presentation documents: Commission agenda memorandum dated September 9, 2009
            from Tom Barnard, Research and Policy Analyst and Ralph Graves, Managing Director,
            Capital Development Division; computer slide presentation; and proposed resolution. 
             Presenter: Mr. Graves 
            Mr. Graves stated that a briefing had been given to the Commission regarding proposed
            changes to Resolution 3605, and that he would provide summary information at today"s
            meeting. He noted that there were also some additional proposed edits which he would
            review and explain.
            Mr. Graves noted four major items being proposed and introduced at the recent briefing
               as: 
               Raising Commission authorization levels on most contracting from $200,000 to 
                $300,000 
               Raising Commission authorization levels on purchased goods from $200,000 to
                $500,000 
               Setting Commission authorization levels for maintenance work at $500,000 

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                Replacing and clarifying the term "Authorized Budget Limits" 
            Additional proposed changes mentioned by Mr. Graves included: 
              Adding language for Section 7.3: Goods and Purchases Services, to address a
                  possible "Critical Work" situation 
              Adding language on approving competition waivers 
               Retention of legal counsel 
             Review period 
               Language changes for clarity 
             Commissioner Tarleton noted that at the briefing previously provided by staff, neither
            Commissioner Bryant nor CEO Yoshitani were present. It was also clarified that today"s
             action would be for First Reading of the Resolution only, and that there would be a
            comment period of at least 30 days prior to Second Reading and Final Passage. 
            Regarding information on the Resolution review period, Commissioner Creighton stated
            that his preference is to have a two-year review period since Commission elections are
            held every two years and there could be new Commissioners cycling on. 
            Mr. Graves noted that additional language to the Resolution to provide more clarity
            would include the following areas: 
              Non-public work projects 
              Change orders and Small Works change orders 
                "Best Bid" definition 
              Project changes 
              Personal services 
               Audit and accounting services 
              Affirmative action 
            It was noted that staff would return to the Commission for Second Reading and Final
            Passage of Resolution No. 3628 sometime in October. 
            Public comment regarding Item 6c was received from the following: 
               Ed White, Vice-president Corporate Real Estate, Alaska Airlines and Horizon
                  Air. Mr. White commented on the vested interest that both Alaska Airlines and
                  Horizon Air have in the Port"s capital project process, and desire for that to be
                   effective, efficient and cost-effective. He stated that he would work with CEO
                 Yoshitani and his staff to add any comments, input or further recommendations to
                  the proposed resolution. 
           Motion for First Reading of Resolution No. 3628  Creighton 
           Second  Tarleton 

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            Motion carried by the following vote: 
           In Favor: Bryant, Creighton, Davis, Hara, Tarleton (5) 
               7.   STAFF BRIEFINGS 
           None. 
               8.   NEW BUSINESS 
            (01:33:44) Public comment regarding the "cruise ship report card" was received from the
             following individual: 
                Fred Felleman, Friends of the Earth. Mr. Felleman commented on a "cruise ship
                  report card" which had recently been released by Friends of the Earth.
            Written public comment regarding the Eastside Corridor was received from Mr. Dwight
            Baker. A copy of Mr. Baker"s comments is, by reference, made a part of these minutes,
             is marked Exhibit "A," and is on file in Port offices. 
            A brief recess of the meeting was called at 2:48 and the meeting was reconvened at 3:00
            for a Budget Workshop 
               9.   POLICY ROUNDTABLE  BUDGET WORKSHOPO 
               a.  (Audio part two  00:00:35) 2010 Budget  Preliminary Tax Levy Discussion 
            Presentation documents: Commission agenda memorandum dated September 3, 2009
            from Dan Thomas, Chief Financial Officer and Elizabeth Morrison, Senior Manager,
            Corporate Finance; computer slide presentations titled, "Preliminary Tax Levy
            Discussion;" and "Seaport Division 2010 Preliminary Capital Budget" 
             Presenters: Mr. Thomas, Ms. Morrison, and Boni Buringrud, Manager, Seaport Finance
           and Budget 
            Mr. Thomas, for introduction and to set some context, noted that this presentation was
             prepared as response to earlier request from the Commission for staff to evaluate the
             implications of having the Seaport eliminate its use of the tax levy moving forward. He
             stated that one set of implications relates to the Seaport"s capital plan and another would
             be related to the policy of how the tax levy is used.
            Ms. Morrison provided background on uses of the tax levy, noting that there are statutory
             limitations on the annual collection, and that the Port is traditionally collects an amount
           below the maximum allowed. She noted that by policy, use of levy funds is generally
             restricted to Seaport/Real Estate capital investments, environmental expenses and freight
             mobility projects, as well as a small piece for Airport noise mitigation which cannot be

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            funded from Airport funds due to FAA regulations. Ms Morrison also reviewed prior
             levy funding criteria. 
            Ms. Morrison noted that from 1994-2008 Seaport and Real Estate Businesses invested
             $1.5 Billion in capital projects, approximately half of which was levy-funded, either
             through direct cash from the levy or through the proceeds of general obligation bonds that
            are backed by the levy.
            Ms. Morrison commented on results of the Century Agenda Funding Panel"s work, and a
             new policy adopted which notes that the Port should primarily be self-sustaining, but that
             there are cases where the tax levy should be used for activities that cannot be self-
             sustaining but do support the Port"s core business.
            Commissioner Tarleton asked for clarification as to what is included when the "Seaport"
             is referred to as far as revenues being generated. Ms. Morrison stated that Seaport
            includes Container and Cargo Operations and the Cruise business as well as the industrial
            properties such as tug & barge, Terminal 107, properties along the Duwamish and the
             fishing boats at Terminal 91. 
            Ms. Morrison provided information on the cash flow of both the Seaport and the Real
             Estate Divisions, noting that the Seaport has a positive cash flow and Real Estate"s cash
             flow is negative. She gave a review of options for managing this negative cash flow,
            which include: 
                  1.  Continuing to use Seaport"s positive cash flow to pay Real Estate"s operating
                   deficit and debt service, or alternatively; 
                  2.  Use the tax levy to pay for the Real Estate deficit 
                  3.  Retool Real Estate to improve their cash flow 
            She also noted that these options can be combined, and provided more in-depth
            information on scenarios 1 and 2. 
            Regarding other tax levy uses, Ms. Morrison noted that for budget planning purposes,
             staff is assuming the tax levy will continue to fund: 
               Existing G.O. bond debt service 
               Public expense projects, including FAST corridor, Eastside Corridor and Highline
                 School noise mitigation 
               Seaport and Real Estate environment expenses 
                Seaport and Real Estate"s portion of PortJobs 
            Commissioner Tarleton raised the question as to whether or not it might be time for a
             new policy to be written regarding the use of the tax levy. Mr. Thomas replied that it is
            probably a good idea to revise and adopt a new tax levy policy, in order to provide more
             specific guidance for capital planning purposes as well as operating planning purposes. 

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            Ms. Morrison reviewed a potential levy scenario, showing uses of the levy just discussed,
             noting that in the scenario there is no need seen for new G.O. bonds over the next 5-year
            period. It was also noted that Port participation in the waterfront tunnel was not included
             in the calculations.
            Commissioner Tarleton commented on thoughts that the public needs to have some
             degree of predictability of how the tax levy is used and why the Port is choosing that
             course, and that the Port needs to either set a limit of the dollars for a continuous period
              of time or set a specific tax rate. She also commented that either of these options must be
              justifiable.
            Commissioner Creighton was excused and was absent from the meeting from this point
            forward. 
            Ms. Buringrud provided a preview of the Seaport 2010 capital budget as well as
             information on projects that would be deferred under this scenario. She noted that within
             the preparation of the budget, all projects are reviewed by cross-functional teams. She
             noted that driving all of the projects are the Seaport"s 2010 key strategies, which are 
                  1.  Protecting current business 
                  2.  Positioning for recovery and change in the container shipping market 
                  3.  Collaborating with others to advance key initiatives 
            A summary of the Seaport Capital plan was provided and within that plan, Ms. Buringrud
            reviewed committed capital projects under contract, committed capital projects
            commission authorized, commission capital projects division pending and capital
             business plan prospective projects. 
            Commissioners asked about the possibility of having projects with an environmental
            component separated out of the Seaport budget in the future, which would allow the Port
             to measure progress toward a clean/green port as well as get a better look at projects
            which receive tax levy funding. 
             Mr. Thomas raised the point that it could sometimes be difficult to pull out an
            environmental piece which was within a Seaport project. 
            Commissioner Tarleton was excused from the meeting and was absent from this point
            forward. 
            Ms. Buringrud provided information on specific projects which may be deferred, noting
             that they are mainly business plan prospective projects, and that many are within the
            category of renewal and enhancement. 
            Commissioner Bryant stated that he did not sense there would be any support for
             collecting any more from the tax levy, but the fact that there is some stability being

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             provided looking out over the next several years will definitely be supported by the
            Commission. 
        10. ADJOURNMENT 
            There being no further business, the meeting was adjourned at 4:20 p.m. 
             (A digital recording of the meeting is available on the Port"s website.) 

           Lloyd Hara 
            Secretary 














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