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NEWSWATCH February 18-March 3, 2014
no additional cost to the city, meaning that the city would not pay more than what it currently does to maintain city hall. Staff determined that a private-public partnership, in which there would be no tax burden to Long Beach residents, could be cost-effective, according to a memo from City Manager Patrick West. The RFP, which is to be released on February 28 to three teams selected among the proposed project’s RFQ respondents, is for the design, construction, financing, operations and maintenance of a new civic center funded by an annual payment of $12.6 million, which is currently how much the city pays to maintain city hall. The idea is to have the city lease the civic center at $12.6 million annually from the builder for a period of 40 years, according to West’s memo. The memo acknowledges, however, that city staff does not currently know if this is actually feasible. At the February 11 meeting, Schipske pointed out that if the private-public partnership is not feasible, the city would bear the burden of paying the $500,000 stipend for each RFP respondent approved by the council last year. Eighth District Councilmember Al Austin asked city staff at the council meeting if a public-private partnership had been considered to fund a retrofit of the civic center. “I just don’t think we’ve looked at all of the options and variables,” he stated. This led the council to make a substitute motion to have staff report back with more details on the cost to retrofit the civic center and to also report on financing options, including a public-private partnership. ■
Long Beach Business Journal 5
Port Of Long Beach Plans To Pay Off Its Debt By 2051 ■ By SAMANTHA MEHLINGER Staff Writer With about $602 million in current outstanding debt and another $1.6 billion to be borrowed for capital improvement projects in the next 10 years, the Port of Long Beach’s finance team projects it will be able to pay off this debt by 2051. Every year, twice a year, the port makes payments to reduce its debt, Sam Joumblat, chief financial officer for the port told the Business Journal. “This works just like your mortgage,” he said. “Every month that you pay your mortgage payment you are paying interest and principal. So in our case, we make two payments a year. One payment is interest only, and the other payment is principal and interest,” he explained. By doing this, the port reduces its debt every year. The payments the port makes to reduce its debt come from port revenues, which are sourced from the port’s operating income, according to Joumblat. Because the port is not a taxing authority, the bulk of this income comes from port operations, although some grant money also contributes. “By port operations, what we are referring to is the revenue received by leasing out our terminals under long-term leases to private companies,” Steven Rubin, managing director of finance and administration, explained in a conference call with Joumblat. These
leases provide a base for revenues that the port may expect every year, Joumblat said. Additionally, Rubin said, the more cargo volume coming through the port, the more revenue the port makes. While cargo volume may fluctuate, the port makes annual projections for how much cargo volume it may expect every year based on recent activity. The port’s finance department also annually produces a 10-year cash flow forecast to ensure that the port has enough revenue to comply with its debt management policy, Rubin said. This policy requires that the port always maintain enough cash on hand
to operate for 600 days and that it maintain a debt service coverage ratio of two-to-one, Joumblat explained. “In essence, if you divide our operating revenue minus our operating expenses by the debt services, it cannot fall below two,” Joumblat said. When the port makes its debt payments, it wires the money to the trustee who in turn wires the money to all of the port’s bond holders, Joumblat explained. “Those are the investors that invested in our bonds and expect to be paid twice a year,” he said. The port’s credit rating on these bonds is (Please Continue To Page 6)