BOARD OF COMMISSIONERS PORT OF NEW ORLEANS MINUTES OF THE SPECIAL MEETING BOARD RETREAT ON JUNE 27, 2013

Transcription

1 BOARD OF COMMISSIONERS PORT OF NEW ORLEANS MINUTES OF THE SPECIAL MEETING BOARD RETREAT ON JUNE 27, 2013 A SPECIAL MEETING, NO. 13 OF FISCAL YEAR 2013, A RETREAT OF THE BOARD OF COMMISSIONERS OF THE PORT OF NEW ORLEANS, HELD IN THE FIRST FLOOR LAFITTE ROOM OF THE HYATT FRENCH QUARTER HOTEL, 800 IBERVILLE STREET, NEW ORLEANS, LOUISIANA, WAS CALLED TO ORDER BY CHAIRMAN JOSEPH F. TOOMY AT 1:00 P.M. ON THURSDAY, JUNE 27, COMMISSIONERS PRESENT: COMMISSIONERS ABSENT: STAFF: Joseph F. Toomy, Chairman Gregory R. Rusovich, Secretary-Treasurer Scott H. Cooper, Member William T. Bergeron, Member Robert R. Barkerding, Jr., Member Daniel F. Packer, Jr., Vice Chairman Michael W. Kearney, Member Gary P. LaGrange, President & CEO Patrick J. Gallwey, Chief Operating Officer Christian Bonura, Business Development Director Gerald O. Gussoni, Jr., Executive Counsel J. Robert Jumonville, Cruise & Tourism Director Deborah D. Keller, Port Development Director Eileen Pansano, Internal Audit Director James E. Ruckert, Director, Finance & Accounting Cynthia W. Swain, Administration Director Paul J. Zimmermann, Operations Director Stacie Ordoyne, Executive Matthew Gresham, Executive Assistant Paul Matthews, Executive Assistant Chris Donner, Real Estate Development Manager Andree L. Fant, Deputy Director, Operations Janine Mansour, Marketing Marianna Rubino, Staff Attorney Isabelle Montelepre, Legal Services Michelle Stieb, Information Technology Page 1 of 47

2 Harold G. Wilbert, Marketing GUEST: John Holt, Government Consultants, Inc. I. DETERMINATION OF QUORUM AND CALL TO ORDER Chairman Toomy determined that a quorum was present and called the meeting to order. II. CALL FOR PUBLIC COMMENT Chairman Toomy called for public comment, but no member of the public was there. III. RETREAT OVERVIEW AND INTRODUCTION Chairman Toomy stated that it has been a year since the Board=s last retreat, and, given the recent turnover resulting from the appointment of three new Board members, he felt it the appropriate time to conduct another retreat. Citing the Board=s record-breaking financial performance, Chairman Toomy pointed out that the Board has a duty to act both in bad times such as in the aftermath of Hurricane Katrina and in the good times. The Board must build on its 117-year history and not just babysit the Port. In that light, the Board must assess its fiscal policies and facility requirements to meet future challenges. This retreat as well as a follow-up retreat scheduled for August, 2013, affords the Commissioners and the staff an opportunity to discuss major strategic issues and develop long range plans for the Port. Chairman Toomy then introduced the Board=s President and Chief Executive Officer Mr. Gary P. LaGrange, who began by paraphrasing a Zen Buddhist saying that demonstrates the importance of constantly striving to move forward: AIf you make one positive change in your life each day, you will not believe the positive impact on your life in one year.@ He pointed out that the Board=s management and the staff act as the custodians of the Port on the Board=s behalf and know how vital both short-term and long-term planning are to the Board and the Port=s continuing success. Pointing out that both the Chief Operating Officer Patrick J. Gallwey and he himself have planning backgrounds, Mr. LaGrange yielded the floor to Mr. Gallwey. Mr. Gallwey provided an overview of the staff retreat that occurred in January, He stated that speakers representing each of the Port=s major business areas were invited to make presentations on their perspectives of the future of their particular industry segment. Representatives of ocean carriers, both container and breakbulk; terminal operations; shipping; railroad; dredging; trucking (with an emphasis on facility access); warehousing; and the cruise and tourism industries addressed the staff and answered questions. The staff then broke into groups to discuss specific issues, including environmental, revenue, marketplace, and port capacity issues. Following the retreat, the group leaders listed the major findings and then developed presentations for the Board retreat. The presentation on Page 3 of 47

3 environmental issues was made by Mr. Chris Bonura, Director of Business Development, at the Executive Committee meeting earlier today. Mr. Gallwey stated that three presentations would now be made on revenue issues, market issues and port capacity issues. Following the presentations, a general discussion period will be held and time made available for questions, answers, and comments. IV. STAFF PRESENTATIONS The following presentations were made: A. Discussion of Revenue Issues Presenter: Janine Mansour, Commercial Manager, Marketing Division B. Discussion of Market Issues Presenter: Janine Mansour, Commercial Manager, Marketing Division C. Discussion of Port Capacity Issues Presenters: Andree Fant, Deputy Director Terminal Operations, Operations Division Chris Donner, Director, Business Development Division Summaries of the presentations are attached to and made part of these minutes. V. General Discussion Chairman Toomy initiated discussion on the presentations as well as the presentation on environmental issues conducted earlier. He stressed that any item requiring a more in-depth analysis or any ideas not presented could be addressed at the August retreat. Mr. LaGrange commended the staff for the number of alternative opportunities for growth and options to resolve issues that were presented. In specific reference to port capacity and the future footprint of the Port, he stated that the Port=s short-term capacity requirements can be met and that the Board=s focus should be on long-term port development issues. He added that the discussion of financing improvements fits hand in glove with the discussion of facility expansion and growth. Discussion initially centered on issues related to the Board=s cruise business segment. It was pointed out that the sale of advertising in the Board=s cruise terminals could generate $100,000 to $200,000 in revenue annually. The sale of merchandise to the approximately 450,000 passengers that traverse the terminals was also discussed. However, Carnival does not support the idea of the Board selling its merchandise at the terminal because it sells its own products on board, and Carnival wants to control passenger spending to its advantage. Although there is an in-terminal operation that sells food products by the Port, Carnival does not want the Board to sell products that cannot be consumed before boarding the ship. The Page 4 of 47

4 Board currently has not developed a line of merchandise, e.g., caps, t-shirts, etc., that could be sold. It was pointed out that the merchandising of Port-related items should not be limited to the cruise segment. Cargo interests have expressed an interest in obtaining logo items to give to customers, which is a good method to publicize the Port=s brand throughout the industry. The sale of branded merchandise could also be accomplished through magazine and online advertising. The Panama Canal Authority uses a similar approach. The discussion moved onto LOA (length overall) vs. GRT (gross registered tonnage) dockages. It was expressed that terminal operators and the Board s customers may not fully understand the difference between the two rates and the conditions that must be met to secure a GRT rate. Technically, all cargo has to be handled over the side to obtain a GRT rate. However, an exception can be granted with prior Board authorization. Additionally, both the ship agent and the operator must agree to the use of the GRT rate. Most terminal operators are cognizant of the availability of the rate, but some, such as Pacorini, may have been able to take advantage of the rate more frequently. The question was raised whether a GRT rate would apply to all cargo on a vessel, and the staff responded that, when some cargo is moving across the wharf and other cargo is going over the side to a barge, a split rate is applied, and the aforementioned prior authorization exception must be obtained to get the split rate. The next topic discussed was the Board=s ongoing traffic study, which the staff reported as nearing completion. The study will recommend that the Board work closely with the City of New Orleans and the Regional Planning Commission to effect immediate improvements to offer an interim solution to traffic congestion problems related to access to and egress from the Board=s Uptown terminal area. Recent publications and data indicated significant investment in the expansion of the chemical industry in Louisiana. That should translate into increased chemical exports such as resins and plastics. This export cargo growth affords a tremendous opportunity for the Port. A question was raised regarding the Board=s strategy to capture this cargo. The staff responded that the biggest hurdle the Port faced was to attract additional ocean carrier service, particularly to Asia. The Port=s service to Europe and South America is excellent; however, the Port loses cargo to Asia because of longer transit times. Another factor in attracting new service is to increase inbound cargo to better balance the Port=s cargo base and to solve equipment positioning issues. The staff is working with existing and new customers to identify inbound cargo opportunities. It was pointed out that the new TCI facility provides a great Amousetrap@ for PVC (resins) cargo. The staff is working very closely with TCI, which includes making joint calls on potential industry customers. The statement was made that the Board has to market the advantages of the Port beyond its traditional geographical market, especially in the Lake Charles area. Potential customers need to know that we have the capacity and that we are willing to work with them. Page 5 of 47

5 The importance of the value-added service that TCI provides in attracting cargo to the Port was noted, and it was suggested the Board strive to identify and establish additional valueadded opportunities at the Port. The usefulness of the newly enacted tax credit for Louisiana cargo as an additional tool to generate cargo was cited. The staff responded that given the low margin of profit in the chemical export trade, the tax credit should be quite helpful in attracting new cargo. Mr. LaGrange advised that he had recently met with representatives of Hapag-Lloyd and determined there was an opportunity to attract a wealth of cargo from the east coast, especially Savannah, to develop the Port=s inbound side using the tax credit. Discussion then turned to whether or not the Port should continue to be considered a niche player with a geographical advantage only for Latin America. It was argued that the chemical market opens new doors for the Port and will enable it to broaden its focus. The north/south trade was acknowledged to be the Port=s strongest market, but the chemical export trade creates a more global marketplace for the Port. Growth in trade with Turkey (including exports of resins and cotton) was cited as an example of this expanding global market. It was asked whether the Board had a retainer with an environmental risk management firm in place in the event of an environmental incident. It was pointed out that the Port has arrangements in place with environmental firms to conduct environmental studies and assessments such as the investigation of hazardous environmental conditions (asbestos, underground storage tanks, etc.) at a particular site and asks for bids on a rotating basis. However, the Board does not have an on call response team for accidents such as spills. Incidents involving hazardous materials are handled by the Harbor Police Department, the New Orleans Fire Department and the State. The comment was made that the Board=s own equipment is susceptible to spills and that it is general industry practice to have a spill contractor on retainer. Discussion then shifted to the criteria for the environmental manager for the planned environmental management program. It was reported that management had to work within the confines of the state civil service rules and regulations to staff the environmental program and that the position of environmental impact manager was the only suitable position available with sufficiently strong requirements in environmental sciences to oversee the program. A question arose regarding the consortium of lower Mississippi River ports and whether or not any arrangements had been made for cooperative endeavors other than security. Many international customers are confused about the various port jurisdictions and sometimes consider the lower Mississippi River as one port area. It was also pointed out that ports on the river are generally not in competition with each other because of each port=s productrelated specialization. The Board has informal joint marketing agreements with the Ports of Plaquemines and South Louisiana. However, the topic of port cooperation is not broached in statewide port organizations. State laws do permit cooperative endeavors. Yet, despite the Page 6 of 47

6 lack of inter-port competition, no port wants to be perceived as yielding advantage to another. Also, there is the perception that port cooperation could result in port consolidation. It was pointed out that the Board has a good relationship with the Ports of St. Bernard and South Louisiana, and the development of a coalition of ports could be useful in addressing issues such as container facility development at the mouth of the river. Discussion then centered on state funding for port capital improvement projects. A review of funding made available by the state over the past five years indicates that the State of Louisiana does not adequately fund ports, especially in comparison to the funding received by ports in other states. It was pointed out the State of Louisiana=s Port Priority Program provides only $20 million annually for all 33 of Louisiana=s ports. Funding through the state=s Capital Outlay Program is not easy to obtain because of limited funding capacity. The Board currently has $60 million in requests for funding through this program and has not received any funding for the upcoming fiscal year. It was pointed out that ports in other states receive dedicated revenues for port improvements. Houston currently gets $25 million in ad valorem taxes annually (to be reduced to $20 million in the near future). This funding can be used to leverage additional funds, and Houston was able to generate $125 million in funding for capital improvements for four years in a row. The Port of Mobile received $300 million for port improvements through the State of Alabama=s Teacher=s Retirement Fund, and Florida provides funding for improvements annually that is divided among the state=s 14 ports each port receives from $9 million to $11 million each year through this program. Gulfport, on the other hand, is being sued because it misappropriated $586 million in HUD funds (intended for a post- Katrina Road Home program) and spent $100 million on improvements for a port with no adequate channel access. The Port Priority Program and the Capital Outlay Program provided the Board with approximately $10 million in Fiscal Year 2013 and will provide some $7 million in Fiscal Year The State does not prioritize port projects in making funding decisions, and this results in a piecemeal approach to project funding. It was suggested that, because of the slow pace of funding and the fact that the system will not permit the bid of a project until it is known how much funding will be available, a recommendation was made that the Board examine the use of a line of credit. Discussion shifted to the operational efficiency of the gate at the Napoleon Avenue Container Terminal. Two terminal operators control the lanes providing access to the terminal. Frequently, truck traffic will be congested for one operator while lanes controlled by the other operator are idle. The terminal operators have thus far declined to cooperate to achieve efficient gate operations. The ability for the operators to cooperate is complicated by the fact that each operator has its own software for gate operation. The staff was asked how far along they were with planning for terminal expansion and whether it was possible to expedite construction of the new second gate included in expansion plans to alleviate congestion Page 7 of 47

7 problems at the extant terminal. In response, the staff reported that terminal expansion plans were at the conceptual stage. The 2008 Master Plan for the Port included two additional phases for terminal expansion: Phase II included marshaling yard development, the acquisition of two container cranes and some additional work yet to be completed. Phase III includes the demolition of the exiting wharf; construction of a new wharf and adjacent marshaling area; purchase of additional cranes and design (completed); and construction of the new intermodal rail facility. With the exception of the intermodal facility, design has not begun for Phase III expansion, and the location of the gatehouse as well as other structures has not been determined. The need to determine a solution for problems at the existing terminal gate was stressed. It was pointed out that action needed to be taken prior to development of the second gate included in Phase III expansion. Construction of a second gate may take another ten years. Even if construction of a new gate is expedited, the cost and location of the gate cannot be determined until plans for Phase III terminal expansion are completed. The option of the new gate should not be pursued until all other options have been exhausted. These options include attaining the cooperation of both terminal operators in the efficient allocation of gate capacity; contracting a third party operator for the gate; or assumption of gate operation by the Board. Mr. LaGrange stated that he will make a request for a three-way conversation regarding gate operation with terminal operators and the Board. Discussion then centered on the planned Poland Avenue Cruise Terminal. The opinion was expressed that, although the Board is at the point of finalizing the transfer of property from MARAD, it has not established a firm cost for the terminal. As recently as last week, it was still not known how terminal parking demand, which is an important cost factor, will be accommodated. To develop concrete cost numbers, the Board needs to move expeditiously on terminal design. A recent TIGER grant application which the submitted provides the most current and accurate estimate of terminal costs. The application is well thought out, and, as a result, the staff knows much more about terminal costs than before. However, the application does not address all of the terminal=s features, including parking facilities. The inclusion of parking in the application would have resulted in its nullification by MARAD. The staff pointed out that Port Priority Program funding would be used for parking. Based on the recommendation of cruise consultants, the staff included two gangways in the TIGER grant application. It was pointed out that any changes to the project, such as requiring the accommodation of larger vessels, as well as MARAD property requirements could impact the ultimate cost of the terminal. The statement was made that with other issues resolved, the Board should determine how it intends to provide terminal parking either through construction of a garage on the wharf, construction of a garage on Parcel B, located adjacent to the wharf, or redevelopment of an existing parking facility located at the former Port of Embarkation. Making this determination will enable the Board to move expeditiously on design and develop concrete numbers for overall terminal costs. By pinning down terminal costs, this will enable the Page 8 of 47

8 Board to proceed appropriately with terminal development within the confines of available funding. The staff reported that one problem has been that it is not yet known exactly what portion of Parcel B will be transferred by MARAD. The percentage of the parcel that MARAD may wish to retain will depend on its access and egress requirements. Therefore, it is essential to obtain this information in order to address terminal parking arrangements properly. The staff was asked when this information would be available, and Mr. LaGrange responded that we will not know until the transfer of the property is consummated with MARAD. Approximately two months ago, architects and designers were invited to participate in a Board-sponsored planning session or charrette on cruise terminal design. At that point, all that was known was the footprint of the facility and the proximity of the parking garage at the Port of Embarkation. The plan developed - a two-story terminal capable of accommodating a Dream Class vessel with a passenger drop site on Parcel B - will cost approximately $20 million. The staff has recently been told that the state has decided to provide to the Port $6 million in capital outlay funds requested for Fiscal Year 2014, bringing total funding available for the terminal to $26 million. However, as of today, these funds are still in Priority 5 and unavailable. Regardless of whether a total of $20 million or $26 million is available, the clock is starting to run on the use of Port Priority Program funding. The Board will have to spend $5 million on the terminal this fiscal year and $5 million in each of the two following fiscal years. We will need to come up with a design that fits within that $20 million to $26 million budget. The development of on-dock parking, which would cost approximately $40 million, is not possible within present budget constraints. The good news is that Parcel B can provide 350 parking spaces at ground level and still accommodate an access road for MARAD. The need to accommodate the residents of the Bywater, the adjacent neighborhood, by eliminating terminal traffic from Chartres St. and shifting it to Poland Avenue was referenced. Terminal access may be able to be provided through the former Naval Support Facility. However, the provision of access will depend on the City of New Orleans= agreement with the developers of that site. It was asked what the Board can do independent of the development options selected by the City and its developers to resolve access issues. The staff responded that the Board has to be flexible in its design of approach routes. Parcel B can be used as a terminal transportation hub and access route for MARAD, whether terminal-related traffic comes through the former Naval Support Facility or uses Poland Avenue and the Mazant St. ramp. Consideration must be given to the possible use of the existing 950-car capacity garage located at the former Port of Embarkation. However, the staff noted the garage requires significant renovation. A new vertical circulation core is needed, and the facility is devoid of bathrooms. Remediation costs are estimated to be as much as $5 million. Additionally, the garage is located a quarter Page 9 of 47

9 of a mile from the terminal, and shuttle service would be required. It was suggested that the Board may be better off building a parking garage on Parcel B adjacent to the terminal. Having a parking facility adjacent to the terminal proved to be very successful at the Erato Cruise Terminal. However, constructing an on-dock facility would be cost-prohibitive. Construction of a garage on Parcel B would certainly be less expensive. However, bank stabilization costs would have to be taken into consideration. Parking issues as well as vessel sizes were not addressed in the 2003 conceptual plan for the terminal. In the aforementioned charrette, a naval architect from Miami with expertise in cruise terminal design advised that vessel sizes have changed since the original plan was drafted in At that time, the nominal capacity for a cruise ship was in the 2,500 passenger range. Today=s ships have a nominal capacity of 3,500 to 4,000 passengers. It was pointed out that the terminal could be designed to accommodate ships with a capacity of 7,000 passengers. However, landside constraints may prevent handling a vessel that size. Given that parking is such a major factor in generating revenue from cruise terminals, the recommendation was made to review parking capacity expansion options for the other Board-owned cruise terminals. The option of expanding the parking facility at Erato St. by constructing a multi-level parking facility over the employee parking lot at the Board Administration Building was discussed. It was noted that employee parking would be reserved on the ground level of the facility and that it would not be intended to replace existing parking capacity at the Whale Lot. It was reported that the arrival of a Carnival Dream Class vessel at Erato St. in August will necessitate the provision of an additional 200 to 300 parking spaces weekly. The parking facility at Erato St. can accommodate up to 150 more cars. Another four-to-five day cruise out of the Port could increase parking demand by another 500 cars weekly. The staff reported that a four-to-five level garage could be constructed over the existing employee parking lot without interfering with the Crescent City Connection. In order to maximize the use of available space, access to a new 500-car garage could be provided via the existing ramp at Erato St. with a bridge built on the fourth level of the new garage to accommodate overflow from the Erato St. garage. It was noted that a new garage does not cost nearly as much as a new cruise terminal. The Erato St. Cruise Terminal and Garage cost $37 million. Given the paucity of funding available to the Board through the State=s Capital Outlay and Port Priority Programs, the best formula for funding construction could be the issuance of revenue bonds. It also provides a perfect opportunity for public/private partnership where the Board issues revenue bonds, and the private partner is obligated to repay them with revenue from the facility and is allowed to retain a portion of the proceeds as profit. It was pointed out that the Board has been approached by parking companies interested in this type of arrangement. Page 10 of 47

10 The staff was asked whether interim plans have been made to meet parking demand growth until a new facility can be developed. The staff responded that, as noted previously, an additional 150 cars can be handled at the Erato St. garage and that arrangements have been made with the Convention Center to accommodate overflow parking at its AJ@ Lot on a revenue-sharing basis. The Convention Center regularly charges $10 for parking, and the Board charges $16 for cruise parking. Under the arrangement worked out, the Convention Center will get $10 and the Board will get $6 per car. The arrangement is similar to the existing agreement for parking at the Whale Lot. Fifty-five percent of the parking revenue generated there goes to the operator of the Whale Lot. That translates to roughly $9 per car. The operator also has the obligation to make all necessary improvements to the lot. Discussion then turned to the Board=s international offices. The Board maintains international offices in Sao Paulo (South and Central America) and Tokyo (Far East and Northeastern Asia) and is in the process of adding part-time representation in Mumbai (Southeast Asia). The Board also operates an office in New York that is responsible for maintaining relationships with container carriers headquartered in the region. The Board elected to contract representation in Mumbai because of India=s rapid economic growth and, in particular, opportunities for expansion of the Port=s breakbulk cargos, particularly pipe and other steel products. The Board=s international and New York representatives visit the Board s headquarters two to three times annually to catch up with Board planning and strategies and to attend major conferences in New Orleans including those on breakbulk and critical commodities. Board members and the staff meet with our representatives when conducting marketing initiatives in their respective areas. The Board maintains good communications and enjoys good working relationships with its representatives, and they are well integrated into Board management. It was pointed out that Louisiana Economic Development (LED) maintains three international offices, including one in London and another in Taipei. It was recommended that the Board work together with the LED international offices to take advantage of opportunities for synergy. The Board=s Sao Paulo office was commended for maintaining an excellent relationship with the Port=s customer base. Celso Camargo, the Board=s representative in Sao Paulo, is also working closely with the chemical association to identify potential new customers. Captain Tanaka of the Board=s Tokyo office was reported to have excellent contacts in the steel industry. Mr. LaGrange added that we receive valuable reports from each of them on a routine basis. Discussion shifted to a recent visit to Turkey by the Board=s Chief Commercial Officer Mr. Bobby Landry and Commercial Manager Ms. Janine Mansour. That trip yielded new opportunities for importing steel products. They were able to meet with representatives of Page 11 of 47

11 the Turkish Steel Exporters Association, which represents some 28 mills throughout Turkey. These representatives expressed interest in investing in value-added services in New Orleans. They are currently working with the Board=s Real Estate Department to identify potential sites and are particularly impressed with opportunities for direct-to-barge discharge. Opportunities have also emerged from contacts in India too. One company which supplies pipe for Canada=s oil industry is planning to use the Port. It was initially looking at establishing a pipe-coating and double-jointing operation in Canada, but it is now considering investing in New Orleans because of potential cost-savings. Board members recommended that we work with LED and GNO, Inc., on this project. It was reported that we are also working in collaboration with JEDCO on opportunities for the Avondale site. The Indian company will require an approximate 50-acre site for its coating and doublejointing operation, and the former Bollinger site on the Industrial Canal has been identified as a potential location because of its rail and water connections. They plan to ship 100,000 pipes annually to Canada. They will be working with one of the Port=s riverfront terminal operators to discharge the pipes. The company indicated that some of the pipes will be shipped to Canada by barge and some by rail. It was noted that the Port=s connections to Edmonton, Alberta, are better than Houston=s. It only takes three days to get from New Orleans to Edmonton via the Canadian National Railway. The potential to take advantage of import/export tax credits was also discussed. With regard to the aforementioned Bollinger property, it was pointed out that the property has significant environmental issues, including litigation regarding the ongoing clean-up. The Board has met informally with environmental groups concerning the site and litigation. The Bollinger site consists of 57 acres, and approximately one half of the property is impacted by environmental problems. The question was raised that, given the current marketability of the site, whether it would be worthwhile for the Board to undertake cleanup. It was added that two questions need to be answered: (1) if the Board proceeds with site clean-up, will it interfere with the ongoing litigation; and (2) should the reimbursement of any clean-up costs be taken into consideration in determining the marketability of the property. The staff responded that restitution of clean-up costs would depend on the source of funds used to accomplish the clean-up. Currently, the Board is looking into obtaining federal funds for the clean-up. Should the Board employ federal funds for the clean-up and then put the property back into commerce, it may be necessary to reimburse the federal government. Environmental problems with the site were described as follows: seven of the 30 acres located in the southern portion of the property require remediation. The most cost-effective approach to remediate affected property would be to encapsulate it in concrete. However, the locations requiring encapsulation are spread out over the southern half of the property. The distribution of concrete pads throughout that portion of the site may affect its usefulness. It Page 12 of 47

12 may prove challenging to attract a user for the site because adding underground infrastructure improvements in encapsulated areas may not be feasible. It was further reported that there are two sunken contaminated barges in the slip adjacent to the southern part of the property. If the Board attempts to remove the barges, it will assume complete responsibility for all related clean-up costs. The comment was made that over time the barges may naturally start to leak contaminants or be hit by another vessel. At that point, the Coast Guard could possibly take action, and it may be a good idea to initiate discussion with them regarding this possibility. In response to questions from the Board members, the staff reported that both barges are located in the same slip, and the slip was just wide enough to accommodate the two barges. The staff added that ownership of the barges is uncertain, but they may be owned by American Marine. Divers were sent down to inspect the barges, but they were unable to determine ownership and were afraid to shift barges around because of potential leakage of contaminants and danger to the inspecting divers. The comment was made that best way to remove the barges and remediate the site would be to construct a coffer dam and de-water the slip. It was suggested that the Board approach the Coast Guard to remove the barges because they have funds to accomplish the removal. The staff replied that the Coast Guard would not undertake removal because the barges are not obstructing a waterway. It was suggested that the State has funding available for clean-up, and the example of the State cleaning up spills on highways if no responsible party could be identified was provided. The staff replied that in this case, as the Board is the owner of the property, the Coast Guard would look to the Board to clean-up the site or else pay whatever costs the Coast Guard might incur if the Coast Guard did the clean-up. It was noted that the problem will only get worse over time and concerns were raised about contaminants leaching from the barges. The staff responded that the cargo is believed to be asphalt or heavy oil that has settled at the bottom of the barges and is not spewing from the barges. The comment was made that asphalt was the type of material handled at the Bollinger facility prior to its closure. Of the overall 57-acre site, the northern 27 acres are not affected and are on the market right now. It was recommended that the Board determine clean-up costs. It may be reasonable for the Board to move ahead with the clean-up, based on the potential market for the property. The staff reported that about ten years ago, clean-up costs were estimated to be $3 million, excluding the cost for removal of the barges and necessary remediation discovered after their removal. However, this estimate was based on digging up and removing polluted soil, not encapsulating it. It was suggested that ten years ago the property was not as marketable as it is today and that, in order to render a decision on what approach the Board should take, a range of prices for differing approaches for cleaning up the property should be obtained. Page 13 of 47

13 The staff pointed out that clean-up of the barges and the property may make the litigation go easier. Liquidation of the damages will let the Board know the full extent of associated clean-up costs. This could expedite settling claims with any underwriter=s counsel. The bottom line is that this Board has been sensitive to the need for waterfront properties to accommodate potential customers and to make this site marketable again is in conformity with that goal. Therefore, it would be advisable for the Board to examine clean-up costs and potential revenues for this site. The staff raised concerns regarding the costs of taking on clean-up efforts in light of other projects that the Board wishes to undertake. Although the Board will receive a refund of at least $15 million from the Corps for the Board=s share of the cost of the deep-draft component of the IHNC Lock Replacement Project, funds are needed for other projects such as the Poland Avenue Cruise Terminal and parking capacity expansion at the Erato St. Cruise Terminal. It was recommended that the Board do additional investigation of the clean-up costs. It is estimated that the clean-up of landside contaminants will be approximately $3 million, and the cost of the barge removal will have to be determined. Given the potential for revenue return from leasing the property, which is estimated to be approximately $400,000 to $500,000 by the Real Estate Department, it would be a worthwhile project to pursue. The staff noted that the contaminated acreage at the site is located in the southern half of the southern portion of the property providing about 50 useable acres. Questions were raised regarding the needs of the proposed steel-pipe-coating and double-jointing facility, including whether deep-draft access is required, how much acreage is actually required, and how the facility access and egress to the facility will be provided. In response, the marketing staff reported that the company had originally indicated that 30 acres would be sufficient, but the property requirement has increased to 50 acres. Deep-draft access is unnecessary as they would move the pipes from a riverfront terminal via the New Orleans Public Belt Railroad or by barge to the proposed facility in order to treat the pipes, then load the cargo onto barges and/or rail for shipment to Canada. France Road Terminal was recommended as a possible alternative site that might meet their needs. VI. ADJOURNMENT Chairman Toomy stated that the Board and the staff will have a number of exciting things to discuss at the follow-up retreat to be held in late August, 2013, and that he hoped all the Commissioners will be able to attend. He added that there is no fixed agenda for the August retreat and that it could be either a full-day or another half-day meeting. He identified several issues to follow-up on at August retreat: (1) The former Bollinger property situation (2) The Poland Avenue Cruise Terminal (3) Napoleon Avenue Container Terminal Expansion and issues related to Page 14 of 47

14 gate operation In the interim, further analysis of options should be conducted to determine the cost of the various options discussed enabling either the selection or elimination of options. He stated that the staff will put together the agenda for the August meeting and that any subject that any of the Commissioners wished to discuss would be included. He asked if there were any further comments. Hearing none, he thanked all present for their participation, adding that he looked forward to accomplishing more great things at the Port, and brought the meeting to a close. Chairman Toomy adjourned the meeting at 4:35 P.M. BOARD OF COMMISSIONERS PORT OF NEW ORLEANS MINUTES OF THE BUDGET COMMITTEE MEETING JUNE 24, 2013 A MEETING OF THE BUDGET COMMITTEE OF THE BOARD OF COMMISSIONERS OF THE PORT OF NEW ORLEANS, HELD IN THE PRESENTATION ROOM ON THE 4 TH FLOOR AT ITS OFFICES AT 1350 PORT OF NEW ORLEANS PLACE, NEW ORLEANS, LOUISIANA, WAS CALLED TO ORDER BY COMMITTEE CHAIRMAN DANIEL F. PACKER, JR., AT 1:38 P.M., ON MONDAY, JUNE 24, COMMITTEE MEMBERS PRESENT: COMMITTEE MEMBERS ABSENT: STAFF: Daniel F. Packer, Jr., Committee Chairman Joseph F. Toomy, Member Gregory R. Rusovich, Member Scott H. Cooper, Member Robert Barkerding, Jr., Member William T. Bergeron, Member Michael W. Kearney, Member G. LaGrange, President & Chief Executive Officer P. Gallwey, Chief Operating Officer B. Gussoni, Executive Counsel J. Ruckert, Director, Finance & Information Technology Page 15 of 47

15 C. Bonura, Director, Business Development R. Jumonville, Director, Cruise and Tourism D. Keller, Director, Port Development R. Landry, Director, Marketing & Chief Commercial Officer E. Pansano, Director, Internal Audit P. Zimmermann, Director, Operations M. Gresham, Executive Assistant, External Affairs M. Rubino, Staff Attorney W. Stokes, Executive Secretary I. Montelepre, Paralegal GUEST: J. Holt, Government Consultants, Inc. A. Determination of a Quorum and Call to Order Committee Chairman Packer determined the presence of a quorum and called the meeting to order. Commissioner Toomy mentioned newly effective legislation which requires all public meetings to be record and said that all of the Board's public meetings would now be recorded, including these committee meetings. B. Public Comment Committee Chairman Packer called for public comment, but there was none. C. Briefing and Discussion Items 1. Review of May, 2013, Financial Statement Mr. Ruckert discussed the May, 2013, monthly and year-to-date performances and provided an analysis comparing Fiscal Year 2013 to Fiscal Year Mr. Ruckert said the Port had another good month for operating revenue. Mr. LaGrange pointed out that the gross revenues with one month to go for Fiscal Year 2013 are $47,173,000, which is approximately $2,900,000 below the $50,000,000 mark and that, if we accomplish this, it would be historic. Mr. Ruckert said that we should not have a problem making that $2,900,000. Mr. Ruckert pointed out that we are $1,062,000 over last year in real estate revenue. Page 16 of 47

16 Mr. LaGrange asked Mr. Bonura the cause for the $1,000,000 spike in real estate. Mr. Bonura responded that a number of new leases caused this. After discussion, the Committee indicated it would refer this item favorably to the Board at its next regularly scheduled meeting. 2. Briefing on and Discussion of a Resolution Authorizing the President and Chief Executive Officer to Enter into a One-Year Agreement with Infor USA, Inc., to Provide Maintenance for the Software Used by the Board and to Renew This Agreement for Three Consecutive Years Mr. Ruckert discussed a resolution authorizing the President and Chief Executive Officer to enter into a one-year agreement with Infor USA, Inc., to provide required maintenance services for the Board s Lawson Software, including Asset Management, Accounts Payable, Accounts Receivable, General Ledger, Payroll and Human Resources at a cost of $106, for the period of July 1, 2013, through June 30, 2014, and, if the services are found acceptable in future years, to extend the agreement for the next three consecutive years, provided the annual increase in these services does not exceed ten (10%) percent. Mr. Ruckert said that the staff is about to embark on a review of the software to see if we can find a software program that is more suitable to our needs and less expensive. After discussion, the Committee indicated it would refer this item favorably to the Board at its next regularly scheduled meeting. 3. Briefing on and Discussion of a Resolution to Adopt the Board of Commissioners of the Port of New Orleans' Financial Plan for Fiscal Year 2014 Mr. Ruckert discussed a resolution to adopt the Board of Commissioners of the Port of New Orleans' Financial Plan for Fiscal Year 2014, which includes the budget message, financial statements, the President and Chief Officer s address, major achievements for Fiscal Year 2013, goals and strategic issues for Fiscal Year 2014 and the comprehensive budgets for operating revenue, expense, capital construction and capital equipment for Fiscal Year Mr. Ruckert touched on highlights of the financial plan. He said that the budget s operating revenues are projected to be $50,800,000 for Fiscal Year Commissioner Packer asked how we compare to other ports in the Gulf Coast area with regards to operating revenues. Mr. LaGrange said that we are second to Houston on the Gulf. Focusing on terminal operations and real estate, Mr. Ruckert said that we project somewhat of a dip in revenue. The decrease in real estate revenue is from loss of Page 17 of 47

17 lease revenue caused by the sale of Port property to the Folger Coffee Company, leases ending, and a decrease in the Foreign Trade Zone tariff to be in line with federal requirements. Moreover, it is projected that there will be no significant change in container volume in Commissioner Rusovich asked why we are projecting dockage to decrease. Mr. Ruckert explained that this is mainly breakbulk and that we are not going to have as much London Metal Exchange cargo and steel imports. He said that those vessels stay two to three days and that is significant dockage. Mr. Landry added that MSC has cut back one vessel call per year and substituted one larger vessel for two smaller ones. Commissioner Rusovich commented that we should start integrating some of the chemical byproducts that are an outflow from these chemical plants into our financial plans for 2014, 2015, and Mr. LaGrange strongly agreed and pointed to TCI as a perfect example. He also said that we have other products and cargos right now that will be changing to containers as well in the future. On the other hand, cruise operations are projected to significantly increase in revenue by approximately $1,000,000 because of the Port s new agreement with Carnival Cruise Line and from including dockage and harbor fees in the passenger wharfage charges. There was $2,300,000 added to the 2014 Financial Plan for cruise terminal improvements because the Port must reconfigure the Erato Street Cruise Terminal and reposition the gangways to accommodate the larger vessels coming into the Erato and Julia Street terminals. Related to the operating expense, payroll is projected to increase from overtime, fringe benefits and the addition of new employees. However, health care and medical costs are projected to decrease because there was a projected 30% increase in the 2013 Financial Plan that did not happen so the failure of this projected increase to appear in 2013 was taken into account for the 2014 Financial Plan. Also, the demographics of the employees have changed, and the health care plans that they are choosing are causing a decrease in the health care expenses for 2014 as well. Mr. Ruckert explained that we had an increase in overtime expenses. Commissioner Barkerding asked if overtime is a projected figure. Mr. Ruckert responded that it is a projected figure and that we estimate overtime by each department and what each department needs in the upcoming year. Mr. Barkerding also asked how different departments estimate overtime. Mr. Ruckert responded that it depended on the department and used the crane department as an example because it will have more overtime because of the addition of two new cranes, and we have also added new employment positions to that department for the same reason. Commissioner Barkerding then asked why we are requiring employees to work overtime instead of hiring additional employees. Mr. Zimmermann commented that we have been shorting the pile-driving department for a couple of years now and that Page 18 of 47

18 the increase in production necessitated the added pile-driving position. Commissioner Packer asked if this increase in employee positions is occurring in all departments. Mr. Ruckert said that we are hiring two new employees in port development to re-establish our environmental department, and new employees have been added in the marketing, accounting, and legal departments. Commissioner Rusovich expressed concern about the 20% decrease in net operating income and said that we are setting a low bar for Mr. Ruckert stated that we will have to watch the expenses for 2014 and keep them within this budget. Mr. LaGrange responded that we need to err on the side of conservatism. Finally, Commissioner Toomy informed that Committee that Mr. Bonura would substitute for Ms. Dunn at the Board retreat scheduled for this coming Thursday afternoon because of the recent unfortunate death of Ms. Dunn's daughter-in-law. After discussion, the Committee indicated it would refer this item favorably to the Board at its next regularly scheduled meeting. D. Adjournment There being no further business to come before the Committee, Committee Chairman Packer adjourned the meeting at 2:34 P.M. BOARD OF COMMISSIONERS PORT OF NEW ORLEANS MINUTES OF THE PROPERTY AND INSURANCE COMMITTEE MEETING JUNE 24, 2013 A MEETING OF THE PROPERTY AND INSURANCE COMMITTEE OF THE BOARD OF COMMISSIONERS OF THE PORT OF NEW ORLEANS, HELD IN THE PRESENTATION ROOM ON THE 4 TH FLOOR AT ITS OFFICES AT 1350 PORT OF NEW ORLEANS PLACE, NEW ORLEANS, LOUISIANA, WAS CALLED TO ORDER BY COMMITTEE CHAIRMAN SCOTT H. COOPER, AT 3:04 P.M., ON MONDAY, JUNE 24, Page 19 of 47

19 COMMITTEE MEMBERS PRESENT: COMMITTEE MEMBERS ABSENT: STAFF: GUEST: Scott H. Cooper, Committee Chairman Joseph F. Toomy, Member Daniel F. Packer, Jr., Member Gregory R. Rusovich, Member Robert R. Barkerding, Jr., Member William T. Bergeron, Member Michael W. Kearney, Member G. LaGrange, President & Chief Executive Officer P. Gallwey, Chief Operating Officer B. Gussoni, Executive Counsel C. Bonura, Director, Business Development Robert M. Landry, Director, Marketing & Chief Commercial Officer E. Pansano, Director, Internal Audit J. Cocchiara, Business Development C. Donner, Real Estate Development Manager M. Rubino, Staff Attorney W. Stokes, Executive Secretary I. Montelepre, Paralegal C. Balthazar, RiverWorks A. Determination of a Quorum and Call to Order Committee Chairman Cooper determined the presence of a quorum and called the meeting to order. B. Public Comment Committee Chairman Cooper called for public comment, but there was none. C. Briefing and Discussion Items 1. Briefing on and Discussion of a Resolution Authorizing the President and Chief Executive Officer to Amend the Board s Lease with Lake Pontchartrain Properties, LLC Mr. Donner discussed the 5 th amendment to the Board s lease with Lake Pontchartrain Properties, LLC (LPP). He said that the purpose of the 5 th amendment is to facilitate further development of LPP s mixed use recreational maritime operation on France Road. Page 20 of 47