The District was formed in 1947 to develop and maintain a deep water port for the northern California region. Upon formation the District was governed by a five-member Commission with two members representing the City of Sacramento, two representing the County of Sacramento, and one representing the County of Yolo. The Port’s boundaries included Sacramento County and the Yolo County Supervisor District 1. The Port opened to commerce in 1963. Soon after the City of West Sacramento incorporated in 1987, legislation was adopted that expanded the five-member Port Commission to a seven-member Commission with two members appointed by each the City of Sacramento and County of Sacramento, one by each the Yolo County Board of Supervisors and City of West Sacramento, and one jointly appointed by the City and County of Sacramento. Several years after the District increased the representation on its Commission, the Port District also increased the size of its boundaries. In 1992, Sacramento LAFCO approved the annexation of 14 parcels totaling approximately 1,754 acres of the Solano County Deep Water Channel into the District.
On December 5, 2005, the Port Commission approved changes to its boundaries, governance, and administration. These changes were approved by the West Sacramento and Sacramento City Councils and the Sacramento and Yolo County Board of Supervisors through the execution of a Joint Port Governance Agreement with an effective date of January 15, 2006. In September 2006, the California Legislature detached the County and City of Sacramento from the District’s boundaries and provided the City of West Sacramento with a majority of the Port Commission seats. The Commission was reduced from seven to five members with four of the Commissioners being appointed by the City Council and one by the Yolo County Board of Supervisors (effectively reorganizing the District from an independent district to a dependent district to the City of West Sacramento). The City of West Sacramento assumed management of the business, financial, administrative, and related operations of the Port. After years of financial losses, in 2013 the Port was reorganized from a district with its own staff to a “landlord-operator” model and the District contracted with SSA Marine to be the Port’s Terminal Operator responsible for business development. The District is currently managed by one, full time Port Chief Operating Officer employed by the City of West Sacramento.
The Port mainly handles foreign exports and imports and little domestic waterborne trade. The Port’s focus is on specialized bulk (unpackaged) cargo shipping. The cargo base consists mainly of exporting rice and importing cement, fertilizer and other miscellaneous products. The primary users of Port facilities are local agriculture producers and local building markets located within 500 miles of Port facilities.
MSR Determinations and Recommendations
There are seven required MSR determinations per state law. The Sacramento-Yolo Port District MSR's determinations and recommendations for Commission review are as follows:
Growth and Population MSR Determination
Local population growth will not have an impact on the District’s service needs or demands, and will not create a need to change the agency’s boundary. The District’s economic drivers extend far beyond local population growth. Therefore, population growth is not a factor for the Sacramento-Yolo Port District.
Disadvantaged Unincorporated Communities MSR Determination
The Sacramento-Yolo Port District does not provide public services related to sewers, municipal and industrial water, or structural fire protection that would trigger the requirements of SB 244 regarding disadvantaged unincorporated communities.
Capacity and Adequacy of Public Facilities and Services MSR Determination
Following years of financial issues, on July 1, 2013, the District implemented a new landlord-lessee operating model and currently the District’s only staff is a Port Chief Operations Officer. Port operations are contracted out to SSA Marine, which leases and operates the Port's North Terminal cargo facilities. There are no concerns regarding services provided by the District being adequate and there is no plan to hire additional staff. The Port is able to be dynamic and responsive to fluctuations in demand for movement of goods through its maritime facilities. Additional cargo facilities and development sites can be made available over time with redevelopment of some of the existing obsolete warehouses. The Port has made investments to develop its real estate business and to maintain the maritime facilities. SSA Marine, the Port’s Terminal Operator, is now responsible for maritime business development. As a landlord Port, having secured an operator and a lease for the maritime facilities, the focus has been on generating revenues from non-maritime real estate assets.
Financial Ability MSR Determination
Overall, the Port's financial condition has improved and stabilized since the last MSR was completed in 2009, primarily due to the implementation of the 2013 Business Plan which changed Port operations from an operating Port to a landlord-lessee operation. In the past, the Port has balanced its budget through the use of one-time revenues including carryover cash balances and property sales. With the implementation of the new model the Port has been able to reduce expenditures, including debt service, and create reliable long-term revenue streams through the execution of leases. Although the City has advanced funds to the Port for investment property acquisition, overall operating and debt service cash flow is now positive which is a big change from 2013 when the Port’s net cash flow was a negative $3.2M. The Port Chief Operating Officer should consider pre-funding a long-term capital project plan and setting aside funds in a specific reserve for unforeseen emergency expenses. Staff noted several financial reporting inconsistencies in the Comprehensive Annual Financial Report (CAFR) related to the Port fund. In fiscal years 2016 and 2017 overhead transfers out were reclassified, as part of the CAFR preparation process, to the salaries/benefits and operations/maintenance line items. For fiscal year 2014 and 2015 the overhead transfers were reported in the CAFR as transfers out. In fiscal year 2018 total transfers out of $740,442 consisting of $190,243 of general support, $50,198 of non-capitalized CIP and a $500,000 repayment to general fund were reclassified to operations and maintenance.
Financial Ability Recommendations
- In addition to the annual budget report, the Port Chief Operating Officer should present quarterly budget-to-actual reports with a year-end projection of net income or loss. Also the Port Chief Operating Officer with City financial staff assistance should present the audited financial statements to the District board.
- Now that the District is financially stable, it should consider establishing and funding a long term capital improvement plan (CIP) and reserve policy to continue to strengthen its financial position.
- We recommend that City finance staff collaborate with the Port Chief Operating Officer when preparing the CAFR and consider additional reporting line items to make the audited numbers more meaningful such as, “general/administration expenditures” and “other operating costs”. The “other operating costs” would include items that are not truly operating but do not qualify as “non-operating” for reporting purposes.
- All City transfers to the Port that are made with the intention of repayment, should be recorded on the Port’s balance sheet as a liability. As previously noted above a $500,000 repayment to the general fund was recorded as a transfer, since a liability was not established for a prior year subsidy transfer to the Port.
Accountability, Structure and Efficiencies MSR Determination
In September 2006, the California Legislature detached the County and City of Sacramento from the District’s boundaries and provided the City of West Sacramento with a majority of the Port Commission seats. The District has effectively become a subsidiary district to the City. Following years of financial issues, as of July 1, 2013, the District implemented a new landlord-lessee operating model. The District has undergone several significant evolutions in governance structure which has resulted in much more efficiency and financial stability. The District has also sold some property (the Prospect and Decker islands) which should be detached from its boundary.
However, there is one notable area where this subsidiary district model may not be operating in the best interest of the District. Despite this simplified landlord model and the District having a dedicated Chief Operating Officer who handles “nearly all of the Port’s management, budgeting, and planning responsibilities”, the City Manager acts as the Chief Executive Officer for the District and is now paying 50% of the City Manager’s salary and benefits, which does not appear to be supported by analysis. This does not appear to be an efficient staff cost from the District’s perspective. There is also the need for the District to improve its public transparency via its webpage on the City’s website.
Accountability, Structure and Efficiencies Recommendations
- Prospect and Decker Islands should be detached from the District boundary since they were sold to the Department of Water Resources in 2015 as part of a land exchange. The District should submit a proposal application to LAFCo to detach these areas as a subsequent cleanup item.
- The District and City should consider the appropriateness of allocating 50% of the City Manager/Port CEO’s salary and benefit costs to the Port. Allocations should be supported by time studies or based on the best approximation of actual time spent on District management. Allocations based solely on budget needs are not an acceptable method for cost allocation under state and federal cost allocation guidelines.
- The District should work on improving its transparency on its page on the City’s website (the District received a 28% transparency score for 2018). The District’s webpage deficiencies can be viewed here: https://www.yololafco.org/yolo-local-government-website-transparency-scorecards.
Other Issues MSR Determination
There are no other issues related to effective or efficient service delivery, as required by Commission policy.
Sphere of Influence Study
The District’s Sphere of Influence is coterminous with the District boundary and the Port Chief Operating Officer has indicated there is no foreseeable need for an update. Therefore, staff has reviewed the agency’s Sphere of Influence and recommends that a SOI Update is not necessary in accordance with Government Code Section 56425(g). Therefore, no change to the District's coterminous SOI is recommended and SOI determinations have not been made.
Public/District Involvement
The primary source of information used in this MSR has been information collected from District staff and adopted plans, budgets, reports, policies, etc. While researching the MSR, staff met onsite with the Port Chief Operating Officer for a tour of the District land holdings and met in the office. On May 1, 2019 a “Notice of Availability of the Draft MSR and Public Hearing” was released by LAFCo and published in the West Sacramento News Ledger, which requested written comments from the public and stakeholders. The City of West Sacramento has also reviewed the MSR. No comments on the draft MSR have been received. |