Study of harbor financials yields 11 percent rate increase recommendation

A public comment period is currently underway for two draft documents released as part of the Comprehensive Plan process-a land use map and a document outlining the financial state of the Borough's harbor facilities.

Borough Manager Steve Giesbrecht explained that the latter document details the financial component of the Waterfront Development Plan, which is being drafted alongside the Comprehensive Plan and will guide future decisions about Petersburg's harbors. In addition to examining the current financial viability of the harbor facilities, the document also includes recommendations to increase revenue in order to account for depreciation of existing facilities and save for future projects.

One of the main findings from Northern Economics, the Seattle-based research firm that assembled the report, was that "operating revenues have consistently been below operating expenses, with an average (annual) deficit of $740,000," according to the report. To address the deficit and balance the budget, "an across-the-board (rate) increase of 11 percent" is recommended, in addition to a two percent rate increase annually for the coming decade to provide funds for repairs and replacements.

"It definitely takes your breath away. But it's less than in other places," Giesbrecht said. By comparison, a moorage rate study conducted by Northern Economics for the Sitka Harbor system in May 2012 recommended nearly a 150 percent rate increase followed by an additional annual increase of 5 percent. The Sitka Assembly did approve rate increases for three years in a row following the release of their city's master plan; the most recent increase of nearly 7 percent took effect in April of this year. The Petersburg Assembly approved an increase to the transient vessel moorage rates earlier this year. The moorage rates for all vessels was last increased in January 2013.

Giesbrecht said Petersburg's rates have historically been higher than other Southeast communities (see sidebar). "Petersburg's always been kind of on the leading edge. Our rates are higher because we've been looking at it like a business," he said. And those relatively higher rates have been generating significant revenues for the Harbor. The draft report highlights that omitting the non-cash expense of depreciation from the financials reveals a profit averaging $60,000 annually over the last decade. The report says current revenues cover about 90 percent of the full cost of the current harbor infrastructure, including depreciation.

Accounting for depreciation is a way to acknowledge and save for the future costs of maintenance and improvements, not to mention new capital projects. A long list of harbor projects is outlined in the draft Waterfront Master Plan, which would require more than $10 million to fund.

Though the report includes recommended rate increases based on current and future costs, Giesbrecht said there are also other considerations.

"Covering depreciation is a great thing when it comes to having to replace infrastructure, but it also gets really, really expensive and you can price yourself out of the market," he said. "We don't want to take advantage of the boat owners and people who use it (the harbor)."

Giesbrecht isn't the only one considering others in the market. A document put out by the City and Borough of Sitka explaining rate increases following the release of the 2012 master plan noted that many Southeast communities set moorage rates based on neighboring communities which "has likely created a regional rate structure that has been suppressed below the cost of doing business."

Sitka's already moved toward changing that by increasing their rates, though not in strict accordance with their master plan's recommendations. Petersburg will move in the same direction, but Giesbrecht said that now, while the plans are still in draft form, is the time for people to provide input.

"Now is the time, and as hard as it is and as busy as everyone is, now is the time to review this," he emphasized.

Once the Comprehensive and Waterfront Master Plans are solidified, they will guide the future actions and recommendations of committee and commission members and department heads that ultimately make recommendations to the Assembly. Any future rate increases to harbor services or other Borough services must go before the Assembly as an ordinance and receive a majority approval across three readings before they undergo a final vote and subsequent implementation.

The draft Comprehensive Plan and Waterfront Master Plan documents can all be downloaded or viewed from the Borough's homepage, http://www.ci.petersburg.ak.us, or a hard copy can be obtained from the downtown Borough offices or the public library. The public comment period for the

recently released documents closes Aug. 15.