Port Commission discusses possible rate increases, vessel insurance requirement

Thanks to its aging infrastructure and pricey upcoming projects, Port and Harbors is the least financially sustainable of all the borough’s enterprise funds. Last Thursday, the Port Commission met with Finance Director Mason Villarma and Susan Erickson of P-W Insurance to come up with a plan to improve the fund’s finances while minimizing the impacts on cash-strapped Wrangell residents.

One major takeaway from the 2021 audit, Villarma explained, was that many of the borough’s self-supporting funds — particularly the Port and Harbors account — are not bringing in enough money to keep up with replacement costs of property like vehicles, floats and other pieces of essential infrastructure.

“This is basically screaming at us that we are not keeping up on recapitalizing our infrastructure back to what it was,” he said.

In the past, Port and Harbors has met its immediate needs largely through grant funding and has not laid away money for future needs. Wrangell voters recently approved a $3.5 million bond for repairs to the elementary, middle and high schools, but “we probably need about five times that for a harbor project,” said Villarma. “Can we afford that? Well, no. We can’t right now. And that’s just saving for one project. How do we get the new trucks and get saving for Heritage (Harbor), which is coming down the line in 20 years?”

The Port and Harbor Department will likely need to use a combination of measures to strengthen its savings, including raising rates and cutting costs.

“We have some of the cheapest rates around,” he said. “I think we can maintain that competitive advantage but still get a little closer to the competition.” He suggested targeting out-of-town users, letting them bear the rate increase burden more heavily than residents, though this plan would require the commission’s and assembly’s approval.

Other “creative” techniques, like establishing a non-compete agreement with Sitka to prevent them from attracting business away from Wrangell’s Marine Service Center, could also be on the table in later borough meetings.

Sitka’s privately owned boat haul-out closed early last year, which has driven more vessel owners to come to Wrangell for work on their boats. However, Sitka voters last year approved withdrawing $8.1 million from savings to build a new haul-out.

In another move to boost finances, the Wrangell commission is considering requiring harbor users to provide proof of insurance so that the department can avoid unaffordable and unexpected costs salvaging boats that sink. The issue had been on the Harbor Department’s radar on and off for years, but when a fire at a Ketchikan harbor last October put the city at risk of a lawsuit for not requiring insurance, Wrangell’s commissioners decided to revisit the issue.

Erickson recommended implementing an insurance requirement or establishing a fee rate for uninsured vessels based on their size, value and age to shore up against possible future costs. “The bottom line is the bottom line,” said Erickson. In the Lower 48, such requirements are the industry standard and “it’s going to cost more and more every single year to raise these boats” due to inflation.

Villarma plans to compile the commissioners’ recommendations into a series of proposals that he will present March 2. After being reviewed by the port commission, the proposals will go before the borough assembly at its meeting on March 28, when assembly members revisit all enterprise fund rates in an effort to secure each funds’ sustainability in the coming year.

Other enterprise funds include water, sewage service and electrical.

 

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