As expected, the Port of Vancouver on Tuesday slashed its total budget by 18 percent, an unusual move triggered largely by the failure of a new freight-hauling venture to live up to revenue expectations.
Commissioners Nancy Baker, Jerry Oliver and Brian Wolfe voted unanimously to adopt the 2015 supplemental budget of $80.72 million. That compares with the $98.79 million budget they approved in November 2014.
The lion’s share of the decrease came by way of taking off the books $15.29 million in revenue anticipated to come from the port’s “dedicated rail service” program. Under that program, the port sought to lease rail cars to haul oil-drilling materials to North Dakota; those cars would then return to Vancouver loaded with Midwestern crops for eventual export overseas.
The program, which the port publicly touted as a big driver of revenue and which faced internal concerns from the port’s own finance director at the time, hasn’t panned out as hoped. During Tuesday’s public meeting, port managers told commissioners that the Standard & Poor’s ratings firm was informed of the budget’s downward revision. The S&P affirmed an A rating for the port’s overall creditworthiness and gave the port a stable outlook, which “was very good news,” said Scott Goodrich, the port’s director of finance and accounting.
Standard & Poor’s defines an A rating of a debtor’s overall creditworthiness as having a “strong capacity to meet its financial commitments but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than (debtors) in higher-rated categories,” according to the firm’s RatingsDirect publication.
Other changes included
The port’s supplemental budget pegs rail service revenue at $3.28 million. That’s down 82 percent from the $18.57 million commissioners approved in November 2014 as part of the overall budget.
At the same time, it drops the program’s expenses to $3.16 million, down 80 percent from an initial estimate of $16.64 million. The result: a program that was expected to bring the port a profit of $1.93 million is now expected to generate a profit of $120,187.
Goodrich said the program represented a “very expensive line of business” for the port to pursue with a “minimum” net impact to the port’s bottom line. The port is still working with BNSF Railway on the rail service program, he said. The port plans to use system cars owned by the railroad rather than using leased cars to fill customer orders.
At one point during Tuesday’s meeting, Wolfe said he recalled asking whether the rail service program would work when port officials discussed it last year. Port CEO Todd Coleman said the port would watch the program and revisit it if things didn’t work out, Wolfe said, and that’s what the port has done.
During public meetings two weeks ago, both Coleman and Goodrich described the need for a supplemental budget as a rare event for the port. In adopting changes Tuesday, port commissioners made other downward revisions to the 2015 budget.
One was a reduction in non-operating revenues of $1.66 million because a deal to sell a piece of industrial-park land fell through. Another reduction pegged the port’s anticipated spending on capital projects at $40.64 million. That compares with the initial $45.24 million approved by commissioners in November 2014.
The reduction in capital spending partly reflects changes to the port’s rail service program, Goodrich said.