New Port of Galveston director faces Texas coast challenges

GALVESTON, Texas (AP) - When Rodger Rees arrives as the Port of Galveston's new director this month, he'll be greeted by a board and a community with high expectations he'll shape a broad vision for the public docks. But his first concern must be in the fine details, several wharves board trustees said.

"Major projects are almost cost-prohibitive right now," Trustee Elizabeth Beeton said. "We really need to sharpen our game with everything within our ability right now and hope that helps us get into a position where we can do bigger projects."

The Galveston County Daily News reports the Port of Galveston's governing board voted 6-0 to hire Rees as the new director, agreeing to a yearly salary of $240,000 and ending nearly a yearlong search to find a replacement for former Port Director Michael Mierzwa.

Rees comes at a time when the city has increasingly become demanding that the port perform better financially and provide a better return on investment. After years of treating the port has merely a jobs creator, the city has recently demanded it become a revenue generator. Rees' arrival also coincides with the city's efforts to re-imagine the development of the port where it should plow its limited resources - the East or West ends.

And he'll have to deal with the perennial issue of aging, deteriorating infrastructure with little cash on hand to make repairs.

Port officials are projecting operating revenues of about $37.4 million next year against operating expenditures of $37.2 million.

Trustees also slowed down a strategic planning initiative to accommodate Rees' arrival, officials said.

The wharves board hired John Manlove of John Manlove Marketing & Communications on Sept. 11 for about $10,300 to develop a strategic plan, but in November agreed to delay it until after the new port director was in place.

"I'm very bullish on where we are going," Mayor and Trustee Jim Yarbrough said. "We've got a good port director who can help us in the areas we need help on, which in 2018 is helping us with the strategic plan and helping us make decisions on what businesses to retain and recruit to come to the port."

Wharves board trustees differed slightly in visions for the future.

Ted O'Rourke, shortly before taking over as chairman, listed some of his top goals for the port that included filling slips on the west end of the port, building the new bridge to Pelican Island, diversifying port business with more cargo customers, developing a container terminal on Pelican Island, deepening the channel, getting Galveston designated a cruise ship port of call, building another cruise terminal and improving the financial health of the port.

"I have three main goals," Beeton said. "I'd like the port to generate more tax revenues through improvements. I'd like the port to become more scenic, attractive and integrated with the town on the East End. And I'd like more cargo."

Rees must navigate the strategic planning process while also determining how the port can run more efficiently, O'Rourke said.

If projections for 2018 hold, the port is due to bring in only about $250,000 in net income, records show.

"It's fine to have a master plan, but if you can't finance and fund it, then it will do no good," Yarbrough said. "With his background in finance, I'm optimistic he can put together not only the master and strategic plans, but can help us find reasonable funding opportunities."

Rees, who is the chief financial officer for Port Canaveral, Florida, must find ways to save money and bring in more revenues to help the port, Vice Chairman Albert Shannon said.

"One thing he talked about doing at Port Canaveral was the ability to borrow money with their good bond rating," Shannon said. "He might be able to help us with funding for projects for infrastructure and capital improvement. We need someone with a good grasp with what is available out there."

Tenant leases and staff structure is another area to look at, trustees said.

"There are some opportunities for low-hanging fruit," Shannon said. "There are existing customers that want to expand their business at the port. We need to find a way to help them accomplish that."

Several trustees have said that the port needs to consider which lines of business the port needs to be in and whether some longtime and once lucrative businesses are in the way of more profitable pursuits.

One tenant Yarbrough has mentioned specifically is the grain elevator operator Archer Daniels Midland Co., which occupies a large section of centrally located port property.

Chicago-based Archer Daniels Midland Co., which took over operations of the elevator in 2004, has been making substantial investments at the Port of Corpus Christi, raising concerns about whether the grain giant would leave town, Yarbrough has said. The mayor at a meeting in 2016 questioned whether the island port should remain in the grain business, which has become less profitable over the years.

Rees also will have to consider whether diversification is important, Shannon said.

"In our most recent bond rating, one thing the analyst told us is that we aren't doing as well because of our concentration and dependence on cruise ships," Shannon said. "Cruise is good, but you learn in business, if you have too many eggs in one basket and it turns upside down, there's going to be trouble."

O'Rourke agreed and said the port needs to pursue more cargo opportunities.

The budget for the 2018 fiscal year anticipates more than 50 percent of the port's $37.4 million in revenues will be cruise-related.

Only through considering the economic details in 2018 and completing the strategic plan will the port be capable of achieving its ultimate goal, O'Rourke said.

"The ultimate goal is to run the port like a business so that it can be the economic engine of the city," O'Rourke said.

The port has done a good job attracting cruise lines to the island and there are further opportunities to consolidate services with the city to improve the port's financial future, Yarbrough said.

"When you've got a port worth $300 million and you look at the return on the investment, it's not very good," Yarbrough said. "We've got to change the mindset of how we approach that and make sure that the return on the public investment is better than we've historically experienced."

Once Rees accomplishes the short-term goal of maximizing profits and takes a hard look at all the current services and areas to save, then money will be freed up for the long-term plans, Yarbrough said.

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Information from: The Galveston County Daily News, http://www.galvnews.com