OHPA, WTF agree to contract terms

Submitted by Suanne Z. Thamm
Reporter – News Analyst
October 20, 2018 4:29 p.m.

After seven months of negotiating, more than a half-dozen public meetings and the resignation of their attorney, the Ocean Highway and Port Authority (OHPA) finally concluded contract talks with their port operator, Worldwide Terminals Fernandina (WTF) during a 3-hour Special Meeting called for late afternoon on Friday, October 19, 2018.  Four Port Commissioners were physically present, and Commissioner Robert Sturgess participated electronically due to a family health matter. The contract was approved on a 3-2 vote, with both District 4 Commissioner Carrol Franklin and District 3 Commissioner Adam Salzburg in opposition.

Agreement did not come easily.  Port Attorney Clyde Davis, who had announced his resignation date earlier in the week, argued his continued opposition to the proposed deal, expressing his concerns that signing the contract as written would short the operator’s payment to OHPA by $25,000 for the year.  This matter appeared to be resolved when the effective date of the contract was set for November 1, meaning that WTF would pay OHPA the full amount due according to the existing contract and two thirds of the next quarter’s payment.  Davis also claimed that contract language as proposed did not allow for OHPA to terminate the contract for cause, a claim that Christopher Ragucci, WTF CEO, disputed.

Commissioner Franklin has steadfastly opposed granting a new contract to WTF, stating that the existing contract originally executed with Kinder Morgan, still had 4 years to run.  Franklin said that although he was pleased with port operations under the new operator, he wanted more time to see how they performed before agreeing to a long-term contract.  He moved to table talk of a new contract for a year, and Commissioner Lissa Braddock (District 5) seconded his motion.  Attorney Davis advised that there did not need to be a time certain on a motion to table and that any commissioner who voted in favor of the motion, could take it off the table at any time.

Although Roberts Rules of Order, the procedural guide used in most public meetings, declares a motion to table to be non-debatable, debate on this motion commenced immediately.

WTF CEO Christopher Ragucci explained to commissioners why it was to the advantage of both OHPA and the port operator to execute a long-term contract. In order to bring port facilities into good working order following Kinder Morgan’s 27-year tenure as port operator, during which there had been little to no capital investment, WTF needs to take out loans.  Lending institutions will not underwrite long-term capital improvement loans unless the port operator can demonstrate that it is in a long-term contractual relationship with its port.  By the same token, port customers are also looking to see that a port operator has a long-term contract before agreeing to a long term shipping relationship that involves costly investments in logistics.

Ragucci argued that it is of mutual benefit to lock in long term shipping agreements and commence immediately to initiate the port improvements necessary to attract new business.  He cited the new port crane as just the first in several planned improvements.

OHPA Treasurer and accountant Pierre LaPorte backed up Ragucci’s explanations.  A 30-year term for port bonds is standard, as well as 20-30 year shipping agreements with port customers.

While initially requesting a 35-year contract, WTF responded to OHPA concerns by changing their proposed terms to a 10-year contract renewable for two additional 12-year periods.  Language allows the parties to reopen talks about terms included in the 22-page contract by mutual consent.

Franklin continued to oppose a new contract, indicating that he did not understand the rush.  He said that children and grandchildren of Port Commissioners would be bound by this agreement, and that he had heard opposition to a long-term contract from many in the community.

Ragucci said that he did not view 7 months of negotiations as “rushing” into a new contract.  He surveyed the less than a dozen members of the audience, which consisted mainly of Port employees and others involved in port operations or government and asked, “Where are those people who have expressed this opposition?”  Ragucci went on to comment the people who work for the Port and their efforts to make improvements.  He also said that because OHPA was in a cash crunch, WTF had written a check in the amount of $11,000 so that OHPA could pay its insurance on time. “I’ve become very attached to [port employees],” Ragucci said, “and we won’t let them down.”

Under Kinder Morgan, Ragucci said, the port was losing more than a million dollars a year.  Most of the money owed to OHPA went directly to the Bank of New York to cover debt payments. When after researching the port’s potential WTF decided to make Kinder Morgan an offer to purchase Nassau Terminals, they agreed to take on that debt.  As a result, OHPA can now bond assets to develop other ventures around the county.  Ragucci said that in WTF’s decision to take on the OHPA debt, they made a leap of faith, believing that the port had the potential to become profitable once more and that additional capital investment would hasten that desired outcome.  While he spoke about the port’s potential, he stressed, “The people who work there are the real gem.”

It was also noted that WTF has agreed to pay the City of Fernandina Beach the two remaining payments of $50K each required by the Port DRI.

OHPA treasurer Pierre LaPorte addressed OHPA in response to a request from Commissioner Danny Fullwood (District 2) to identify the pros and cons of moving forward at this time with the new contract.  LaPorte said that the finances of the port operator were solid.  He said that the new contract addresses inflation. “For the last 27 years OHPA has had to operate frugally to pay off its debt,” LaPorte said, adding that OHPA should continue to live frugally for the next 6-12 years to take care of debt now owed to WTF and long neglected maintenance.  He said that WTF has already done more maintenance than Kinder Morgan did in the last 10 years.

“You are better off under the proposed contract than you are under the current one,” LaPorte told commissioners.

Ragucci said he had always assumed that OHPA and WTF shared the same goal: building a healthy port.  With respect to the length of the new contract, Ragucci reminded commissioners that people take out 30-year mortgages to buy a home.  Any fear that WTF would pull out early was unjustified because WTF would have made massive investments that need to be paid off.  And, according to the defeasement agreement reached late last year, WTF also took over OHPA’s $6.2M bond debt and $4.5M debt to Kinder Morgan.

Fullwood asked Franklin why he continued to oppose the contract, which has now been changed from a 35-year term to a 10-12-12 year agreement specifically to address Franklin’s concerns.  Franklin reiterated his belief that more time was needed to consider the deal.

Ragucci told Franklin, “We cannot wait a year to recommence contract talks because we need to make badly needed infrastructure improvements. Those improvements can’t be made overnight.  This [new contract] is the road map to go beyond stabilization to prosperity.  It is the last piece in the puzzle to allow us to seek long term financing.”

Commissioner Robert Sturgess (District 1) who participated in the discussion electronically strongly supported the arguments put forth by both Ragucci and LaPorte.

Franklin continued his objections, reiterating that there was no need to rush because there are 4 years remaining on the current, Kinder Morgan contract.  Ragucci reiterated that a 4-year contract is not sufficient to secure long term financing. “Tabling it for a year after 7 months of negotiations is stabbing your port operator and port employees in the heart,” Ragucci said.

Sturgess reminded commissioners that they had previously approved the contract and only called this special meeting because the contract had not been made available to the public seven days prior to a final vote.

Commissioner Lissa Braddock (District 5) said that times were tumultuous with the impending departure of two commissioners and the attorney. Ragucci replied that the only reason there had been so much public and social media chatter over the new contract was because Clyde Davis had gone public with his resignation and concerns. He pointed to a proposed 11th hour pullout from what had looked like a firm agreement, claiming that an inability to make a decision would be a disaster for the port.  “The five of you have worked with us over 7 months,” he said. “There is no need to put this off for a new commission and a new attorney.  Time has not helped the situation.  We are out of time,” Ragucci said.

Fullwood and Sturgess reminded commissioners that the only changes proposed to the new contract from the previous iteration were ones OHPA requested.  When asked for his take, Davis said he had not read the latest proposal, which was delivered just before the meeting.  He claimed that a clause was needed to allow OHPA to opt out.  This statement resulted in a harsh exchange of words between Davis, Salzburg and Ragucci.

Sturgess asked Braddock and Salzburg, the two departing commissioners, to adjust their thinking to understand that the remaining three commissioners would still be in office to follow through with the new agreement.

Fullwood addressed his fellow commissioners.  “If we don’t want WTF, then let’s tell them and go out to get another port operator.  It is time to move on.”

Commissioners voted on Franklin’s motion to table, which was defeated on a 3-2 vote with only Franklin and Salzburg in support.

Fullwood asked Ragucci what he would do if OHPA did not sign a new contract at the meeting.  Ragucci hesitated, saying that he wanted to make sure that his response was not viewed as a threat but as a pragmatic response.  “I have been ordered to withdraw from negotiations and regroup if we do not get an agreement.  Perfection is the enemy of the good,” Ragucci replied.

Ragucci informed commissioners that WTF is already moving forward to develop a master plan that would provide for a new Customs House and new gates to the port.

OHPA Chair Adam Salzburg said that he preferred to bring in a lawyer specializing in port contracts to review the agreement before signing.  He objected to a clause in the contract that would give WTF the right to match any future offer to take over port operations. Ragucci replied that that language had been lifted from the existing agreement.  He added that after WTF’s significant investments to pay off debt and rebuild neglected infrastructure, he viewed such a condition as fair.

LaPorte, once more asked for comment, said, “Financially, this is a good agreement.  I sympathize with the port operator’s concerns.”

After 3 hours of discussion, Commissioner Danny Fullwood moved to approve a resolution that incorporated the latest version of the contract with the port operator.  Commissioner Robert Sturgess seconded the motion.  The motion passed on a 3-2 vote with Commissioners Carrol Franklin and Adam Salzburg voting in opposition.  The effective date was set as November 1, to ensure that OHPA would receive the annual payment of $88K from WTF called for in the existing contract.  Under the new contract, WTF will make quarterly payments of $62K.

An unresolved issue surrounding contract negotiations between OHPA and WTF is a charge of Sunshine Law violations leveled by Fernandina Beach City Commissioner Chip Ross.  Ross claims that alleged violations make any contract agreement null and void.  Both OHPA Chair Adam Salzburg and Attorney Clyde Davis have denied these charges, citing numerous public meetings where the contract has been discussed.  Davis said that a “finished product” was never presented to OHPA, and changes have been worked out in public.  WTF CEO Ragucci also rejected Ross’ allegations.

Editor’s Note: Suanne Z. Thamm is a native of Chautauqua County, NY, who moved to Fernandina Beach from Alexandria,VA, in 1994. As a long time city resident and city watcher, she provides interesting insight into the many issues that impact our city. We are grateful for Suanne’s many contributions to the Fernandina Observer.