Port Finances Are ‘At The Cliff’s Edge’

By Mike Lednovich

The Port of Fernandina’s crushing legal debt may threaten its ability to pay its future operating expenses and could result in the elimination of the port director position.

The $250,000 in legal costs thus far dominated the Ocean Highway and Port Authority (OHPA) meeting Wednesday. OHPA is currently $140,000 over budget on legal expenses and may not be able to pay its attorney.

The debt is a result of two ongoing lawsuits. In 2022, Nassau County Property Appraiser Michael Hickox sued OHPA claiming the district should have to pay ad valorem taxes on its property. While OHPA, which is a public special district, owns the port, it is used by a for-profit company that runs the port. The port operator’s deal with OHPA is a lease, according to the property appraiser, which means the operator needs to pay those taxes.

The other lawsuit is with the City of Fernandina Beach over Payment In Lieu of Taxes yearly $50,000 assessments. OHPA claims the agreement to pay is no longer valid.

“The lawyer has been put on notice that at some point there are going to be no more funds to pay his fees … we’re running out of money and there’s no fix for it,” said OHPA accountant Pierre LaPorte. “We’re at the cliff’s edge.”

LaPorte said OHPA would have to find new revenue to offset the legal costs. “Otherwise, if the attorney wants to work for free that’s up to him.”

OHPA commissioners said the burden of legal fees on OHPA operations must be resolved.

“If we tried to run our household budgets like this we’d all be homeless,” said Commissioner Ray Nelson. “This is crazy to say the least. Especially these two lawsuits we’re battling right now that were no fault of this board. We were drawn into it. But to allow ourselves to get into this position, in my opinion, straight up, is unacceptable. We have to eliminate this immediately, whatever that takes.This doesn’t look like this is going to stop unless we as a board stop it.”

Chairman Danny Fullwood said OHPA is not incurring any legal fees currently in the property appraiser’s lawsuit. He said OHPA is awaiting a state Supreme Court ruling on a related case that would impact OHPA’s lawsuit.

“That one is something we have to fight, because if we lose that one we’re done.” Fullwood said.

He said the City of Fernandina Beach lawsuit is in settlement talks.

However, Fullwood disclosed that two undisputed $50,000 payments owed to the city had not been placed in escrow by the previous port operator. There was discussion about whether the current operator, Savage, is obligated to pay the $100,000.

Commissioner Miriam Hill said that if the $100,000 is not in the escrow account, then OHPA will be unable to settle the case.

“We can’t settle the case with the city if we don’t have the funds. We need to be able to point to an escrow account where the funds are. Those are two payments prior to the initiation of the suit,” she said.

The mounting legal costs may threaten the future of the port director position.

In May 2022, OHPA hired David Kaufman as its port director. The $130,000 yearly position was paid for by a federal grant and was budgeted through the 2024 budget year.

LaPorte said the original plan to fund the port director position was to use the grant money to build a reserve fund that would be used once the grant ran out.

But with the burden of the legal fees, “that’s not the case any more,” LaPorte said. “The port has enough revenue, other than the port director position, to sustain itself and pay expenses.”

But OHPA’s finances are so threadbare that it can’t afford to pay health benefits to Administrative Office Manager Rossana Hebron. And, Chairman Fullwood spent more than 20 minutes trying to figure out how to avoid paying a required Nassau County bailiff overtime during meetings at the James Page Governmental Center. OHPA finally voted to move its future meetings to 5 p.m. to save an hour of overtime.

“I hate to say this because I’m one of the new kids on the block, but we got ourselves into this and it’s up to us to get ourselves out,” Nelson said. “We’re going to have to make some tough decisions. We’re going to have to bite the bullet because we have a responsibility to the taxpayers of this county to do the right thing. Paying our bills, paying people we owe and learning that lesson.”