Town debates selling harbor

Cape Charles Mirror Report – Wayne Creed

The Cape Charles Town Council met Thursday to discuss the future of the town harbor. Although the discussion was intended find a way forward, there was a subtle undercurrent–it appeared the Town was attempting to rewrite history by vilifying former harbormaster Smitty Dize, blaming him for the current financial distress the harbor  finds itself in. The situation at the harbor is somewhat daunting, as it has suffered serious losses during the last four years (-$16,496, -$17,637, -$183,109, and –$198,884). As a way forward, current town manager Brent Manuel stated, “The purpose of this work session, is since we are in transition with the harbormaster position, we are looking at the job description for how we may want this to look in the future. We have three options, continue as a town to own and operate the harbor, a 2nd option is to continue to own the harbor but look at an outside vendor to operate it, and third to sell the harbor.”

Before diving into the ramifications of Manuel’s options, Councilwoman Natali took the opportunity to go after the Shanty, and how the Town’s deal with Blue Crab may be having adverse effects on the bottom line.

Natalie asked, “Is the income in the Shanty included in harbor revenues?”
“No, the base lease of $6000 a year is included,” said Panek.
Natali continued, “Is the Shanty charged, for the maintenance of the parking lot that they use…”

Panek said, “No…the reason for that is…”
Natail said, “The harbor is responsible for maintaining that….I just want to understand the facts.”
Panek followed, “The parking for the Shanty does not require a full parking lot, most of the parking in that lot is associated with parking for the slips (in the harbor). Only one side of one row is required for the Shanty. The lease of that land provides them with parking. So, the base rent is in the harbor revenues, the rest goes into the general fund.”

Editor’s Note: Panek’s response is ridiculous. That entire (full) lot is for Shanty parking. Most of the slips in the harbor are transient, that is, very few people sail in with a car in tow, and the few seasonal slip owners usually ride golf carts or bikes to the harbor. 

“Do we have a read out of how much that is?” Natali asked.

Treasurer Deborah Pocock responded, “This summer it was around three thousand per month, when he (John Dempster) closes we don’t have any at all.”
Panek said, “The reason the Shanty is not included in harbor revenue is because the lease has nothing to do with harbor operations. The harbor fund only maintains the parking lot.”

Natali asked, “All of the boats that come into the harbor to go to the Shanty, are they paying dockage fees, or who pays those?”
Panek answered, “The lease states that, space allowed, transients that patronize the Shanty, can provide the harbormaster a receipt to get free docking.”
Natali continued, “So, the Shanty doesn’t reimburse us for that, do they?”
“No,” said Panek.
Natali continued to press, “Do we have a quantifiable number for the revenue we would have if we had revieved income?
Panek said, “No, we found the management of that was ‘lax’.”
Natali said, “Okay. Hopefully we’ll tighten that up.”
Panek said, “We have.”
“Good,” said Natali

Mayor Proto added, “This presentation brings up questions.”

Councilman Wendell, attempting to dig into the meat of the harbor issue stated, “Selling the harbor would be losing all control. I did not know that this workshop would be this far reaching. I think we should temper the idea of the town going on any more selling sprees. We need to be looking at what we can operate and where we are at least breaking even.”

Manuel followed, “We are never going to make up the $180,000 shortfall as a Town. Operating the harbor is a lot like communities that have a swimming pool. You can never charge enough to cover the cost of operating the pool, but it is a public service people want. Operating the harbor is like having a pool.”

Natali asked, “Can you elaborate on your second option.”

Manuel said, “There are management groups out there that would like to take on the harbor”.
Panek, from audience ,“There are two variations on that theme. You can hire a management company or structure it as a lease.”

Council Brown weighed in, “What is the difference between hiring a management company and just hiring a harbormaster that could maintain this harbor?”

Councilman Bennett said, “Yeah, you’re going to lose some control, but I don’t see it as a statement that we can’t do it, I think we definitely ought to look at that, for the much needed expertise that a management company that does this all the time, instead of a single person. Smitty was as good as they get, and I don’t think you are going to find someone to come to Cape Charles who is better than Smitty. A management company would have more expertise and be better positioned to help us move to the future.”

Manuel said, “One thing you would get from a private management company is marketing.”
Proto said, “Do we have a significant amount of empty slips during the summer?”
Manuel answered, “I don’t think so.”

Natali asked, “You know, what, or how many businesses that benefit from the use of the harbor are going to help pay for the breakwater? We made the decision to incur that debt service, is that not a fact? We’ve put this lodestone around our neck.”
Proto said, “The debt service isn’t going away. If we sell it(the harbor), it does.”
Bennett added, “The harbor isn’t profitable anyway.”

“As good as Smitty was, I don’t how think he was very good at financially managing the harbor. Is there some way to tighten up the way the finances are handled, how do we have 60% of our accounts receivable over 60 days? There are discrepancies in how the harbor has been managed and how we can change the way it is managed,” said Natali.

Wendell said, “I have not heard anything yet that would make me consider selling the harbor. What are we going to be left with? The town has done too much of that already. Where did he (Manuel) even come up with this idea? We hired a town manger to do his job of managing the Town, not to become the town real estate broker. I would like to see the Town move forward and pursue hiring another harbormaster.”

Bannon said, “I agree with you Frank, the big taboo is we should never sell the harbor. I’d like to see us just get a good harbormaster.”

“I would not see it, and would not hire a management company until we have a harbormaster in place that could have procedures in place to manage the finances appropriately and that there are checks and balances, that was one of the big problems that got us to where we are. Hire someone that not only knows the job of the harbormaster but is fiscally attuned to work with the treasurer to set up financial procedures,” Natali said.

Editor’s Note: Natali’s idea of harbormaster core duties is somewhat off. The harbormaster should run the harbor, period. She should not be involved in finances at all; why would the town want to duplicate efforts? One of the big problems was that the town and harbor had disparate financial systems, which were nearly impossible to reconcile. All payments and collections should go through the town’s financial professionals, and this process should be transparent to the harbormaster, who could then focus more on the day to day operations at hand.

Councilman Bennett stated, “A management company, in order for them to be successful, will have to manage the harbor correctly and I see no reason why we shouldn’t look into that. We’d be short selling ourselves if we didn’t look into it. They come with credentials and experience, they come ready to do the job. It is a much better thing to do than put a advertisement out and see what you get. Maybe they could find ways to make money, maybe get rid of fuel sales.”

Panek responded, “We have had some issues with fuel sales (we are assuming Panek is referring to the town/harbor fronting several thousand dollars in fuel,  for which it never received payment). There are policy considerations that residents get discounted fuel prices, get discounted slip fees. Council needs to be aware of that, whether you hire a management company or a harbormaster. You can’t tell them they have to provide discounted fuel prices or slip fees to residents.”

Wendell said, “In a couple of years, with the debt service gone, the town would be able to make the harbor profitable and we would be able to take the profit and re-invest it in the harbor itself. I’d like to know if there has been a study to see if there are others that have used a management company and how that worked out.”

Panek responded that the Springstead report could not find a harbor similar to Cape Charles when doing salary comparisons.

“Somewhere in the Chesapeake basin?” asked Wendell. “Look, I think we would be better moving forward refining the criteria for hiring a new harbormaster. We didn’t hire an outside entity to manage the town, we hired a town manager ourselves.”

Bennett countered, “What I hear from Frank is knowledge is not a good thing, just keep blinders on, keep doing what you’re doing,”

Wendell said, “That’s not what I said–can you run the tape back for Mr. Bennett and let him hear what I said, that knowledge is not a good thing, I don’t think that is what I’m saying.”

Bennett said, “That’s it Frank, that is just how you said it, you want to keep the blinders on and keep going and doing just what you’ve been doing.”

Attempting to retain decorum, Proto responded, “Guys! Guys…that’s enough!”

Bennett said, “I see no harm in looking into a management company. We have a harbormaster now, it is the slow season, we’ve got time, this is the time to do it, and while we’re doing it, we can look at all the numbers. What is the harm in looking? Selling the harbor, we can take that off the table.”

Councilman Bannon said, “I would hire a harbormaster and do a study into a management company.”

Bennett responded, “And then you’ll just have fire them later.”

Natali added, “We could do what Dickie (Foster) used to do. Bring someone in (management company), learn what the do, and then get rid of them.”

Consensus was to move forward with looking for a new harbormaster, while maintaining the option of researching management companies that could either operate or lease the harbor,.

Opinion: The big question is where did the idea of selling the harbor, as well as using a management company to run it, come from? It is understood that members of Council met separately to discuss this before the work session. Selling the harbor is obviously a non-starter, yet it appears that this option is merely meant to keep our eyes off the real ball, which is turning the harbor over to a private entity to control. It has been rumored that there has been an active interest from a local entity in taking over the harbor, so this is something to watch closely. Even if they do hire a harbormaster, as Mr. Bennett said, they can always just fire him to make room for who they really want running the harbor.

The scapegoating of Smitty Dize is also interesting. Certainly the harbor has lost money, but it is the huge debt service incurred over the break waters that is responsible for the biggest chunk of the shortfall. Since several boats have left the harbor to follow Dize over to King’s Creek, this appears to be a convenient opportunity to smear his reputation.

It should also be noted that the town is still planning for a third breakwater, which will incur a debt service of its own.

Given the Town has just sold deep water harbor lots for pennies on the dollar, divesting itself of harbor management may be a real possibility.  First, they have to realize that the harbor will never turn a profit, it’s just too small. As they are finding out,  a commercial marina is very, very expensive to operate. If you make back your operating costs, I would call that a win. Most commercial operations only use the slips to get people there, and then they make money on other retail offerings (see Tides Inn).