General Obligation Bond Request
On August 16, 2007, the Port Commission took formal
action to petition the Harris County Commissioners Court
to call a November 6 election seeking Harris County
taxpayers’ approval of the Port of Houston Authority’s
$250 million general obligation bond request. These
bonds will help the PHA meet its most immediate capital
improvement needs over the next four years. On August
21, the Harris County Commissioners Court unanimously
approved the PHA’s request to call the election.
The ballot language
reads as follows:
The issuance of $250,000,000
Port of Houston Authority bonds for port improvements
(including related transportation facilities, security
facilities and environmental enhancements) to provide
economic development and the levying of the tax
in payment thereof.
PHA Comprehensive Capital
Improvement Program
The Port of Houston Authority recently concluded that
it will need $1.7 billion in capital improvements over
the next nine years to keep pace with market demand.
In addition to the $1.2 billion the port authority expects
to generate from its general operations over the next
nine years, it forecasts that it will need a total of
$550 million in bond funding in the future.
The port authority presented its nine-year
capital improvements program to Harris County Commissioners
Court. After many discussions with the Harris County
officials, and taking into consideration the county’s
$660 capital improvements general bond request, the
port authority reduced its initial bond request from
$550 million to $250 million, to help maintain the county’s
current overall tax rate.
PHA’s Annual Operating
Budget
The port authority’s fiscal year 2006 audited
general operating expenses were nearly $168 million,
and generated approximately $42 million for investment
in additional capital improvements. While the port authority’s
current cash flow fully supports its day-to-day operating
needs and many of its capital improvements, the port
authority’s current cash flow alone do not sustain
the pace of market-driven port infrastructure needed
to maintain the flow of cargo, generation of jobs and
positive economic impact for the region. Simply put,
the port authority’s contribution to the Houston
economy could fall behind without a fully-funded comprehensive
capital improvement program.
PHA’s Capital Program
Planning Prioritization Program
A continuous planning process underlies the PHA staff’s
financial evaluations. The PHA undertakes this work
on an ongoing basis, with an additional annual focus
in connection with the preparation and approval of operations
budgets and capital improvement plans. However, before
the PHA formulates any recommendations for capital funding,
it takes a comprehensive long-term look at the proposed
business prospects and financial viability as well.
The PHA Origination and Operations
Divisions have the initial responsibility in this effort,
remaining in constant contact with PHA customers in
order to gauge the direction of the Houston cargo market.
PHA terminals handle a variety of cargo types, including
containers, of course, but also steel, bulk, and project
cargoes, among others. Staff members track and predict
each of these cargo volumes, not only to forecast revenues,
but to assist in determining operating and capital expenditures.
The container market merits special
attention, both because of increased consumer demands
in a densely populated market that the PHA operates
in, and that containerized cargo has increasingly become
the most preferred way of product distribution in the
world. To assist in its analysis, the PHA has retained
one of the nation’s foremost container industry
consultants. This allows the PHA to tap into the market
intelligence of experts, including the former president
of one of the nation’s largest container lines,
the former CFO of another significant container operation,
and the developers of the foremost container market
statistical service, to collectively provide insight
into industry trends. Their services have allowed the
PHA unparalleled access to the highest levels of the
container shipping industry, and have helped it achieve
real success in forecasting market growth.
The managers of each of PHA’s
facilities take over from there. Facility managers review
accumulated market trend data and use it to develop
their proposed operating budgets and multi-year capital
spending forecasts. The key goal of each of these components
is the same: maximizing the PHA’s business opportunities,
while being mindful that its work of handling cargo
must deliver direct and indirect economic development
for our city, region and state
These budgets are questioned, tested,
and revised by PHA senior management. While not all
projects can be funded when desired by terminal managers,
the result each year is an overall operating budget
and capital plan that best achieves the PHA’s
goal to create and sustain economic growth.
After this exhaustive process is completed
each fall, the following year’s budget and capital
expenditure plan are submitted to the Port Commission
for its review. Staff also prepares operating budget
and plan re-forecasts on at least a quarterly basis,
which are again vetted by senior management.
IIn order to work up its recommendation
for capital funding, PHA staff performs some additional
analysis of its entire multi-year capital-spending forecast.
The goal is to accumulate and maximize those expenditures
to be paid each year from current funds; the balance
comprises the staff’s recommendations for long-term
bond financing.
Operating and maintenance expenditures,
and capital improvements with short-term lives unsuitable
for use as long-term collateral must, of course, be
paid from current revenues.
Long-term capital projects are also
reviewed; as many of these as possible are paid from
current funds, and brought on line as soon as possible,
to promptly contribute to revenues. The resulting increased
income is then applied in future years of the forecast
to pay for more long-term improvements.
The remaining long-term projects are
evaluated for inclusion in a long-term bond-financing
program. For example, wharves, container yards, and
cranes, which have operational lives lasting over decades,
are primary candidates for such financing.
Revised: 09/24/07
Port
of Houston Authority
111 East Loop North • Houston, Texas 77029
P.O. Box 2562 • Houston, Texas 77252-2562
Phone: 713-670-2400
Copyright 2009 Port of
Houston Authority • All Rights Reserved
For questions and comments, send an e-mail.
Please include company name and phone number, when appropriate,
so we may better respond to your inquiry.
