Minutes 10/06/1964 - Laserfiche WebLink

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October 6~ 1964 appear to be :willing tc m~ke any reasonable cormmitment~' essential to the development of this Terminal. From our conference with the VSPA a practicisI approach to the financing of the Marine Terminal at Pinners Point has emerged. If all conditions are met and rill parties are in accord, i{ is proposed that title to the City .owned land (described in the nubjeet report) be-conveyed to the VSPA who W3Lllcoens~ruct the proposed Marine Terminal from funds obtained through the sale of bonds. In or,er to market these bonds, the City of Portsmouth wo~ld enter into s lease agreement with the VSPA similar ~o that now existing between VSPA and the N & W RR and covering the general cargo facilities in Lamberts Point. In the event chat s favorable opinion is handed down in the test case now pending end involving a similar proposal between the City of ~ewport News, the C & 0 Rsilway and the FSPA could market the bonds without havi~g the pledge apply against its bond limit. How- ever, your commissioners are of the opinion thai the potential benefits derivaDle from the proposed Marine Terminal are sufficient to warrant the Cityts participation even though it might effect the City's bond limit ss well as its credit. Under this plan, the City would pledge their credit to secure an annual rental lease sufficient fer the amortizafion and servicing of the construction money bonds. Under the VSPA, the state legislature (as In the case of the ~SPA-N&W RI{ Lease agreement involving the above mentioned Lamberts Point terminals) would authorize the allocation of funds sufficient' to service and amortize one~ahalf of the total bond issue's annual requirements. These funds would go to the City of Portsmouth for the purpose of defraying one half of the annual rental obligated or proposed to be obligsted in a rental agreement. Inas much, as the~e would not be general obligations bonds, the allocation of funds for service and smortizstion would be dependent upon favorable sction by the legislature at subseque~t sessions over'{he period of the lease. Although the ac~ on taken by the legislature st one session does no~ bind future sessions, due [6 the character of the plan and in light of t~e fact that the State;~ ~r~'~'~ilt benefit/ ~nquestionably~the State ~outd accept this as s serious moral obligation and protec~ the interest of the City of Portsmouth, who through~participati6h ~Oul'd be evidencing their faith in the State. The reporL which you gentlemen have in hand covers in detail recommendations for the terminal's operstionsl methods. Your commissioners generally agree with the recommendations of the reporting firms. The Port snd Industrial Commission would engage s Director and small ~tsff for the basic operation.of the Terminal and the correlation oi the various subleasing from the Port, and Industrial Commission, or those firms granted the right to handle cargo over %he terminal facilities. It is ~o be a public facility designed and located so as to be extremely well suited for rail or. truck. It will be accessible to all railroads vis the Norfolk and Port~mouth Belt Line RI~ and wil~ be directly~eccessible to the Southern Railway on the east via e right-6f-way across the Midtown TunnelLproperties. The foregoing remarks cover most of the specific factors studied sad considered. However, your commissioners also wish to mention other factors. These factors .~hough somewhat intshgible represen5 an important facet in our thinking. In the final analysis your commissioners had to weigh potential overall benefits against represented by the estimated cash.,~uilays set forth in the repots. In the business world, benefits are generally in the form of cssh and the desirability of s venture or investment is deIermined by the ne5 income flow per annum. After providing for the recapture of capital, based upon the remaining economic life of the ~uilings, a study of the actions of informed investors in the market sugges~ an interest rate for estimating the amount that an investor would be warranted in paying for a property. This interest rare is related ~o risk. The greater the risk the higher the interest rate. Certainly this risk is directly related to the actual cash outlay or equity required. Your commissioners considered Portsmouth's position in this light. What specifically will be the City's equity in this proposed venture? The land that is to b~ used in the proposed terminal development, in its present state, is unable to produce either taxes or rent for the City. However, this represents the City's equity under the propose~ plan. The City must assume the obligation of paying sufficient rental to cover the servicing and amortization of the construction bonds for the improvements. However, the engineers estimate that from the b6ginhing there will be sufficient income to pay for the ~erminsl operation exclusive of said amortization requirements. The State of Virginia is to pay one half of the said amortization requirements thus decreasing Portsmouth rental obligations by one half. According 5o the report, when the SEate funds are taken into account Portsmouth's maximum risk will involve no~ more than $90.000 per year. Conservative estimate~ indicate that this picture will steadily improve over ~ five year ~eriod and could conceivably result in the City actually realizi~g~a net pro,it over and above amortization cost. Thus under the worst and most pessimistic estimstes, the City would be acquiring all those indirect benefits that certainly wpu~d accrue from the control, and for all practical purposes, the ownershi~ ~f? ~ $5/0~0,000 modern Marine Terminal (in a location that is considered by the expert-s ~o be second to none in the United States) for the sum of $90,000,000 per annum. The construction would involve no other cash outlay by the City'and the firs~ $90,000,000 would not be payable until the facilities were completed and in operation one year. We recognize the fact that the fee ownership would res~ in VSPA, however, for all practical purposes Portsmouth's position in this venture would be ~antsmount to o~nership inasmuch as all lateral benefits that m-ight ac~ue from-its operatio~n, and location, would be enjoyed by Portsmouth. This closely compares to the standard purchase a-nd lease back ~rrsngement" employed more and more by large firms and investors. Our studiies have indicated thet the indirect benefits to the City:~ould be tremendous. Certainly the most conservative estimates suggest that they would be considerable and commensurate with any risk that is foreseeable for the City of Portsmouth;" Motion of, Mr. Knight to accept the report and the recommendation of the Portsmouth Port and Industrial Commission a~d that the Council go on record ss requesting the Portsmouth Port and Industrial Commission to proceed as expeditiously as possible ~i~th the proper negotiations with thelseveral prospective users of this terminal and with the V~rginia State Ports Authority ~y way of preparing a lease ~greemen~ which will be acceptable to both the C~ity of Portsmouth and ~o the Virginia St~e Ports Authority and that the Portsmouth Port and Industrial Commission be charged 9ith the responsibility of implementing these recommendations ss rapidly a~d thoroughly as possible, with the provision that they have the right to the continued assistance and support of the Tidewater Virginia Development Counci~nnd the Portsmouth Chamber of Commerce and the City's legal staff to get this underway at the earliest possible moment, was unanimously adopted. Approved On motion adjourned. President City Clerk