New Times / News
The following articles were printed from New Times [newtimesslo.com] - Volume 28, Issue 13
Money movers: The Port San Luis Harbor District shuffles some debt with help from the county and comes out ahead
BY RYAN MILLER
Let’s do a simple word association, like I say “orange juice,” and you say the first word that pops into your head. Maybe it’s “glass” or “pulp.”
“Good with money.”
No matter what you came up with—from “my accountant” to “pulp” (again?)—you likely didn’t say “government.” If you did, you were probably cheating.
Or maybe you’ve already heard that the Port San Luis Harbor District recently took the “Innovative Program or Project” recognition for small districts at the annual California Special Districts’ Association annual conference, held this past September in Monterey. The award—delivered by State Sen. Bill Monning—was for a bit of financial wrangling that put the district on track to save a quarter of a million dollars while tucking $40,000 into San Luis Obispo County’s pocket.
The district, started in 1954 to drum up business for South San Luis Obispo County and spruce up aging structures in the area, now provides public services for the port and regulates commercial and recreational activity in the harbor.
It had recently been chipping away at $1.1 million owed to CalPERS, the state system that administers health and retirement benefits on behalf of public institutions. According to the press release, the district created a pension obligation some years back—not an uncommon situation in California—and was paying it off at a 7.5 percent interest rate.
Cut to the county, which sees a 1.75-percent investment return on five-year notes.
Now cut to Port San Luis Harbor District Business Manager Julie van Hoff. She’s held that position since 2011, before which she worked in Broome County, New York; worked at the Monterey Bay Aquarium; served as the deputy auditor controller for Monterey County, where she stayed for six years; handled consulting for a company in Sacramento; and helped implement a financial software system for Caltrans.
Now, she has an office at the base of Harford Pier.
“I can hear the sea lions and see the fog rolling in when it’s there and the waves when they’re big,” she said. “It’s a nice place to come to work. I was very lucky.”
While successful anglers gut and clean their catches at the station outside her window, she tracks and shepherds all of the district’s accounting, budgeting, human resource activities, customer service, risk management, property management, and anything else on the business side of the port. Amid those duties, she chewed on the idea that the district could do better (i.e. lower) than the 7.5 percent interest rate it was being charged by CalPERS.
She started looking around for a body that has a lot of money and was trying to get a better return on its investment. More chewing revealed that the county could do better (i.e. higher) than the 1.75 percent interest rate it was earning, and would probably like to do so. So she proposed a partnership, helped along by the fact that she’d previously worked with SLO County leaders while she was in Monterey.
A little more than a year ago, van Hoff went to then-County Treasurer Frank Freitas (who’s since retired) to talk refinancing. He ultimately agreed to hold what’s known as a Tax Revenue Anticipation Note for the district for five years at 2.6 percent annual interest, meaning the county paid off CalPERS and the harbor district is now paying back the county.
That move immediately saved $75,000 in the district’s 2012/2013 budget, and the savings should total $250,000 over five years. The county’s set to get $40,000 more than it would otherwise get on a five-year investment.
Locals heartened to hear such a tale of fiscal positivity—especially after being battered by debt ceiling headlines at the national level—shouldn’t get their hopes up too far, though. Van Hoff said that refinancing a CalPERS obligation isn’t a unique move, but keeping the whole process in the county, as opposed to going out to market, is rare. She had trouble thinking of a similar model off the top of her head, but noted that such a move takes an entity—county, state, whatever—that actually has extra money it can invest.
Also: “If an organization says, ‘I can’t afford to pay my bills, can I borrow some money for the next five years?’ I think that conversation would go very differently,” she said.
James P. Erb, San Luis Obispo County’s current treasurer-auditor-controller-etc., was on the county’s debt advisory committee back when Freitas was mulling this deal over, so he was a part of the process. Like van Hoff, Erb couldn’t think of such a refinancing tango danced in recent memory or in nearby locales—and there’s a reason for that. The stars have to align just right, typically bringing in a loan period of no more than five years and a sturdy borrower.
“We can’t go out further than five years without board approval,” he said, noting that other bodies have approached the county with similar requests, but for non-workable 15-year payoffs.
He said that the county’s priority when it comes to its money isn’t returns. The top aims are liquidity and safety. There are also state and local regulations that dictate what can and can’t be done with dollars. With interest rates continuing to bob along down on the low end of expectations for who knows how much longer, the future is uncertain. Heck, even the debt ceiling fiasco is going to come up again before the year is up. In short, nobody knows what will happen, and governments looking to make the most bang from their investment buck are unwilling to lock themselves into low rates for too long, just in case the percentages start creeping—or shooting—up again.
But when it comes together, it comes together, much to the delight of the harbor district and the county.
“We’re kind of all one government here in the county. We can all help out to some extent,” Erb said. “It was good news, and I’m glad it worked out the way it did.”
Contact Executive Editor Ryan Miller at email@example.com.