Virginia Port Authority Hoping for Increased Volume to Climb Out of $5.5 Million Hole
Volume will determine whether the Virginia Port Authority can climb out of a $5.5 million hole in the first half of the fiscal year and come out ahead, leaving it with the $2.8 million in operating income it originally budgeted, the port said.
Chairman John G. Milliken said Feb. 4 at the commission’s regular meeting that if container volume remains flat, the port could hit its mark with CEO John Reinhart’s plan to manage expenses and grow business at the same time.
Port volume dropped in November and December, a result of a slowdown in China’s economy and a sagging holiday shopping season, he said. Milliken said discounts offered to customers based on exceeding volume levels were triggered earlier than usual because of last year’s heavy traffic, leading to a drop in the port’s income.
Milliken said he is OK with a couple of years of flat volume in order to build up the port’s capacity, which can’t handle much more as it is.
“It gives us a little breathing room,” he said.
The port still is negotiating a lease with Virginia International Gateway in Portsmouth to double the size of the facility. Milliken said he’s “very optimistic” talks will conclude with a positive result before the end of June. The authority also is seeking $350 million in state money to enhance capacity at Norfolk International Terminals.
Reinhart said the higher expenses stem from managing the port’s severe congestion last year.
“That’s people. That’s equipment. Those were investments we made to protect the reputation of the Port of Virginia,” he told commissioners.
Reinhart said “it’s not unexpected to start the first six months with a loss,” assuring that income would be in line with what was budgeted by the end of June.
At the same meeting, commissioners unanimously approved awarding Reinhart a $211,500 bonus on top of his base salary of $450,000, based on performance metrics that weren’t disclosed.
As part of Reinhart’s five-year contract, he’s eligible for a bonus worth up to $225,000.
Milliken said a committee determined the port and Reinhart had a “very strong year” and the CEO met 94% of the goals set last year. Milliken didn’t say what those goals were or what Reinhart may have missed.
“That’s not in any way to detract from the quality of performance,” Milliken said of Reinhart coming up a bit short on one of his goals.
Milliken chose not to divulge what determines Reinhart’s bonus. “Frankly, we don’t want to tell our competitors what our plans are,” he said of the measurements that are changed every year.
“It’s a different year,” Milliken said of 2016, with more focus on economic development and growing business, for one.
In other business, the commission voted to:
• Authorize the executive director to refinance the port’s debt to take advantage of lower interest rates. The port’s financial adviser already identified one opportunity to refinance $54 million in debt, saving the agency about $5.5 million over the life of the bond.
• Authorize the port authority to expand its foreign trade zone, which offers duty and excise tax discounts, into several North Carolina counties.
