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2009 Annual Report: Port of San Diego

2009 Annual Report: Port of San Diego



2009 Port of San Diego Annual Report

2009 Port of San Diego Annual Report
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    2009 Annual Report: Port of San Diego 2009 Annual Report: Port of San Diego Document Transcript

    • Annual Report 2009 SAN DIEGO UNIFIED PORT DISTRICT Table of Contents: Chairman’s Message . . . . . . . . . . . . . . . . . . . 2 President’s Report . . . . . . . . . . . . . . . . . . . . 3 Capital Development Program & Major Maintenance Program . . . . . . . . . . 4 Community . . . . . . . . . . . . . . . . . . . . . . . . . 6 Cruise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Employees . . . . . . . . . . . . . . . . . . . . . . . . . 10 Environmental . . . . . . . . . . . . . . . . . . . . . . 12 Maritime . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Public Art. . . . . . . . . . . . . . . . . . . . . . . . . . 16 Public Safety & Homeland Security . . . . . . 18 Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . 20 Parks History . . . . . . . . . . . . . . . . . . . . 22 Financials . . . . . . . . . . . . . . . . . . . . . . . . . 24 Board of Port Commissioners . . . . . . . . . . . 55 Gr een way s tr ul y cap tu re th e im ag in at io n an d bo ld ne ss of the Am er ic an spi ri t
    • Chairman’s Message President’s Report Trust and teamwork are two words new public park), the Draft Environmental Impact Report When I came to the Port in January upcoming North Embarcadero Visionary Plan, which will that describe my year as Chairman for the demolition of the former Teledyne Ryan site near 2009, I was fortunate to join an beautify the waterfront of the Embarcadero area. Other of the Board of Port Commissioners. Lindbergh Field was completed, and the new Pier 32 Marina organization that had a solid projects will enhance public access, promote maritime, Trust de nes the way the Port of San in National City opened. Additionally, an appealable Coastal foundation and a reputation based recreation and sheries, improve the environment, and Diego operates – clear and transparent Development Permit was issued for the North Embarcadero on good governance. Since the Port’s improve security along the San Diego bayfront. governing of the tidelands of San Visionary Plan’s rst phase, and the Port was awarded a $3.5 inception, it has thrived on sound Diego Bay. Teamwork is how we get million grant from the Ruocco Fund to build a new waterfront nancial and business practices— e Port leadership team looks forward to guiding this things done at the Port. e Chair park at the former Harbor Seafood Mart site near Seaport elements that have helped us through vibrant world class organization through these di cult times, of the Board of Port Commissioners Village. a tough 2009. but I’m optimistic that the clouds will clear. I am con dent in sets the agenda, but it is a team of seven commissioners this: the Port’s future is bright. working with the sta at the Port, who see that projects get In the environmental arena, funding was approved for shore e sta at the Port, the Port tenants, business customers o the ground and that the Port is accomplishing its mission. power for cruise ships, a program to take old diesel trucks and the community have demonstrated they are all great I encourage you to take a look at the map inside this o the road got underway and several environmental fund partners. ere were, and still are, many challenges for Port annual report. On that map, you’ll be able to see the miles Protecting the working waterfront continued to be at the projects were completed. Additionally, the Port received a leaders during this nancial downturn, but all of us in the of walkways and paths that are part of the tidelands. All forefront this year after a failed ballot initiative threatened $1 million grant from the U.S. Environmental Protection Port community have tackled these challenges with eagerness. of the Port’s 17 parks are indicated on the map, along with the future of the Port of San Diego’s Tenth Avenue Marine Agency to restore about 160 acres of coastal wetlands in south the public boat launch ramps, shing piers and many other Terminal. e November 2008 initiative, which sought to San Diego Bay. e Port’s revenues in maritime and real estate were down recreational amenities provided to the public by the Port of change land use designations for the area so that more visitor slightly from last year’s numbers, but toward the end of the San Diego. We hope you will have many opportunities for serving industries could be built, would have been detrimental e Port also created a partnership with San Diego Gas year we were beginning to see hopeful and positive signs. New recreation on the tidelands. to the Port’s marine operations and industrial tenants. & Electric. e “energy roadmap” created by SDG&E will maritime contracts were signed that will bring in additional help guide us on conservation e orts. Some of these include automobile imports and other cargoes. People were coming I am grateful for the warm welcome I received when I joined is ght will never be over as long as there are people installing solar panels onto the Port’s Administration building, to San Diego for conventions and staying in tenant hotels the Port team. I look forward to serving you in 2010. who envision a stadium or other type of use for the marine which we accomplished this year, and we’ll be installing them and we were able to move forward with some of our major terminal. Your Board of Port Commissioners is working hard on the new cruise ship terminal building opening in late 2010. projects. to protect the valuable jobs and industries that make up the working waterfront. At the same time, we continue to promote ese programs and projects helped the Port balance its e Port’s operating revenues for scal year 2009 totaled Tenth Avenue Marine Terminal as a viable alternative to Los responsibilities that were set forth in the Port Act, which was $134.5 million, compared to $144.1 million in scal year Angeles and Long Beach. We’ve got the experience, the lay rati ed by the State Legislature in 1962. According to the Act, 2008. Although we were down by about seven percent, the Charles D. Wurster down area and the customer service. the Port is not only expected to build, maintain and operate Port fared better than many other ports around the nation. President & CEO maritime shipping facilities and promote commerce and Port of San Diego revenues are public funds and are used Port of San Diego In addition to promoting maritime activity and acquiring navigation, but it is entrusted with managing and regulating for public infrastructure improvements. Examples are the new trade contracts, we were busy this year promoting Port the waters and tidelands of San Diego Bay for shing and real estate tenants. e tidelands weren’t immune from the recreation. sti ing economy. Our hotels, restaurants and shops felt the pain. Some tenants experienced such low sales that they were I’ve had the great pleasure of serving as your Port Chair twice having di culty paying the rent. To help out these tenants, during my 12 years on the Board of Port Commissioners. the Port established a temporary nancial relief program that During this time, I’ve worked with many elected o cials, allows tenants to defer portions of their lease-required rental union leaders, community representatives and the public payments. to try and do what’s best for the region as a member of this Board. I thank each and every one of you for this opportunity. Another program to help Port tenants was a new marketing campaign. e campaign o ered special o ers at Port restaurants, hotels, shops and attractions in an e ort to attract business. Despite the economic downturn, the Port of San Diego was Stephen P. Cushman successful on several fronts this year: construction began on Chairman, Board of Port Commissioners the Broadway Pier Cruise Ship Terminal, the new Hilton San Diego Bayfront hotel opened (and along with it, a 2 3
    • CAPITAL DEVELOPMENT PROGRAM & MAJOR MAINTENANCE PROGRAM e Port of San Diego has two programs to help ensure that is past year, the Port began refurbishing 30 of the public Work on the Pepper Park public boat launch ramp in National Other major projects include the demolition of the former infrastructure around the tidelands is improved and maintained. restrooms in Port parks and other public areas. Many of City was completed. e original concrete launch ramp was Teledyne Ryan building near San Diego International Airport. e programs include projects that bene t public access, the the restrooms were built in the 1960s and were in need of demolished and replaced with an eight-lane boat launching ramp e $15 million project will involve demolishing 58 vacant environment, the economy and recreation in the Port’s ve modi cations. e nearly $2 million project was completed and two, 10-foot wide boarding oats. is was a $1.1 million industrial buildings. e project also includes removal and member cities. in late summer. Work included replacing plumbing xtures, project that was co-sponsored by the Port and the California disposal of hazardous construction materials. electrical components, piping and mechanical equipment. Department of Boating and Waterways. State grant funding was e Capital Development Program includes projects that are also used to help pay for it. e Port will soon begin a project to An environmental remediation project is also scheduled in new improvements on the tidelands. Examples include the new A $4 million project that transformed the end of Palm Avenue in remove the public restroom at Pepper Park. It will be replaced Chula Vista. e project will clean up a drainage ditch that used cruise ship terminal on Broadway Pier, and a new restroom in Imperial Beach was also completed. A park-like plaza was created with a modern facility that is compliant with the Americans with to be part of the former BF Goodrich South Campus. e area Pepper Park in National City. and the installation of a landmark public artwork, the “Spirit of Disabilities Act. is scheduled to be redeveloped in the future as part of the Chula Imperial Beach” was installed. e project included a new storm Vista Bayfront Master Plan. Major maintenance initiatives include projects that are the complete water pump station with a built-in pollution diversion system. Projects for 2010 include the installation of shore power refurbishment, or reconstruction, of prior Capital Development Emergency ramps that provide direct access to the beach were equipment at the new Broadway Pier Cruise Ship Terminal and e Port will also begin several major maintenance projects. projects. Examples include pavement reconstruction projects also installed. the B Street Cruise Ship Terminal. e equipment will allow ese include continued maintenance on the Imperial Beach and pier deck and pile replacement. Maintenance of existing cruise ships to plug into clean power while berthed, so that they Pier, repaving parts of Shelter Island and repaving the National infrastructure is becoming increasingly important, requiring don’t have to idle their diesel engines. City and Tenth Avenue Marine Terminals. signi cant investments, as the District’s infrastructure ages. 4 5
    • COMMUNITY As the administrator of the San Diego Bay tidelands, the Port is environment or maritime along the tidelands. Past recipients tasked with promoting recreation along its shorelines. is means include the Paci c Life Holiday Bowl, for its annual Big Bay providing open space and su cient access to the waterfront of Balloon Parade. e parade and its associated Holiday Bowl San Diego Bay and the oceanfront of Imperial Beach. To heed football game bring thousands of visitors to San Diego and that call, the Port established 17 public parks along the waterfront. to the waterfront. ese visitors support Port businesses and Many of these parks have recreational amenities such as basketball attractions. Past recipients have included the Alpha Project for courts, softball elds, children’s playgrounds and tness courses. the Homeless, the “Gator by the Bay” music festival and the Coronado Chamber Golf Classic. Marketing Fee for Service In addition to the parks, there is the Bayshore Bikeway that nearly recipients have included the San Diego Sport shing Council, encircles the entire bayfront, from Point Loma to Imperial Beach. the San Diego Film Commission, the San Diego Maritime ere are ve public shing piers, four public boat launching ramps Museum and the San Diego Regional Economic Development and 26 marinas and yacht clubs with about 7,000 boat slips. Corporation. ese organizations help promote business on the tidelands and draw thousands of visitors to the waterfront. is year, a one-acre park opened next door to the new Hilton San Diego Bayfront Hotel. Called the San Diego Bayfront Park, e Port continued to reach out to the public by o ering free boat it is open to the public for events, picnics and gatherings. Next and bus tours of the tidelands. As part of its campaign to educate year, the Port will begin work on Ruocco Park, a new park that the community about the importance of the working waterfront, will be located north of Seaport Village at the former Harbor the tours gave an up close and personal look into the intricate Seafood Mart site. operations of several industrial tenants. General Dynamics/ NASSCO, Continental Maritime and even the United States In addition to providing parks and open space, the Port is a Navy participated in the program. e bus and boat tours are a community service provider. Programs such as the Financial way the Port lets county residents learn about the many businesses Assistance Program and Marketing and Fee for Service that rely on the Port’s maritime industry to survive. Along with contribute funds and/or Port services to groups or programs learning about the Port’s business side, the boat tours provided that might need a hand getting started. To qualify for assistance, information on the Port’s environmental initiatives. the group or program must support recreation, sheries, the 6 7
    • CRUISE Th e co nn ec ti on be tw ee n pe op le + la nd e Port’s cruise business continues to be an economic force Construction for a new cruise facility on Broadway Pier got e Port will be installing equipment at the new terminal to Cruise ship calls for the region. In scal year 2009, 224 ships called on the Port underway. e new building will serve the public as a space for allow cruise ships to plug into shore power. Providing electrical Five-year trend comparison (actual numbers) of San Diego, bringing nearly 814,000 passengers here. Each events and gatherings, while providing the functional space to power to the ships reduces air pollution caused by idling diesel 2005 203 home-ported ship that stops here has an economic impact of $2 accommodate cruise line operations. e bright, modern, steel engines. 2006 219 million on the region. Right now the Port has four seasonally and glass design will include a signature artwork by New York 2007 181 home-ported lines —Holland America, Celebrity, Carnival and artist Leni Schwendinger. e rst 400 feet of the pier will serve is year, Holland America Lines and the Port partnered with Royal Caribbean —which o er cruise itineraries to the Mexican as a public special event area. Adjacent to the building, there will the Alpha Project, a local nonpro t human services organization 2008 297 Riviera, Panama Canal, Hawaii and other destinations. be a pedestrian walkway leading to the west side special event that provides assistance to more than 2,000 local men, women 2009 224 and viewing area. Inside, both levels of the building will include and children each day. e “Ship to Shelter” program donates Although this year’s total number of ships was lower than last more special event space. e public facility/cruise terminal is reusable goods from Holland America cruise ships to local Cruise Passenger Totals year, it was still the Port’s second-best year in the history of its expected to be ready for business in December 2010, and will shelters to help the homeless. Goods include toiletries, cookware, Five-year trend comparison (actual numbers) cruise business. In April, about a dozen ships were rerouted to be the Port’s rst “green” building. It is being designed to obtain dishes, silverware and even televisions. 2005 567,622 the Port because of the threat of the H1N1 u virus in Mexico. a silver-level Leadership in Energy and Environmental Design 2006 621,434 is brought the Port, its tenants and area attractions some (LEED) certi cation, which means it will use less energy and 2007 555,071 unexpected but welcome business. produce less waste. 2008 991,559 2009 813,822 8 9
    • EMPLOYEES e Employee Recognition Program is another way the Port fosters continuous growth and demonstrates how the Port values Port employees not only look out for their own well being, but its employees. Each quarter, an employee is selected from a slate they participate in programs to help the community and the of nominees submitted by all District divisions. e nominees are environment. Each year, a large percentage of employees participate viewed by their peers as individuals who exemplify the Port’s core in the United Way campaign. Employees hold bake sales, book values of courage, diversity, fairness, fun, integrity and teamwork. sales and craft fairs to help raise money for the annual giving At the end of the year, an employee of the year is selected for a campaign. e San Diego Harbor Police Department sponsors recognition award. blood drives and participates in the local law enforcement “Teddy Bear” drive during the holidays. is program provides toys and To promote health and wellness, the Port’s Health Bene ts stu ed animals to patients at Children’s Hospital. A world-class organization is characterized by strong leadership. ensure this, the Port established the Port Learning Center in 2008. Committee has initiated a series of healthy living seminars which e Port of San Diego prides itself as a top-tier organization. Strong e Learning Center focuses on improving employee performance focus on nutrition and tness. ere is an on-site Weight Watchers Port employees are also active in environmental projects. A group leadership and talented, skilled employees keep it running smoothly. and e ectiveness. Classes are open to all employees and subjects group and a program that allows employees to purchase organic of employees began a composting program at the Port, which range from supervisory training to specialized computer courses. produce from a local farm as part of a community-supported has diverted tons of food waste from the local land ll. ey also Among the 600-plus employees that work at the Port are Harbor Employees have the opportunity to update their skills and learn agriculture program. Additionally, the committee has mapped out participate in bi-annual recyclable electronics events. Police o cers, engineers, architects, trade representatives, electricians, management skills to help advance their careers. local walking routes for employees. carpenters, mechanics and many others. ese employees are encouraged to keep learning and improving at their jobs. To help 10 11
    • E N V I RO N M E N T A L e Port of San Diego’s environmental department is responsible e Voluntary Vessel Speed Reduction Program is another e ort for several initiatives to improve the air and water around the designed to improve the air quality around the tidelands. In the tidelands. ese include mitigation for construction projects, program, the Port requests cruise and cargo vessel operators as well as stormwater monitoring programs, natural resource to reduce their speed when entering or leaving San Diego Bay. management and several others. A new addition to these initiatives Studies show that when vessel speeds are reduced, there is a is an energy partnership with San Diego Gas & Electric, which signi cant reduction in air emissions. Vessel speeds are tracked will assist the Port with conserving energy. by using data that all vessels transmit to automatic identi cation receivers. e program began in April 2009 and by the end of the e Port entered the second year of the Green Port Program, quarter, 78 percent of the cruise ships and 58 percent of the cargo which was approved by the Board of Port Commissioners in ships visiting the Port had demonstrated compliance. December 2007. e program focuses on six areas—water, energy, air, waste management, sustainable development and e Port received a $1 million grant from the U.S. Environmental sustainable business practices—and spells out how the Port can Protection Agency, which will help restore and enhance about minimize its carbon footprint. 70 acres of coastal wetlands in south San Diego Bay. e work includes excavating about 50,000 cubic yards of material at the Great strides were made to improve the air quality around the Chula Vista Wildlife Reserve to add tidal channels to increase the tidelands. A program to replace or retro t older model trucks water ow into the salt marsh. Another area, Emory Cove, will using the Port’s marine terminals got underway and was embraced have invasive plants removed and native plants added to restore by one of the Port’s largest tenants. Pasha Automotive Services, the shoreline. which processes more than 260,000 automobile imports at the National City Marine Terminal, replaced seven car-carrying A project to install arti cial reef structures o the shoreline of trucks with assistance from Port funds. Five new trucks for Bayside Park in Chula Vista was completed this year. is project APEX, another terminal trucking customer, were funded with received nancial help from the Port’s environmental fund, which the rst of the state grant funds available for port trucks and was established in 2006 to nance environmental projects that matching Port funds. go beyond state and federal compliance. e reef structures provide additional habitat for sh and other sea life in the bay to e Board of Port Commissioners approved funding its shore protect them from predators, resulting in increased populations power projects at the B Street Cruise Ship Terminal and the of marine species. new Broadway Pier Cruise Ship Terminal, currently under construction. e projects will provide infrastructure so that Additionally, solar panels were installed on the Port’s cruise ships can plug into grid-based power while docked, Administration Building. ese panels are providing clean power eliminating the need to run diesel engines. e shore power for more than two percent of the administration building’s energy system will be installed by December 2010. use. is percentage will increase as the building becomes more energy e cient. In 2010, the Port will install solar panels on its General Services building. B r in gi ng gr ee n to th e pe op le 12 13
    • MARITIME Maritime Revenue Five-year trend comparison (revenue in millions) 2005 2006 2007 2008 2009 $23.7 $35.3 $39.4 $45.9 $43.7 Types of cargo Total tonnage received during scal year 2008-2009 (in metric tons) Dry bulk: 1,264,619 (includes cement, sand and fertilizer) Vehicles: 394,569 Liquid bulk: 153,589 (includes jet, bunker and diesel fuel) Containers: 604,841 Breakbulk: 401,853 Without a doubt, 2009 was a strenuous year for most of the a result of the overseas trips, the Port may be gaining additional Maritime Cargo Tonnage (includes bagged cement, bagged fertilizer, Port of San Diego’s importers and shippers. Automobiles and project cargo such as steel and windmill components, and Five-year trend comparison (metric tons in millions) lumber, palletized fruit, bagged sand and building products seemed to bear most of the weight of the perishables such as mangoes and avocados. miscellaneous steel and wind turbine products.) weak economy, while shipments of containerized fruit and 2005: 3.3 Vehicle units: 264,710 project cargo such as transformers, generators and wind turbine is year, the Port began its rst Mediterranean mooring 2006: 3.6 Container units (TEUS): 96,817 products declined slightly. operation for mega yachts. A lease was granted to San Diego 2007: 3.3 Mooring Company to conduct a two-year trial for the vessels, 2008: 3.3 For the past three years, wind turbines were a dominant import which are generally more than 100 feet long. Mediterranean 2009: 2.8 cargo at the Port’s Tenth Avenue Marine Terminal. In addition mooring is de ned as a vessel docking end-on, as opposed to to the regularly scheduled shipments, six ships arrived with alongside a pier and is commonly used in European harbors in components used to build windmill towers. e towers were the Mediterranean Sea. e rst mega-yacht to take advantage trucked to a wind farm in Palm Springs, California. of the new mooring system was the Princess Mariana. e 252- foot vessel drew admiring glances from the public with its six As the year closed, prospects began improving for auto imports. decks, helicopter and tender craft that can turn into a swimming Pasha Automotive Services, the Port’s auto processing tenant at pool with underwater lighting. the National City Marine Terminal, signed a three-year contract with Glovis America to import 50,000 new Hyundai and Kia e Port of San Diego became the rst West Coast port to automobiles through the Port. e new imports are a promising implement a program geared toward protecting marine terminals sign that the global economy is beginning to recover. from trespassers. e congressionally mandated Transportation Worker Identi cation Credential (TWIC) evolved from the Port commissioners and trade development sta traveled to parts Maritime Transportation Security Act and the Department of of Europe and Michoacán, Mexico, to seek new cargo business. Homeland Security’s e orts to strengthen port security after the In addition, they attended the 2009 Asia Breakbulk Cargo terrorist attacks of September 11, 2001. e program prohibits Conference. ese trips are important because they build lasting anyone without a TWIC identity card from entering a marine partnerships with current customers, attract new customers and terminal without an escort. TWIC card carriers must undergo keep the Port apprised of current trends in cargo movement. As an extensive background check to be approved for the card. 14 15
    • PUBLIC ART is year, the Port’s Public Art Program underwent an extensive An artistic lighting project for the San Diego-Coronado Bay review to see what was needed to ensure its sustainability over Bridge moved forward with the receipt of proposals from the next several years and to strengthen the foundation on which three artist teams. e project, sponsored by the Port and the it was built. Changes included a recon guration of the Public California Department of Transportation, envisions an artistic Art Committee’s membership to provide a balance of input from design that would illuminate the bridge. e project will include member cities, the Board of Port Commissioners, Port tenants energy-conserving elements and sustainable materials. and the public. In addition, the Board approved a xed annual amount to be set aside for the program’s operation and expenses, Celebrated artist Bernar Venet, whose sculptures are in uenced maintenance of the current art collection and acquisition of by math and theoretical science, loaned the Port of San Diego future works of art. eight large-scale steel sculptures, which were installed around San Diego Bay. e Port partnered with Scott White Contemporary In Imperial Beach, a monumental sculpture by the late A. Wasil Art to bring the renowned exhibit to the waterfront. Venet’s was dedicated at the foot of Palm Avenue and Seacoast Drive. sculptures have been exhibited in major cities in the United “ e Spirit of Imperial Beach” is an 18-foot tall artwork of a States, Asia, Europe, the Middle East and South America. e surfer and his long board. It epitomizes the surf culture of the Port displayed the Venet exhibit for a year. Port’s only oceanfront city and also pays homage to the popular “Sandcastle Days” event that draws thousands of visitors each July. A major goal of the Port’s Public Art Program continued to be incorporating public art into development projects. is year, Family members of the late entertainer Bob Hope traveled to the Port commissioned New York artist Leni Schwendinger the Port this summer to help dedicate a sculpture celebrating the to create the public art component for the new Broadway Pier beloved entertainer. e sculpture of Bob Hope was placed in Cruise Ship Terminal. Schwendinger’s concept consists of an the center of the military tribute artwork, “A Salute to Bob Hope art wall with special lighting that will re ect the motion of the and the Military.” e artwork includes 15 life-sized bronze bay onto the façade of the terminal and on the walkway near the gures representing servicemen and women from the Army, terminal. For the North Embarcadero Visionary Plan, a project Navy, Air Force, Marines and Coast Guard. A group of World that will redevelop a one and a half mile stretch of Harbor Drive War II veterans raised the $1.5 million for the artwork and the along the Embarcadero, the Port commissioned artist Pae White Port dedicated the site at the G Street Mole, which is near other to incorporate public art into a restroom, a shade structure and a military-themed artworks. ticket kiosk. ose public buildings may include artistic lettering on the rooftops, along with unique cut-outs that would cast interesting shapes and patterns onto the Embarcadero’s sidewalk. Th e Po rt Ti de la nd s A r i bb on of gr ee n 16 17
    • PUBLIC SAFETY & HOMELAND SECURITY is year, the Harbor Police Department continued project is a state-of-the-art surveillance system that monitors A new ordinance regulating the parking of oversize vehicles Six Harbor Police o cers were honored for saving lives in three implementing security measures to safeguard San Diego Bay and all maritime facilities. e system is linked to the Joint Harbor took e ect this year. e purpose of the ordinance is to prevent separate incidents this year. In August 2008, O cers Pedro the harbor from the threat of terrorism. A $3.5 million grant Operations Center, a communications center shared by the Port, overnight camping in the Shelter Island Shoreline Park and Arce, Eric Mitchell and Raul Munoz pulled an unconscious from the Department of Homeland Security was allocated to Coast Guard, Customs & Border Protection and the U.S. Navy. along Shelter Island Drive. Business owners and visitors to man from San Diego Bay and performed cardiopulmonary the Port of San Diego and maritime entities serving its areas. e system is managed around the clock. the area complained of inadequate parking on Shelter Island resuscitation (CPR). ree months later, Sergeant Salvador e grant will enable several bay-wide security projects to move because so many of the oversized vehicles were lined up. e Colin, along with two U.S. Navy personnel, pulled a man from forward, including ones that will develop a ber optic network to e Harbor Police not only monitor San Diego Bay and the Harbor Police conducted numerous community outreach a burning vehicle on Harbor Drive. In May 2009, Harbor ultimately encircle the entire bay, provide security enhancements tidelands, but are under contract with the San Diego County sessions and handed out yers to alert vehicle owners of the Police O cers Timothy Terry and Eugene Wheeldon, used an for the new cruise ship terminal at Broadway Pier, and replace Regional Airport Authority to provide police services to the changes. Oversized vehicles are still allowed on Shelter Island, automated external de brillator on a citizen in cardiac arrest the older Harbor Police patrol and re ghting vessels. airport. ere, the o cers work closely with the Transportation but have designated parking with speci c hours. while on his vessel on San Diego Bay. All of the o cers were Security Administration (TSA). e Harbor Police K-9 unit publicly honored with life-saving commendations and life- Over the past seven years, the Port has been the recipient of includes TSA-certi ed explosives detection dogs. e unit is saving “shirt bars” to wear on their uniforms. about $30 million in law enforcement and security grants. often called to assist other regional police agencies with detecting at money has helped make the Port safer and more secure explosives and narcotics. than before the terrorists attacks of September 11, 2001. One 18 19
    • REAL ESTATE On Shelter Island, the developers of the Point Loma Marina Real Estate Revenue Sources commercial site completed the rst phase of a project that will Total revenue for scal year 2008-2009: $78,536,468 include three buildings, a 50-slip marina, a 16,000 square foot park and a new shoreline promenade. Also in the area, three Concessions: $48,157,380 (includes hotel rooms, marina slips, sport shing businesses—Fisherman’s Landing, H&M Landing food & beverage, retail) and Point Loma Sport shing—moved ahead with plans to redevelop their sport shing landings. e redevelopment Fixed rent: $21,408,987 (includes ground rent, includes improvements to the existing buildings, an enlarged including boatyards and shipyards) public plaza, and improved access. Completion is scheduled for May 2010. e three companies are also working with the Port Parking: $7,770,734 to nd a solution to the parking issue in the area. A possible Parking meters: $923,517 e Port of San Diego has jurisdiction over some of the most held public outreach meetings on the design of the park, which is remedy is building a parking structure at the former Westy’s Grants: $278,131 beautiful real estate in California. Waterfront parks, gleaming expected to begin construction in 2010. lumber site on North Harbor Drive. Miscellaneous: $2,281 high-rise hotels, pier-side restaurants and marinas with million- dollar yachts are just a small sample. As close to perfection as Other positive news included the opening of the Hilton San In the South Bay, the new, 250-slip Pier 32 Marina opened on they may seem, these venues were not immune to the economic Diego Bayfront Hotel in January 2009. e 1,200-room property the National City waterfront. e Port is recon guring some Real Estate Revenue Trend of the land around the National City Marina to add even more Five-year trend comparison (revenue in millions) downturn experienced this past year. is located next to the San Diego Convention Center and boasts a modern design, public art and a one-acre public waterfront park. visitor-serving uses. Possibilities include a hotel, public park and 2005 $80.9 San Diego Bay, usually one of the top areas for conventions and More good news was the completion of a $10 million expansion a commercial site near the new marina. 2006 $82.4 vacations, was impacted with vacant hotel rooms, fewer diners in and remodel of the Best Western Island Palms Hotel on Shelter 2007 $83.6 Port tenant restaurants and fewer visitors to Port attractions. Island. New rooms were added, giving the hotel a total of 174 In Chula Vista, the Port continues to work with the city on 2008 $87.1 guest rooms. a master plan for its bayfront. e 550-acre development 2009 $78.5 To help alleviate some of the nancial strain on its tenants, the Port incorporates a land exchange with a private developer, which established a temporary nancial relief program. e program An appealable coastal development permit was approved by the will add more than 90 acres of natural protected habitat to the enabled the tenants most severely impacted by the recession Board of Port Commissioners for the rst phase of the North bayfront. Also, the decommissioning of the South Bay Power to defer a portion of their lease-required rental payments. In Embarcadero Visionary Plan. e project will cover about a Plan got underway. e process of decommissioning and addition, the Port created a vigorous marketing campaign to mile and a half of waterfront on Harbor Drive in San Diego and dismantling the plant will take approximately ve years, but will drive visitors to the waterfront. e plan concentrated on driving include widened sidewalks, landscaping, public art and gathering result in additional opportunities for the area. consumers to Port tenants through advertising, promotions and spaces. e rst phase proposes to include the area on Harbor public relations. Drive from the former Navy Pier to the B Street Pier and a portion of West Broadway from the railroad tracks, just past ere was good news on the real estate front. e Port was Paci c Highway to the intersection of Harbor Drive. e project awarded a $3.5 million donation by the Lloyd and Ilse Ruocco is a collaboration between the Port, Centre City Development Foundation to create a 3.3-acre waterfront park at the former Corporation and the City of San Diego. Harbor Seafood Mart, just north of Seaport Village. e Port 3 20 21 2
    • Port Parks From Sea to Shining Sea Parks History The Port of San Diego has 17 public parks and several other public areas with access to the waterfront. Since 1950, thousands of people have enjoyed these spots for picnics, weddings, family reunions and other celebrations, such as birthdays and holiday parties. In addition to the parks and play areas, there are miles of walkways and a bicycle path that encircles nearly the entire tidelands. Port parks include Shelter Island Shoreline Park, Harbor Island Park, Spanish Landing Park, Tuna Harbor Park, Embarcadero Marina Parks North and South, Point Loma Promenade, San Diego Bayfront Park, Cesar E. Chavez Park, Coronado Tidelands Park, Coronado Landing Park , Pepper Park, Chula Vista Bayside Park, Chula Vista Bayfront Park, Chula Vista Marina View Park, Portwood Pier Plaza, and Dunes Park in Imperial Beach. There are also smaller open areas such as Kellogg Beach, Parque del Sol, and Grand Caribe Shoreline Park, all where the public is welcome. From the Port’s first park on Shelter Island, which dates to 1950, to the most recent addition, the San Diego Bayfront Park, there are plenty of places to enjoy. California Coastal Trail Route In 2008, the first California Coastal Trail insignia in San Diego County was unveiled at Spanish Landing Park. The Port is proud to be included in the 1,200-mile trail that extends along the west coast from Oregon to Mexico. CA Coastal Trail Route 22 23
    • Financial Statements Management’s Discussion and Analysis and Basic Financial Statements June 30, 2009 (With Independent Auditors’ Report Thereon) Table of Contents Independent Auditors’ Report . . . . . . . . . . 26 Management’s Discussion and Analysis . . . 27 Basic Financial Statements: Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . 33 Statement of Revenues, Expenses, and Changes in District Equity . . . . . . . . . 34 Statement of Cash Flows . . . . . . . . . . . . . . 35 Notes to Basic Financial Statements. . . . . . 36 25 24 25
    • Mayer Ho man McCann P.C. 2301 Dupont Drive, Suite 200 Irvine, California 92612 Management’s Discussion and Analysis June 30, 2009 e Board of Port Commissioners e nancial management of the San Diego Uni ed Port District (the “District”) o ers readers of these basic nancial statements San Diego Uni ed Port District this narrative overview and analysis of the nancial activities of the District as of and for the year ended June 30, 2009. is Independent Auditors’ Report discussion and analysis is designed to assist the reader in focusing on the signi cant nancial issues and activities, and to identify any signi cant changes in nancial position. We encourage readers to consider the information presented here in conjunction with the accompanying basic nancial statements and the accompanying notes to those basic nancial statements. We have audited the accompanying balance sheet of the San Diego Uni ed Port District (the District) as of June 30, 2009, and the related statements of revenues, expenses, and changes in district equity, and cash ows for the year Financial Highlights then ended. ese nancial statements are the responsibility of the District’s management. Our responsibility is to express opinions on these nancial statements based on our audit. e prior year partial comparative information has been derived from the nancial statements of the District for the year ended June 30, 2008, and in our report dated October 31, 2008, we expressed an unquali ed opinion on those nancial statements. to $130.0 million for scal year 2008. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to nancial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. ose standards require that we plan and perform the audit to obtain reasonable assurance about whether the nancial statements are free of material misstatement. An audit includes Overview of the Basic Financial Statements examining, on a test basis, evidence supporting the amounts and disclosures in the nancial statements. An audit is discussion and analysis is intended to serve as an introduction to the District’s basic nancial statements, which are comprised also includes assessing the accounting principles used and signi cant estimates made by management, as well as of the basic nancial statements and the notes to the basic nancial statements. e statements are organized so the reader can evaluating the overall nancial statement presentation. We believe that our audit provides a reasonable basis for our understand the District as a whole and then proceed to provide an increasingly detailed look at speci c nancial activities. ese opinions. components are described below. As discussed in note 14 to the basic nancial statements, the District is subject to various contingent liabilities arising Basic Financial Statements from legal and environmental matters. e ultimate outcome of these matters cannot presently be determined. Since the District is comprised of a single enterprise fund, no fund level nancial statements are shown. e basic nancial Accordingly, no provision for any loss that may result from the resolution of these matters has been made in the statements provide a broad view of the District’s operations in a manner similar to a private sector business. e statements accompanying nancial statements. provide both short-term and long-term information about the District’s nancial position, which assist in assessing the District’s economic condition at the end of the scal year. e basic nancial statements are prepared using the ow of economic resources In our opinion, the nancial statements referred to above present fairly, in all material respects, the nancial position measurement focus and the full accrual basis of accounting, which basically means they follow methods similar to those used by of the District as of June 30, 2009, and the changes in its nancial position and its cash ows for the year then ended most private sector companies. e basic nancial statements take into account all revenues and expenses connected with the scal in conformity with accounting principles generally accepted in the United States of America. year even if the cash involved has not been received or paid. As described further in Note 9 to the nancial statements, the District changed its method of accounting for post- e Balance Sheet presents all of the District’s assets and liabilities with the di erence between the two reported as “equity.” employment bene ts other than pensions for scal years ending on or after June 30, 2009. Increases or decreases in the District’s equity may serve as a useful indicator as to whether the nancial position of the District is improving or deteriorating over time. e information identi ed in the accompanying table of contents as management’s discussion and analysis is not a e Statement of Revenues, Expenses, and Changes in District Equity presents information showing how the District’s equity changed required part of the basic nancial statements, but is supplementary information required by accounting principles during the two most recent scal years. All changes in equity are reported as soon as the underlying event giving rise to the change generally accepted in the United States of America. We have applied certain limited procedures, which consisted occurs, regardless of the timing of related cash ows. us, revenues and expenses are reported in this statement for some items principally of inquiries of management regarding the methods of measurement and presentation of the required that will not result in cash ows until future scal periods (e.g., invoices for goods or services received but for which payment has supplementary information. However, we did not audit the information and express no opinion on it. not yet been made). In accordance with Government Auditing Standards, we have also issued a report dated October 30, 2009 on e nal required nancial statement is the Statement of Cash Flows. e statement reports cash receipts, cash payments, and net our consideration of the District’s internal control over nancial reporting and our tests of its compliance with changes in cash resulting from operating, investing, and nancing activities. It also provides answers to such questions as, “Where certain provisions of laws, regulations, contracts, grant agreements, and other matters. e purpose of that report did cash come from?”, “What was cash used for?”, and, “What was the change in the cash balance during the reporting period?” is to describe the scope of our testing of internal control over nancial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over nancial reporting or on compliance. at e basic nancial statements can be found immediately following this discussion and analysis. report is an integral part of an audit performed in accordance with Government Auditing Standards and should be Notes to the Basic Financial Statements considered in assessing the results of our audit. e notes provide additional information and more detail that is essential to a full understanding of the data provided in the basic nancial statements. e notes to the basic nancial statements can be found immediately following the basic nancial statements. Financial Analysis Irvine, California One of the most important questions asked about the District’s nances is, “Is the District as a whole better or worse o as a October 30, 2009 result of this year’s activities?” Equity, which is the di erence between assets and liabilities, is one way to measure nancial health or nancial position. Increases or decreases in equity are one indicator of whether the District’s nancial health is improving or deteriorating over time. e Balance Sheet and the Statement of Revenues, Expenses, and Changes in District Equity report information about the District’s activities in a way that will help answer this question. ese two statements report the District’s equity and changes in the District’s equity. 26 27
    • Management’s Discussion and Analysis Management’s Discussion and Analysis June 30, 2009 June 30, 2009 Balance Sheet Land increased $1.0 million in scal year 2009. is was primarily due to capitalizing the costs for land improvements at the South Campus of the former BF Goodrich site in Chula Vista. To begin our analysis, a summary of the District’s Balance Sheet is presented below. e District’s equity totaled $547.1 million at the end of scal year 2009, compared to $550.9 million at the end of scal year 2008. e largest portion of the District’s equity, e District invested a total of $22.9 million in Construction-in-progress during scal year 2009. Some of these projects were 75.7%, is its investment in capital assets net of related debt. e District uses these capital assets to generate regional economic completed and capitalized during the scal year. growth and to provide services and recreational opportunities to citizens; consequently, these assets are not available for future spending. Following are amounts expended during scal year 2009 for some of the major capital projects: e District’s nancial position at June 30, 2009 and June 30, 2008 is summarized as follows: Assets, Liabilities, and District Equity (Expressed in thousands) $ Change increase 2009 2008 (decrease) % Change Current assets $ 153,079 173,325 (20,246) (11.7) % Other noncurrent assets 87,922 68,122 19,800 29.1 % Capital assets 457,595 452,141 5,454 1.2 % Total assets $ 698,596 693,588 5,008 0.7 % Current liabilities $ 31,205 26,673 4,532 17.0 % Noncurrent liabilities 120,330 115,968 4,362 3.8 % Total liabilities 151,535 142,641 8,894 6.2 % Invested in capital assets (net of related debt) 413,928 405,708 8,220 2.0 % Restricted 29,163 29,861 (698) (2.3) % e $16.7 million decrease in Construction-in-progress was primarily due to projects that were completed and capitalized to the Unrestricted 103,970 115,378 (11,408) (9.9) % appropriate asset categories during scal year 2009. Total District equity 547,061 550,947 (3,886) (0.7) % Total liabilities and Building and structures had additions totaling $6.7 million for scal year 2009. e major additions include $2.3 million for street District equity $ 698,596 693,588 5,008 0.7 % end improvements at Palm Avenue in Imperial Beach; $1.7 million in improvements to the boat launching facility at Pepper Park; $0.9 million for the replacement of the boilers & chillers at the District’s main administration building; $0.8 million for the public art project a “Cannery Workers Tribute;” $0.3 million for replacement of the viewing platform located at Embarcadero Marina Current and noncurrent assets Park North; and, the remaining $0.7 million was for other small projects. Current assets decreased by $20.2 million compared to prior year while noncurrent assets increased $19.8 million. Machinery and equipment increased $7.3 million in scal year 2009. e major increases can be attributed to the purchase and Capital Assets installation of security equipment at cargo and cruise terminals for $5.1 million; $0.8 million for upgrading the R/3 integrated business applications module in SAP; $0.5 million for the purchase of a Harbor Police fast response vessel/rigid hull in atable e District’s investment in capital assets as of June 30, 2009 totaled $835.0 million, with accumulated depreciation of boat; $0.3 million for the purchase of motive equipment; $0.2 million for the purchase of hand-held and vessel mounted sonar $377.4 million, resulting in a net book value of $457.6 million. equipment; $0.2 million for the purchase of four lifeguard towers; and, the remaining $0.2 million increase for other small equipment purchases. Machinery and equipment decreased $0.7 million during the scal year due to assets declared as surplus, Capital Assets which were subsequently retired. (Expressed in thousands) Balance at Balance at Roads and parking lots increased $2.4 million in scal year 2009. is was primarily due to street improvements at the west end Description June 30, 2008 Increases Decreases June 30, 2009 of Palm Avenue located in Imperial Beach. Nondepreciable assets: Land $ 196,266 1,001 - 197,268 Accumulated depreciation increased $18.0 million mainly due to the depreciation expense recorded for the scal year. e $0.7 Construction-in-progress 18,150 22,867 (16,705) 24,312 million decrease in accumulated depreciation is the result of capital assets that were retired during the scal year. Depreciable assets: - Land improvements 7,650 - - 7,650 Buildings and structures 459,904 6,711 - 466,615 Revenues, Expenses, and Changes in District Equity Machinery and equipment 46,118 7,252 (701) 52,669 While the Balance Sheet shows the change in the District’s nancial position, the Statement of Revenues, Expenses, and Changes Roads and parking lots 84,162 2,353 - 86,515 in District Equity provides insights as to the nature and source of the change in nancial position. e District’s summarized Total assets 812,251 40,184 (17,406) 835,029 Accumulated depreciation (360,110) (18,024) 700 (377,434) results of operations for the scal year ended June 30, 2009 are presented on the next page: Capital assets, net $ 452,141 22,160 (16,706) 457,595 28 29
    • Management’s Discussion and Analysis Management’s Discussion and Analysis June 30, 2009 June 30, 2009 Revenues, Expenses, and Changes in District Equity revenue of $1.3 million due to the transfer of maritime-related leaseholds from the Real Estate Department, and xed rental (Expressed in thousands) revenue of $0.9 million due to retroactive rent adjustments for two large tenants. e remaining $0.1 million decrease was from all other revenue sources. $ Change increase 2009 2008 (decrease) % Change scal year due primarily for police services provided to the San Diego County Regional Airport Authority (SDCRAA) for Operating revenues: Real Estate operations $ 78,536 87,181 (8,645) (9.9) % increased canine patrol services for explosives detection and additional hours of mandatory airport police training. Maritime operations 40,694 42,520 (1,826) (4.3) % Harbor Police operations 12,464 12,289 175 1.4 % grant revenues. Other 2,816 2,140 676 31.6 % Total operating revenues 134,510 144,130 (9,620) (6.7) % Operating expenses: Operating Expenses: Direct expenses Real Estate operations 21,191 21,897 (706) (3.2) % Maritime operations 23,243 23,328 (85) (0.4) % allocation, decreased by $0.7 million primarily due to the reclassi cation of $1.4 million prior year expenses for the Teledyne Harbor Police 32,974 31,049 1,925 6.2 % Ryan building demolition and abatement to a capital project. is decrease was partly o set by a $0.5 million increase in Other operating expenses 11,732 8,442 3,290 39.0 % personnel expense mostly due to the recording of the Annual Required Contribution (ARC) for Other Post Employment Depreciation and amortization 18,117 17,412 705 4.0 % General and administrative expenses 31,428 27,867 3,561 12.8 % Bene ts (OPEB) (see Note 9). Total operating expenses 138,685 129,995 8,690 6.7 % Income (loss) from operations (4,175) 14,135 (18,310) (129.5) % million from $23.3 million in the prior scal year. Pasha automotive terminal operator fees of $2.4 million decreased by $0.7 Nonoperating revenues 11,172 14,794 (3,622) (24.5) % million due to a lower volume of automotive imports. Personnel expenses had a net increase of approximately $0.7 million Nonoperating expenses 16,228 10,692 5,536 51.8 % mostly due to the recording of the ARC for OPEB and the lling of previously vacant positions. e remaining variances were Nonoperating income (loss) (5,056) 4,102 (9,158) (223.3) % spread across various expense categories. Capital contributions 5,347 5,425 (78) (1.4) % Change in District equity (3,884) 23,662 (27,546) (116.4) % Beginning District equity 550,948 527,286 23,662 4.5 % $2.0 million from $31.0 million in the prior scal year. Personnel expense had a net increase of approximately $1.5 million Ending District equity $ 547,064 550,948 (3,884) (0.7) % mainly due to recording of the ARC for OPEB, negotiated salary increases, increases in retirement costs and health insurance premiums. Motive expense increased by approximately $0.3 million primarily due to extensive repairs and maintenance performed on Harbor Police re and emergency vessels. Fire, police, emergency and medical services agreements with member Total operating revenues of $134.5 million decreased $9.6 million from the prior scal year of $144.1 million. Operating expenses cities also increased approximately $0.2 million. of $138.7 million increased $8.7 million from the prior scal year of $130.0 million. million from $8.4 million in the prior scal year. Other operating expenses include the Environmental Services and Miscellaneous Approximately 58% of the District’s total operating revenue was attributable to Real Estate operations, which includes land and cost centers. An increase of $3.0 million from the prior scal year was mainly due to an increase in major maintenance expenses building leases, concession fees, and parking fees. Maritime operations, which includes wharfage, land and building leases, cruise of approximately $1.7 million for repairs to refurbish comfort stations at tideland parks, various pavement repairs, and repairs ship passenger fees, dockage fees, and storage space rental, accounted for approximately 30% of the District’s total revenue. Harbor to the Chula Vista Bayside Park Fishing Pier. Expenses for the Regional Harbor Monitoring Program and Environmental Police accounted for approximately 9% of total operating revenues, which consists of services provided to the San Diego County Fund projects increased approximately $0.9 million from the prior scal year. Personnel expense also had a net increase of $0.4 Regional Airport Authority (SDCRAA), citations issued for vehicle code violations, revenue from piers and oats, and operating million mainly due to the recording of the ARC for OPEB, negotiated salary increases, increases in retirement costs and health grant revenue. Other operating revenue accounted for approximately 3% of the District’s total operating revenue and includes park insurance premiums. Miscellaneous operating expenses increased approximately $0.3 million primarily to due to Port Security usage fees and others. Grant Round 8 expenditures. Non-operating revenue includes legal settlements, interest income, reimbursed legal fees, terminal special facility fees, and miscellaneous other revenue. e largest non-operating revenues are interest income of $5.5 million and terminal special facility scal year primarily due to the recording of the ARC for OPEB of $1.6 million, increases in salaries, retirement costs and group fees of $2.9 million. health insurance of approximately $1.4 million, and increases in marketing costs of $0.4 million for advertising. Following are the major factors that in uenced the scal year 2009 operating revenues and expenses in comparison to scal year 2008: above analysis. Operating Revenues: Concession and Parking revenues decreased approximately $7.0 million due to the unfavorable economic environment and the Non-operating Revenues and Expenses: transfer of maritime-related leaseholds for harbor excursions to Maritime Operations. Other rental revenue decreased $1.3 million due to the completion of Lane Field option payments for scal year 2009. Fixed Rent revenue decreased $0.3 million scal year. Interest on investments decreased approximately $2.7 million from the prior scal year and legal fee reimbursement primarily due to a negotiated rent adjustment which occurred in the prior scal year. e remaining $0.1 million decrease was decreased approximately $2.3 million. Partially o setting these decreases were increases in unrealized gain/loss on investments from various other revenue sources. (GASB 31) of $1.1 million and legal settlements of $1.1 million. were lower by approximately $3.9 million primarily due to a decrease in cargo import activities such as autos, sand, lumber and other imported goods. Cruise ship passenger fees and cruise ship security charges decreased $1.3 million due to lower cruise the prior scal year primarily due to a payment to SANDAG of $5.3 million for the freeway access improvement project. ship calls and fewer passengers embarking and disembarking. Dockage revenue decreased $0.5 million as a result of lower vessel calls compared to prior scal year. ese decreases were partially o set by increases in storage space rentals of $1.8 million primarily due to an increase in the number of vehicle imports being stored at the National City Marine Terminal, concession e following charts show the total District revenues and expenses by major categories for scal year 2009: 30 31
    • Management’s Discussion and Analysis Basic Financial Statements June 30, 2009 FY 2009 Revenues FY 2009 Expenses Balance Sheet Convention Center Expansion 3% June 30, 2009 Miscellaneous/Other 2% Marine Operations 27% Direct Expenses 57% Financial Assistance 4% Other 1% Assets Nonoperating Revenue 7% Capital Grants 4% Interest Expense 3% June 30, 2009 June 30, 2008 Harbor Police 8% Current assets: Cash and cash equivalents $ 32,280,309 37,381,750 Investments 95,490,470 116,995,162 Real Estate Accounts receivable, net of allowance 14,530,493 15,412,006 Operations Note receivable 1,000,000 1,000,000 52% General and Other current assets 9,778,193 2,535,774 Administrative 20% Total current assets 153,079,465 173,324,692 Noncurrent assets: Depreciation 12% Cash & investments designated for speci c capital projects & commitments 22,029,384 8,166,968 Restricted assets: Restricted cash and investments: Debt Administration Convention Center expense rate stabilization 5,500,000 5,500,000 TDY site demolition, and building abatement 22,961,559 23,599,529 e authority of the District to incur debt is described in Section 29 of the San Diego Uni ed Port District Act. e District is Carnival loan 5,349,774 — authorized, by its enabling legislation, to levy property taxes along with its ve member cities (San Diego, National City, Chula Deposits and other miscellaneous 2,479,412 2,586,255 Vista, Imperial Beach, and Coronado). From 1963 to 1970, the District required a small tax levy to pay debts incurred for Escrow accounts improvements accomplished before the formation of the District. Since then, revenues from the principal operational areas have So. Bay Power Plant remediation and other miscellaneous 21,132,743 20,029,708 Lease / Purchase Acquisition 1,356,519 — been su cient to support District operations, service bonded indebtedness, and allow for capital improvements. As a result, no Workers’ comp collateral 2,117,531 2,116,473 taxes have been levied since 1970. Series 2004 bonds Debt service reserve funds held by trustee 3,517,210 3,543,461 As part of the airport transfer on January 1, 2003, as described in Note 1(a), the District issued a $50.0 million promissory note Deferred costs 850,741 944,190 to the SDCRAA and a $2.4 million note for the Pond 20 real estate. On January 1, 2003, the District began repayment of the Total restricted assets 65,265,489 58,319,616 Pond 20 note to the SDCRAA based upon a preliminary appraisal of the fair market value of $2.4 million. e appraised value Note receivable, less current portion 500,000 1,500,000 of Pond 20 was one of a number of items under dispute between the District and the SDCRAA. On May 20, 2004, a settlement Other noncurrent assets 126,777 135,965 agreement, with an e ective date of June 1, 2004, was reached between the two entities. With regard to Pond 20, the parties agreed Total other noncurrent assets 87,921,650 68,122,549 that the value of Pond 20 would be the average of the District’s appraisal of $2.4 million and the SDCRAA’s appraisal of $4.3 million. Accordingly, the note for Pond 20 was increased to $3.3 million. Under the Airport Transfer Agreement, the $50.0 million Capital assets: promissory note was unsubordinated and fully negotiable, had an interest rate of the prime rate plus 1%, with monthly payments of Nondepreciable assets: Land 197,267,503 196,266,470 interest only for seven years, with the principal due and payable on December 31, 2009. Under the settlement agreement, the note Construction-in-progress 24,311,783 18,149,922 is now being amortized over a period of 25 years, which commenced January 1, 2006, with a xed interest rate of 5.5% per annum Depreciable assets: and is subordinate to all other bonded indebtedness of the District. Land improvements 7,650,334 7,650,334 Buildings and structures 466,614,635 459,903,511 Machinery and equipment 52,669,442 46,118,439 On October 28, 2004, the District issued $49.5 million aggregate principal amounts of revenue bonds. e issuance consisted of Roads and parking lots 86,515,099 84,162,008 $23.0 million and $26.5 million principal amounts for the 2004 Series A Bonds and 2004 Series B Bonds, respectively. e bonds were sold at a premium of $2.5 million, which netted issuance proceeds of $52.0 million. e bonds are due serially over 25 years Total capital assets 835,028,796 812,250,684 and bear interest rates ranging from 2.00% to 5.25%. e bonds will be repaid using the Pledged Revenues of the District, as Less accumulated depreciation (377,433,871) (360,109,702) de ned in Article 1, Section 1.02 of the indenture related to these bonds. Capital assets, net 457,594,925 452,140,982 Total noncurrent assets 545,516,575 520,263,531 Following is a summary of the District’s outstanding bonds and notes payable: Total assets $ 698,596,040 693,588,223 See accompanying notes to basic nancial statements. Balance at Balance at Amounts due June 30, 2008 Increases Decreases June 30, 2009 within one year Notes to SDCRAA: $50.0 Million promissory note $ 47,483,210 — (1,100,014) 46,383,196 1,162,063 Pond 20 note 1,714,515 — (346,864) 1,367,651 365,519 Revenue bonds: Series A and B 2004 bonds payable 46,020,000 — (1,255,000) 44,765,000 1,305,000 Series A and B 2004 bonds premium 1,828,214 — (161,896) 1,666,319 — Total bonds and notes $ 97,045,940 — (2,863,773) 94,182,166 2,832,582 Requests for Information is nancial report is designed to provide a general overview of the District’s nances for all California citizens, taxpayers, and stakeholders, and the District’s investors and creditors. is nancial report seeks to demonstrate the District’s accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the San Diego Uni ed Port District, O ce of the District Clerk, P.O. Box 120488, San Diego, California 92112 0488. Or, you may contact the District by phone (619) 686-6203 or by email at publicrecords@portofsandiego.org. 32 33
    • Basic Financial Statements Basic Financial Statements Balance Sheet Statement of Cash Flows June 30, 2009 Year ended June 30, 2009 Liabilities and Equity June 30, 2009 June 30, 2008 Current liabilities: June 30, 2009 June 30, 2008 Accounts payable $ 10,810,281 12,734,104 Cash ows from operating activities: Accrued liabilities 4,937,538 4,423,758 Payments from customers $ 135,479,545 146,434,208 Current portion of accrued leave 4,100,000 3,165,000 Payments to suppliers (48,269,253) (43,487,686) Deposits and other short-term liabilities 2,593,350 2,505,576 Payments to employees (74,235,153) (65,545,350) Accrued interest payable, series 2004 bonds 730,696 740,934 Other receipts 879,021 2,436,115 Notes payable, current portion 2,075,685 1,446,878 Net cash provided/(used) from operating activities 13,854,160 39,837,287 Carnival loan 4,652,181 401,539 Bonds payable, current portion 1,305,000 1,255,000 Cash ows from noncapital nancing activities: Total current liabilities 31,204,732 26,672,789 Maintenance Fund-Salute to Bob Hope 97,408 — Convention Center expansion (4,500,000) (4,500,000) Noncurrent liabilities: Financial assistance to other governments (652,973) (967,924) Liabilities – payable from restricted assets: SANDAG Payment - Freeway access Improvement Project (5,330,000) — South Bay Power Plant remediation 20,735,871 19,632,836 Note payments (350,672) (1,363,475) Other long-term liabilities: Net cash provided/(used) in noncapital nancing activities (10,736,237) (6,831,399) Notes payable to SDCRAA 46,223,264 47,750,847 Bonds payable 45,126,318 46,593,213 Cash ows from capital and related nancing activities: Accrued leave, net of current portion 1,471,389 1,991,739 Capital expenditures (24,527,293) (31,155,809) Deferred Income Other 97,408 — Proceeds on sale of capital assets 67,248 16,898 Master Tax-Exempt Lease/Purchase Agreement 2,150,298 — Federal/state grants received 5,330,200 4,102,534 Net OPEB Obligation 4,525,339 — Donations for Capital Assets/Public Art 17,050 — Total other long term liabilities 99,594,016 96,335,799 Terminal Special Facility Fee 2,975,552 3,447,272 Total noncurrent liabilities 120,329,887 115,968,635 Master Tax Lease Purchase (548,103) — Total liabilities 151,534,619 142,641,424 Payment of bond principal (1,255,000) (1,215,000) Interest paid (4,807,902) (4,966,331) Equity: Carnival Loan 4,250,642 (108,218) Invested in capital assets, net of related debt 413,928,591 405,707,681 Restricted for other projects and grants 29,163,155 29,860,785 Net cash provided/(used) in capital and related nancing activities (18,497,606) (29,878,654) Unrestricted 103,969,674 115,378,333 Cash ows from investing activities: Total equity 547,061,420 550,946,799 Purchase of short-term investments (168,120,712) (196,125,980) Total liabilities and equity $ 698,596,040 693,588,223 Maturity of short-term investments 171,158,031 182,003,579 Payment received on note receivable 1,000,000 1,000,000 Statement of Revenues, Expenses, and Changes in District Equity Interest received from investment securities 6,240,927 8,497,266 Year ended June 30, 2009 Net cash provided/(used) by investing activities 10,278,246 (4,625,135) June 30, 2009 June 30, 2008 Net increase/(decrease) in cash and cash equivalents (5,101,437) (1,497,901) Operating revenues: Cash and cash equivalents, beginning of year 37,381,748 38,879,649 Real Estate operations $ 78,536,468 87,180,527 Cash and cash equivalents, end of year $ 32,280,311 37,381,748 Maritime operations 40,694,314 42,520,189 Harbor Police 12,463,742 12,288,513 Reconciliation of operating income to net cash provided by operating activities: Other operating revenues 2,815,735 2,139,694 Net income/(loss) from operations $ (4,176,346) 14,134,059 Total operating revenues 134,510,258 144,128,923 Adjustments to reconcile income from operations to net cash provided by operating activities: Operating expenses: Depreciation and amortization expense 18,117,495 17,412,168 Direct expenses: Bad debt expense 80,489 (1,380) Real Estate operation 21,191,259 21,896,833 Gain/(loss) on disposal of assets (1,122) (231,015) Maritime operations 23,243,014 23,327,762 Settlement income 1,165,548 35,762 Harbor Police 32,974,100 31,049,096 Other nonoperating activities (284,347) 2,655,320 Other operating expenses 11,732,433 8,441,561 Changes in assets and liabilities: — — Depreciation and amortization 18,117,495 17,412,168 Accounts receivable/notes receivable-tenant 801,023 3,171,951 General and administrative expenses 31,428,303 27,867,445 Other current assets (7,242,419) (326,826) Accounts payable (935,587) 1,709,264 Total operating expenses 138,686,604 129,994,865 Accrued liabilities 1,443,940 2,111,263 Income/(loss) from operations (4,176,346) 14,134,059 Other restricted assets (1,357,578) (23,951) Nonoperating revenue (expense): Other long-term liabilities 6,155,289 55,958 Interest income 5,517,998 8,319,291 Deposits 87,774 (865,286) Settlement income 1,165,548 35,762 Net cash provided/(used) from operating activities $ 13,854,160 39,837,287 Unrealized gain/(loss) on investments 1,117,440 (18,526) Interest expense (4,701,676) (4,834,213) Financial assistance (5,982,973) (967,924) See accompanying notes to basic nancial statements. Convention Center expansion expense (4,500,000) (4,500,000) Other nonoperating income 2,327,381 6,067,778 Nonoperating revenue (expense), net (5,056,283) 4,102,168 Capital grants and contributions 5,347,250 5,424,533 Change in District equity (3,885,379) 23,660,759 District equity, beginning of year 550,946,799 527,286,040 District equity, end of year $ 547,061,420 550,946,799 See accompanying notes to basic nancial statements. 34 35
    • Notes to Basic Financial Statements Notes to Basic Financial Statements June 30, 2009 June 30, 2009 (c) Accounts Receivable An allowance for uncollectible accounts receivable has been provided in the amount of $78,871 as of June 30, 2009; the (a) Organization amount is based upon management’s estimate of accounts that will not be collected. Accounts receivable are carried e San Diego Uni ed Port District (the “District”), an autonomous public agency, was established on December at original invoice amount for xed rent tenants and at estimated invoice amount for concession (i.e., variable) rent 18, 1962 in accordance with laws of the State of California for the acquisition, construction, operation, maintenance, tenants, less an estimate made for doubtful receivables for both xed rent and concession tenants based on a review of development, management, and regulation of harbor works and improvements, including rail, water, and air terminal all outstanding amounts. Management determines the allowance for doubtful accounts by evaluating individual tenant facilities, and tidelands and submerged lands of the Harbor of San Diego and San Diego Bay, and for the promotion of receivables and considering a tenant’s nancial condition, credit history, and current economic conditions. commerce, navigation, sheries, and recreation. e District is governed by a seven member Board of Port Commissioners appointed by the District’s ve member cities (Chula Vista, Coronado, Imperial Beach, National City, and San Diego). (d) Cash Equivalents For the purpose of the statement of cash ows, cash equivalents consist of short term, highly liquid investments with In 2001, the California legislature established the San Diego County Regional Airport Authority (the “SDCRAA”) original maturities of three months or less. by enacting the San Diego County Regional Airport Authority Act (the “Airport Authority Act”), California Public Utilities Code Section 170000 et seq. e Airport Authority Act was amended in 2002 and proposed a phased transfer (e) Investments of all airport operations of the District to SDCRAA. E ective January 1, 2003, pursuant to the Airport Authority Act Investments are stated at fair value. Valuations are obtained by using quotations obtained from independent published sources. and the Memorandum of Understanding (MOU) dated as of December 31, 2002, the District transferred all airport operations and certain related assets and liabilities to the SDCRAA. (f ) Restricted Assets Funds are set aside as restricted assets and are not available for current expenditures, when constraints placed on their (b) Basis of Accounting use are legally enforceable due to either: e accounting policies of the District conform to accounting principles generally accepted in the United States of 1. Externally imposed requirements by creditors (such as through debt covenants), grantors, contributors, or laws or America applicable to state and local government agencies and, as such, the District is accounted for as a proprietary regulations of other governments, or, fund. e accompanying basic nancial statements have been prepared using the economic resources measurement 2. Constitutional provisions or enabling legislation. focus and full accrual basis of accounting. Under the accrual basis of accounting, revenues are generally recognized when earned and expenses are recognized when incurred. e District classi es assets as restricted when the resources that were received or earned contain an explicit understanding between the resource provider and the District that the funds would be used for a speci c purpose. In accordance with the provisions of Governmental Accounting Standards Board (GASB) Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Entities that Use Proprietary Fund Accounting, the District has (g) Designated Assets applied all applicable GASB pronouncements. e District has applied Financial Accounting Standards Board (FASB) e District’s management may designate funds, which they do not consider to be available for general operations. At pronouncements and interpretations, Accounting Principles Board (APB) opinions, and Accounting Research Bulletins June 30, 2009, management had designated funds for speci c approved capital projects and other commitments totaling issued on or before November 30, 1989 that do not con ict with or contradict GASB pronouncements. e District has approximately $22.0 million. elected not to apply FASB pronouncements and interpretations issued after November 30, 1989. (h) Capital Assets Implementation of New Accounting Pronouncements: Capital assets are carried at cost (except for property contributed by third parties, which is recorded at fair market Accounting and Financial Reporting by Employers for Postemployment Bene ts Other an value at the date of contribution) less an allowance for accumulated depreciation. Recurring normal maintenance and Pensions. is Statement, issued in 2004, establishes standards for the measurement, recognition and display of repair costs are charged to operations, whereas major repairs, improvements, and replacements that extend useful life are other post employment bene ts expenses and related liabilities or assets, note disclosures and, if applicable, required capitalized. e capitalization threshold is $5,000 and depreciation is computed by use of the straight line method over supplementary information in the nancial reports. e requirements of this Statement were e ective for the District the following estimated useful lives: beginning with its scal year ending June 30, 2009. Land improvements 30 to 40 years Accounting and Financial Reporting for Pollution Remediation Obligations. is Statement Roads and parking lots 10 to 30 years addresses accounting and nancial reporting standards for pollution (including contamination) remediation obligations, Buildings, water borne structures, and other terminals 10 to 50 years which are obligations to address the current or potential detrimental e ects of existing pollution by participating in Automotive and eld equipment, furniture, and xtures 3 to 15 years pollution remediation activities, such as site assessments and cleanups. is standard requires the District to estimate the components of expected pollution remediation outlays and determine whether the outlays for those components (i) Compensated Absences should be accrued as a liability or, if appropriate, capitalized when goods and services are acquired. Employees of the District hired before October 1, 1979 may be paid upon termination or retirement a portion of their accrued unused sick leave bene ts. Such bene ts are paid based upon the current rates of compensation. Employees Pronouncements issued, not yet e ective: hired on or after October 1, 1979 are not entitled to any reimbursement of earned unused sick leave upon termination Accounting and Financial Reporting for Intangible Assets. is Statement, issued July 2007, or retirement. All employees of the District earn annual leave that is paid upon termination or retirement. Annual leave will be e ective for the District with its year ending June 30, 2010. is Statement provides guidance regarding how is accrued and paid at current rates of compensation. to identify, account for and report intangible assets. e new standard characterizes an intangible asset as an asset that lacks physical substance, is non nancial in nature and has an initial useful life extending beyond a single reporting period. (j) District Equity Invested in capital assets net of related debt consists of capital assets, which are net of accumulated depreciation and Accounting and Financial Reporting for Derivative Instruments. is Statement, issued June further reduced by the outstanding balances of any borrowings used for the acquisition, construction, or improvement 2008, will be e ective for the District with its year-ending June 30, 2010. is Statement addresses the recognition, of those assets. measurement and disclosure of information regarding derivative instruments entered into by state and local governments. e objectives, terms and risks of hedging derivative instruments are required disclosures. Disclosures also include a Restricted equity represents amounts that are appropriated or are legally segregated for a speci c purpose. District summary of derivative instrument activity that provides an indication of the location of fair value amounts reported on equity is reported as restricted when there are limitations imposed on its use, either through the enabling legislation the nancial statements. adopted by the District or through external restrictions imposed by creditors, grantors, laws or regulations of other governments. 36 37
    • Notes to Basic Financial Statements Notes to Basic Financial Statements June 30, 2009 June 30, 2009 (k) Revenue Classi cations 2. Cash and Investments e District classi es revenue as operating revenue or nonoperating revenue, based on the following criteria: Cash and investments as of June 30, 2009 are classi ed in the accompanying nancial statements, as follows: Operating revenues are derived from the revenue sources that constitute the principal ongoing activities of the District’s Summary of cash and investments: 2009 2008 operations. e major components of the operating revenue sources are provided as follows: Cash and cash equivalents $ 32,280,311 37,381,750 Investments 95,490,468 116,995,164 Restricted cash and investments: of tenant revenues subject to certain minimum monthly fees for industrial, commercial, and recreational facilities, and Convention Center expense rate stabilization 5,500,000 5,500,000 parking fees. TDY site demolition, and building abatement 22,961,559 23,599,529 Refundable security deposits 2,176,737 2,303,132 Carnival loan advance 5,349,774 — Various grants - 16,183 xed rents, and other marine services subject to District tari s led with the Federal Maritime Commission. Wharfage Other 302,675 266,940 revenue is the charge assessed to both inbound and outbound cargo when crossing over District property. Dockage fees Total restricted cash and investments 36,290,745 31,685,784 are the charges assessed against a vessel for the right to berth at a wharf or pier of the District. Designated cash and investments: Designated for capital project commitments 22,029,384 8,166,968 Total designated cash and investments 22,029,384 8,166,968 allocation), citation revenue, and expense reimbursements, which include both grants and cost recovery for service provided. Environmental Services park usage fees are also included in other operating revenue. Total cash and investments $ 186,090,908 194,229,666 Cash and investments as of June 30, 2009 consist of the following: principal ongoing activities of the District’s operations. e major components of the non-operating revenue sources Cash on hand, current $ 6,375 Deposits with nancial institutions 1,806,586 are interest income from cash and investments, reimbursed legal fees/litigation costs, legal settlements, Terminal Special Investments 184,277,947 Facility Fees, grant reimbursements for capital projects and donations. $ 186,090,908 (l) Expense Classi cations e District classi es expenses as operating or non-operating based on the following criteria: Investments Authorized by California Government Code and the District Investment Policy Operating expenses are from expense sources that constitute the principal ongoing activities of the District’s operations. California Government Code § 53600 et seq. and the Board of Port Commissioner’s Policy 115 (BPC 115), “Guidelines for e major components of the District’s operating expense consist of salaries and bene ts, contractual services, Prudent Investments,” regulate the investment of the Port’s temporarily idle cash. e table below identi es only those investments maintenance, administration, and materials and supplies. that are authorized by both California Government Code and BPC 115. e table also identi es restrictions as to investment terms to maturity and maximum allowable investment percentages; the more restrictive policy requirements are identi ed. Note Non-operating expenses are from expense sources that are related to nancing, investing and other activities that do not that while the maximum allowable term to maturity for various investment classes may be ve years, BPC 115 limits the portfolio’s constitute the principal ongoing activities of the District’s operations. e major components of non-operating expense weighted average days to maturity to three years. At no time during FY 2009 did the portfolio’s weighted average days to maturity are nancial assistance and interest expense. exceed three years. (m) Capital Grants and Contributions Maximum Allowable Investment When a capital grant agreement is approved and all eligibility requirements have been met, the expenditures are recorded Term to Total Any One Issuer Investment Types Authorized by California Government Code and BPC 115 Maturity (% of Portfolio) (% of Portfolio) as grants receivable and capital grant revenue. When a capital asset is donated, the contributed capital asset and donated revenue is recorded at fair market value in the period it was received. U.S. Treasury Bills, Notes, Bonds 5 Years No Restriction No Restriction U.S. Government Agency Obligations 5 Years No Restriction No Restriction (n) Deferred Bond Costs Bankers Acceptances 180 Days 40% FMV 10% FMV e 2004 revenue bond issuance costs are deferred and amortized over the term of the bonds using the straight-line Certi cates of Deposit - Account Registry Service (CDARS) 5 Years 30% FMV FDIC Limit method, which approximates the e ective interest method. In addition, the bonds were issued at a premium and the premium is amortized over the term of the bond using the straight-line method. Commercial Paper 270 Days 15% FMV 10% FMV Commercial Paper 31 Days 30% FMV 10% FMV (o) Estimates Negotiable Certi cates of Deposit 1 Year 30% FMV No Restriction e preparation of basic nancial statements in conformity with accounting principles generally accepted in the United Medium-term notes - “A” rating 2 Years 30% FMV 5% FMV States of America requires management to make estimates and assumptions that a ect the reported amounts of assets and liabilities; disclose contingent assets and liabilities at the date of the basic nancial statements; and, disclose reported Medium-term notes - “AA” rating 3 Years 30% FMV 5% FMV amounts of revenues and expenses during the reporting period. Actual results could di er from those estimates. Repurchase Agreements 1 Year No Restriction No Restriction Reverse Repurchase Agreements 60 Days 10% FMV No Restriction (p) Reclassi cations Local Agency Investment Fund (LAIF) Not Applicable No Restriction Not Applicable Certain reclassi cations have been made to the 2008 nancial information to conform to the 2009 presentation. ese reclassi cations had no impact on net income or District assets or liabilities. Shares of Bene cial Interest – Issued by Management Companies Not Applicable 20% FMV 10% FMV Shares of Bene cial Interest – Issued by Joint Powers Authorities ( JPA) 2 Years 30% FMV Not Applicable 38 39
    • Notes to Basic Financial Statements Notes to Basic Financial Statements June 30, 2009 June 30, 2009 Disclosures Relating to Interest Rate Risk e information presented below identi es the minimum credit rating required by California Government Code, the District’s investment policy and the actual rating as of June 30, 2009 for each investment type. Funds held in trustee and scal agent accounts Interest rate risk is the risk that uctuations in market interest rates will adversely a ect the fair value of an investment. In general, as of June 30, 2009 met California Government Code minimum credit rating requirements. an investment with a longer term to maturity has a greater sensitivity to changes in market interest rates than does an investment with a shorter term to maturity. Credit Rating at Year End Fair Value at Minimum Exempt from Investment Type June 30, 2009 Rating Disclosure AAA AA+ to A+ AAAm AAf / S1 Not Rated One of the ways the District manages its exposure to interest rate risk is by purchasing a combination of shorter-term and longer- U.S. Treasury Securities 6,996,252 N/A 6,996,252 - - - - - term investments and by structuring the maturities to coincide with expected capital investment cash out ows. Investment Federal agencies (coupon) 90,014,776 N/A - 90,014,776 - - - - purchases are further structured so as to mature at fairly regular intervals in order to provide liquidity su cient for operations. Federal agencies (discount) 36,484,692 N/A - 36,484,692 - - - - Medium Term Notes 14,214,881 N/A - 12,203,813 2,011,068 - - - Certi cates of Deposit - CDARS 5,000,000 N/A - - - - - 5,000,000 e District uses remaining days to maturity, weighted average days to maturity, and duration as methods by which to analyze Money Market Fund 21,501,513 N/A - - - 21,501,513 - - the portfolio’s overall sensitivity to interest rate risk. e District intends to hold callable securities until maturity, however, for Shares of Bene cial Interest-JPA 10,065,833 N/A - - - - 10,065,833 - disclosure purposes, the District used the call date as equivalent to maturity date. Information pertaining to the portfolio’s overall Totals: $184,277,947 N/A $6,996,252 $138,703,281 $2,011,068 $21,501,513 $10,065,833 $5,000,000 sensitivity to interest rate risk at June 30, 2009 is provided in the following tables: Concentration of Credit Risk Port Investments Remaining Days to Maturity e District’s investment policy is consistent with the California Government Code with respect to the categorical limitations Investment Type Fair Value at June 30, 2009 120 Days or Less 121 to 360 361 to 720 721 to 1,080 placed on the amount that may be invested in any one issuer. e District’s investment holdings at June 30, 2009, grouped by U.S. Treasury Securities 6,996,252 3,000,000 3,996,252 - - issuer, are identi ed in the table below. Federal agencies (coupon) 90,014,776 19,937,832 44,368,927 20,656,452 5,051,565 Federal agencies (discount) 36,484,692 23,495,288 12,989,404 - - Issuer Investment Type Fair Value at June 30, 2009 % of Portfolio Medium Term Notes 14,214,881 2,011,068 - - 12,203,813 United States of America U.S. Treasury Securities 6,996,252 3.80% Certi cates of Deposit - CDARS 5,000,000 1,000,000 4,000,000 - - Federal Home Loan Bank Federal agencies securities 63,489,712 34.45% Money Market Fund 21,501,513 21,501,513 - - - Federal Home Loan Mortgage Corporation Federal agencies securities 17,107,360 9.28% Shares of Bene cial Interest - JPA 10,065,833 10,065,833 - - - Federal National Mortgage Association Federal agencies securities 31,480,519 17.08% Totals: $184,277,947 $81,011,534 $65,354,583 $20,656,452 $17,255,378 Federal Farm Credit Bank Federal agencies securities 14,421,877 7.83% General Electric Capital Corp Medium Term Notes 5,026,437 2.73% e District’s investment portfolio is conservatively managed. Although the District is authorized by Board policy to invest in Goldman Sachs Group Medium Term Notes 4,021,744 2.18% securities whose fair value would be considered highly sensitive to interest rate risk, the District did not own any speci c securities Wells Fargo & Company Medium Term Notes 5,166,700 2.80% considered highly sensitive. Various FDIC-Member Banks Certi cates of Deposit – CDARS 5,000,000 2.71% CalTRUST Short-Term Fund Shares of Bene cial Interest – JPA 10,065,833 5.46% Investment Type Weighted Avg. DTM Duration (Years) Wells Fargo Advantage Fund Government Money Market Fund 21,501,513 11.67% U.S. Treasury Securities 3 0.008 Totals: 184,277,947 100.00% Federal agencies (coupon) 284 0.294 Federal agencies (discount) 26 0.072 Custodial Credit Risk Medium Term Notes 59 0.126 Custodial credit risk is the risk that investments held by the transaction counterparty may not be recoverable in the event of the Certi cates of Deposit - CDARS 7 0.019 failure of the counterparty rm. e District’s adopted investment policy states that, “To protect against potential losses by the Money Market Fund 1 0.003 collapse of individual securities dealers, all securities owned by the District shall be held in safekeeping by a third party bank trust Shares of Bene cial Interest - JPA 1 0.003 department acting as agent for the District under the terms of a custody agreement executed by the bank and the District. All Total Weighted Avg. DTM 381 securities will be received and delivered using standard delivery-versus-payment procedures.” e District uses a custodial bank for the receipt and safekeeping of its securities and all securities purchased in scal year 2009 were received using delivery-versus- Portfolio Duration 0.525 payment procedures. Funds invested in the money market fund consist of U.S. Government obligations and repurchase agreements collateralized by U.S. Government obligations. California Government Code requires that nancial institutions secure local government agency deposits by pledging securities in an undivided collateral pool; the depository holds the collateral. e market value of the securities held in the collateral pool must Funds invested in Shares of Bene cial Interest issued by joint powers authority include 51% U.S. Government Agencies, 18% be greater than or equal to 110% of the total amount deposited by the public agencies. A nancial institution may, in accordance Corporate Notes, 15% Commercial Paper, 11% Money Market, 3% Mortgage-Backed Securities/Asset-Backed Securities, and 2% with California Government Code, secure the local public agency deposits using rst trust deed mortgages; however, the market Certi cates of Deposit as of June 30, 2009. e risk of investing through this program includes movements in interest rates, which value of the rst trust deed mortgages collateral must be at least 150% of total amount deposited. could adversely a ect the market value, yield and return of the Shares program. If interest rates rise, the values of debt securities generally fall. In general, bond prices vary inversely with interest rates. With the exception of inactive time deposits, all securities as of June 30, 2009 were held by a third party bank trust department acting as agent for the District under the terms of a custody agreement. Disclosures Relating to Credit Risk Investment in CalTRUST Investment Pool Credit risk is the risk that the issuer of an investment will not repay its obligation as promised. Credit quality is measured using a rating assigned by a nationally recognized statistical rating organization (NRSO). e District is a voluntary participant in the Investment Trust of California (doing business as CalTRUST), a Shares of Bene cial Interest program. e Shares program is a Joint Powers of Authority ( JPA) authorized by California Government Code sections 53601 and 53635 created for the purpose of pooling local agency assets for investing. e District participates in the program’s 40 41
    • Notes to Basic Financial Statements Notes to Basic Financial Statements June 30, 2009 June 30, 2009 short-term account which has a target duration of 0 to 2 years. Authorized securities under this account typically include treasuries, As of June 30, 2009, the total cash received by the District from Carnival as a loan was $12.0 million. Carnival also consented agencies, CMOs, MBS, ABS, bankers acceptances, commercial paper, certi cates of deposit, repurchase agreements backed by to the District to assess and collect from all cruise line users of the District cruise ship facilities a Terminal Special Facility Fee 102% government agencies and treasuries, medium term notes and rated money market funds. equal to a $4.00 per embarking home port cruise passenger and a $4.00 per disembarking home-port passenger. e Terminal Special Facility Fee serves as a revenue source for the District to repay the loan. e Shares Program’s investment objectives seek to attain a high level of current income consistent with the preservation of capital. e program is subject to interest rate and credit risk. is is primarily due to interest rate movements and to the potential of In exchange, the District agreed, with other miscellaneous provisions, to allow Carnival preferential berthing of its ships at two Share value decline in response to events a ecting the issuer of any securities or its credit rating. e Shares program, CalTRUST, of the District’s four berths through April 2015 or until the loan is paid in full, whichever takes longer. E ective April 1, 2006, is not registered as an investment company under the Investment Company Act of 1940 and, accordingly, is not subject to the the District assessed against and collected the Terminal Special Facility Fee from all cruise line users of the District cruise ship provisions of that Act and the rules thereunder, including the protective rules relating to registered money market funds and other facilities. e Terminal Special Facility Fee shall remain in e ect until the loan is repaid in full to Carnival, including any and types of mutual funds. all interest, late fees and other charges. However, Carnival announced in September 2009 that the Elation, the homeport ship, would discontinue service from San Diego. e e ect on the Terminal Special Facility Fee is not known at this time. Investments in Medium Term Notes and the FDIC’s Temporary Liquidity Guarantee Program From April 1, 2006 to June 30, 2009, approximately $7.5 million was collected for the Terminal Special Facility Fee and was e District’s Medium Term Notes listed in the tables above include $12,203,813 of notes guaranteed by the Federal Deposit used to repay a portion of the loan. e outstanding balance of the loan, including interest, was $4.7 million as of June 30, Insurance Corporation (FDIC) under the newly created U.S. Government’s Temporary Liquidity Guarantee Program (TLGP) 2009; a total $7.2 million has been spent on improvements from inception through June 30, 2009 leaving an available cash adopted on November 21, 2008. Under the TLGP, the Debt Guarantee Program component allows participating entities to balance of $5.3 million shown as a restricted asset. have certain newly-issued senior unsecured debt guaranteed by the FDIC with the full faith and credit of the United States. e guarantee expires the earlier of the maturity date of the debt or June 30, 2012. 5. Long-Term Debt Investments in Certi cates of Deposit Account Registry Service (CDARS) (a) Summary of Long-Term Liabilities e District participates in the CDARS program through Neighborhood National Bank, certi ed as a Community Development Below is a summary of long-term liabilities and their activity for the scal year ended June 30, 2009: Financial Institution by the U.S. Treasury. Deposits through this program are authorized by California Code Sections 53601.8 Balance at Balance at Amounts due and 53635.8, and are 100% FDIC insured. June 30, 2008 Increases Decreases June 30, 2009 within one year Notes: $50.0 Million promissory note - SDCRAA $ 47,483,210 — (1,100,015) 46,383,195 1,162,063 3. Capital Assets Pond 20 note - SDCRAA 1,714,515 — (346,864) 1,367,651 365,519 Master Tax-Exempt Lease/Purchase Agreement — 2,698,401 — 2,698,401 548,103 Following is a summary of the capital assets activity for scal year ended June 30, 2009: Revenue bonds: Series A and B 2004 bonds payable 46,020,000 — (1,255,000) 44,765,000 1,305,000 Capital Assets Series A and B 2004 bonds premium 1,828,214 — (161,896) 1,666,318 — (Expressed in thousands) Total bonds and notes 97,045,939 2,698,401 (2,863,775) 96,880,565 3,380,685 Other noncurrent liabilities: Balance at Balance at Deferred Income - Bob Hope Memorial — 97,408 — 97,408 — Description June 30, 2008 Increases Decreases June 30, 2009 OPEB Obligation — 6,681,339 (2,156,000) 4,525,339 Nondepreciable assets: Accrued leave 5,156,738 414,652 — 5,571,389 4,100,000 Land $ 196,266 1,001 - 197,268 South Bay Power Plant remediation 19,632,836 1,103,035 20,735,871 — Construction-in-progress 18,150 22,867 (16,705) 24,312 Total other noncurrent liabilities 24,789,573 8,296,434 (2,156,000) 30,930,007 4,100,000 Depreciable assets: Land improvements 7,650 - - 7,650 Total long-term liabilities $ 121,835,512 10,994,835 (5,019,775) 127,810,573 7,480,685 Buildings and structures 459,904 6,711 - 466,615 Machinery and equipment 46,118 7,252 (701) 52,669 Roads and parking lots 84,162 2,353 - 86,515 e District’s required debt service payments for the bonds and notes for scal years ending June 30 are as follows: Total assets 812,251 40,184 (17,406) 835,029 Accumulated depreciation (360,110) (18,024) 700 (377,434) Principal Interest Total Debt Service Capital assets, net $ 452,141 22,160 (16,706) 457,595 2010 3,380,685 4,789,678 8,170,364 2011 3,512,998 4,657,431 8,170,429 2012 3,626,155 4,546,464 8,172,619 4. Carnival Loan 2013 3,606,946 4,348,618 7,955,564 On October 11, 2005, the District entered into a terminal nancing and berthing agreement with Carnival Corporation 2014 3,580,695 4,164,065 7,744,760 (“Carnival”). Carnival owns and/or operates a number of cruise ship lines, which include Carnival Cruise Lines, Princess 2015-2019 17,578,006 18,173,432 35,751,438 2020-2024 22,379,395 12,970,243 35,349,638 Cruises, P&O Cruises, Holland America Line, Cunard Line, Seabourn Cruise Line, and Costa Crociere. Carnival utilizes 2025-2029 28,971,696 6,273,076 35,244,773 cruise ship terminals in ports around the world including the District’s cruise ship terminal for embarking and disembarking 2030-2031 8,577,671 315,165 8,892,836 passengers, shore tours, and provisioning their vessels. e District’s main cruise ship facility, known as the B Street Pier, is Total $ 95,214,248 60,238,172 155,452,419 located at the foot of B Street on Harbor Drive. e District’s Broadway Pier, located at the foot of Broadway on Harbor Drive, is used as an auxiliary pier. Both piers were built in the 1920s and have signi cant infrastructure needs that a ect the cruise lines’ ability to move passengers from ship to shore e ciently. (b) Notes Payable As part of the transfer of airport operations and the San Diego International Airport (SDIA) to the SDCRAA on To maintain and grow its established cruise business, the District and Carnival identi ed improvements needed for the B Street January 1, 2003 and pursuant to the MOU, the District issued a $50.0 million promissory note to the SDCRAA. e Pier (fenders, additional tents, gangway platform, and early arrival area). In October 2005, Carnival agreed to loan the District note was unsubordinated and fully negotiable, with an interest rate of the prime rate plus 1%. Monthly payments of $8.0 million to fund the improvements at a xed rate of 4.5% per annum. In May 2007, the loan was increased to $12.0 million interest were required for seven years with the principal due and payable on December 31, 2009. e note was amended so that improvements totaling $26 million could be completed on the Broadway Pier (pier deck strengthening, improved as a result of a settlement agreement, e ective June 1, 2004, between the District and the SDCRAA. e note is now vehicle circulation, Customs and Border Protection facilities, passenger facilities, and baggage lay down area). Ultimately being amortized over a period of 25 years, which commenced January 1, 2006, with a xed rate of 5.5% per annum; the the Broadway Pier is planned to continue functioning as the District’s auxiliary pier when the B Street Pier construction is note remains subordinated to all other bonded indebtedness of the District. completed. However, that construction may not begin until 2016 or later given the cost of the project. 42 43
    • Notes to Basic Financial Statements Notes to Basic Financial Statements June 30, 2009 June 30, 2009 e Airport Authority Act speci ed that Pond 20 real estate in the South Bay would remain District property. Pond merger, which was consented to by the BPC at the November 2006 Board meeting, included a transfer of control of the 20 is a portion of the land acquired as part of the Western Salt Company, Naval Training Center (NTC) acquisition in equity interests in the Plant’s operating entity, LSP South Bay, along with a number of other power generation assets, 1999, which was intended to provide for mitigation for future expansion of the airport. As part of the transfer of the from LS Power to Dynegy. e post-transaction Dynegy is comprised of the combined assets of LS Power (and other airport to the SDCRAA on January 1, 2003, the District began repayment to the SDCRAA for the fair market value LS Power assets) and Dynegy (the new entity retained the name “Dynegy Inc.”). e Duke Guarantees have remained of the property based upon an appraisal of $2.4 million. e payment schedule was a xed, ten year payment plan with in e ect since the Dynegy transaction. interest based upon the prime rate plus 1% on January 1, 2003. e appraised value of Pond 20 was one of a number of items under dispute between the District and the SDCRAA. As a result of the June 1, 2004 settlement agreement, the Also in scal year 1999, the California State Legislature appropriated $15.0 million to assist the District in mitigating parties agreed the value of Pond 20 would be the average value of the District’s $2.4 million appraisal and the SDCRAA environmental and community issues associated with the Plant. e District deposited $15.0 million into the Property appraisal of $4.3 million. Accordingly, the note payable to SDCRAA was increased to $3.3 million. e xed, ten-year Escrow Account, which was initially established by the District and Duke South Bay. e escrowed funds together payment plan remained unchanged but the interest rate was set to a xed rate of 5.25% per annum, e ective retroactively with their earnings are to be retained in the Property Escrow Account until such time as the funds are needed to to January 1, 2003. Because the initial payments made by the District to the SDCRAA were less than the recalculated decommission or dismantle the Plant or for the environmental remediation of the Plant site. At June 30, 2009, the amortization schedule, in June 2004 the District made a lump-sum payment of principal and interest of $0.2 million to balance in the property escrow account after drawdowns and income on investments is $20.7 million. is amount the SDCRAA to ensure repayment of the revised note amount during the agreed upon ten-year amortization period. is reported in the balance sheet as a restricted asset and also reported as a noncurrent liability payable from restricted assets. All such costs in excess of amounts available in the escrow account are the responsibility of Dynegy, so long as the e District entered into a Master Tax-Exempt Lease/Purchase Agreement, with Key Government Finance, Inc. to lease approval to decommission and dismantle the plant is obtained and a replacement generating plant is constructed during phone and network equipment. e lease term is for ve years and the annual principal and interest payment each year the term of the lease, or of future operators in the event that the lease with Dynegy expires or is terminated. SDG&E is $592,767.50 for a total amount of $2,963,837.50. remains responsible for the cost and performance of the environmental remediation of the Plant. e lease terminates three months from the termination by the ISO of the “must run” obligation imposed on the Plant. At the termination (c) Revenue Bonds and Pledge of Revenues of the Lease Agreement, Dynegy is required to decommission, dismantle, and remove the Plant and return the Plant site On October 21, 2004, the District sold $49.5 million (par value) of Series 2004 Revenue Bonds (“Bonds”), which are free and clear of all structures and improvements. secured by a pledge and lien on net pledged revenues. As of June 30, 2009, the Bonds’ remaining principal and interest requirement totals $71.8 million. e District intends to use the site for the highest and best use for the public bene t after it is returned by Dynegy at the termination of the Lease Agreement. e Bonds were issued for a term of 25 years, with the last debt service payment due September 1, 2029. e proceeds from the sale of the Bonds were used to reimburse the District for certain previous capital expenditures, fund the Bonds’ 6. San Diego Convention Center reserve requirement, and nance the costs of issuance. In 1985, the District entered into an agreement, which was subsequently amended four times, (collectively, the “Original Agreement”) with the City of San Diego (the “City”) for the management of the San Diego Convention Center (the “Convention Pledged revenues for the period ending June 30, 2009, totaled $140.8 million, which represents approximately 93.2% of Center”). e Original Agreement provides that the City will manage, operate, maintain, and promote the Convention Center, total District revenues and 196.1% of the Bonds’ remaining principal and interest requirements. Net pledged revenues and the District will manage, operate, and maintain the parking facility of the Convention Center. for the period ending June 30, 2009 totaled $14.0 million, which represents 404.9% of the Bonds’ annual principal and interest requirements. In consideration of the District’s investment in constructing the Convention Center and managing, operating, and maintaining the parking facility, the City paid the District $20 ($1 per year). e City operates and maintains the Convention Center and (d) Accrued Leave receives all income from, and bears all expenses of, the Convention Center. e District receives all income from, and bears all District employees earn annual leave, which is recorded by the District at current rates of compensation when earned. expenses of, the operations and maintenance of the parking facility. (e) South Bay Power Plant Site Remediation During scal year 1994, the District entered into a Memorandum of Understanding (“MOU”) with the City regarding a Pursuant to the Asset Sales Agreement between the District and the San Diego Gas & Electric Company (“SDG&E”), proposed expansion of the Convention Center (the “Expansion Project”). e MOU provides that the District will assist the the District acquired the South Bay Power Plant (the “Plant”) in April 1999. e District recognized that it would be City in the annual payment of any debt obligation created to nance the Expansion Project by contributing up to $4.5 million in the baywide region’s best interest to acquire the Plant as the means to accelerate the closure, decommissioning, and/or per year for 20 years, not to exceed total payments of $90.0 million, and will reimburse the City for the costs of the program relocation of the Plant. e California Independent System Operator (“ISO”) has designated the Plant as a “must run” manager and other consultants and contractors associated with the planning, design, and construction of the Expansion facility, which means that the Plant must remain in operation until a replacement plant is constructed or ISO removes Project, not to exceed $4.5 million per year as part of the annual obligation. the “must-run” designation. e Plant was leased to Duke Energy South Bay, LLC (“Duke South Bay”) in April 1999. During scal year 1997, the District incurred expenses of $9.3 million, including a payment to the City of $9.0 million toward the planning and design costs for the Expansion Project and $0.3 million of District costs for the Expansion Project. e In scal year 1999, pursuant to the Real Property Contribution Agreement that was entered into between the District MOU provides that the $9.0 million payment to the City would be applied toward the 19th and the 20th annual payments. and SDG&E, SDG&E donated approximately 165 acres of land located beneath and adjacent to the Plant with a fair market value of $24.9 million. e land transaction was recorded as contributed capital and is included in capital assets During August 1998, the District entered into a series of additional agreements with the City. ese agreements include in the basic nancial statements. a Support Agreement that supersedes the 1994 MOU, a 1998 Convention Center Management Agreement (the “1998 Agreement”) that supersedes the Original Agreement, and, a Purchase Option and Lease Agreement. In early 2006, Duke Energy Americas, LLC, the parent company of Duke South Bay, requested the District’s approval of its sale of the equity interest in Duke South Bay to LS Power Generation, LLC (“LS Power”). In May 2006, the BPC e Support Agreement provides for a payment of $9.0 million to the City, in lieu of the 17th and 18th annual payments adopted a resolution granting consent to transfer ownership of Duke South Bay to LS Power Generation LLC subject required under the MOU upon the sale of bonds to nance the construction of the Expansion Project and an annual payment to conditions expressed in the resolution. One of the conditions required Duke Capital, LLC, the guarantor of Duke of $4.5 million for 16 years beginning on June 30, 1999. On September 17, 1998, the lease revenue bonds were issued to South Bay obligations to the District, to acknowledge and agree that the “Duke Guarantees” (the Lease Guaranty dated nance the construction of the Expansion Project. e debt obligation for the bonds was structured as the City’s sole legal April 1, 1999; the Environmental Remediation Guaranty dated April 22, 1999; and, the Guaranty of Contract and responsibility. On September 21, 1998, $9.0 million, less the costs incurred by the District for the Expansion Project in the Permit Rights Assignment and Property Escrow Agreement dated April 22, 1999, each made by Duke Capital, LLC in amount of $0.3 million, totaling $8.7 million, was paid to the City in accordance with the terms of the Support Agreement. On favor of the District) shall remain in e ect until such time as the District grants its consent for the release of said Duke June 30, 1999, the District accrued $4.5 million representing the rst annual payment, which was subsequently paid on July 1, Guarantees. Upon completion of the sale to LS Power, the name of the Plant operator entity changed to LSP South 1999. Each year thereafter, beginning with scal year 2000, an annual payment of $4.5 million has been made by the District Bay, LLC (“LSP South Bay”). in accordance with the terms of the Support Agreement. As of June 30, 2009, $67.5 million has been paid to the City of San Diego under this agreement. e annual payments will be completed by June 2014. In October 2006, LS Power requested the District’s approval of LS Power’s merger with Dynegy Inc (“Dynegy”). e 44 45
    • Notes to Basic Financial Statements Notes to Basic Financial Statements June 30, 2009 June 30, 2009 e 1998 Agreement contains modi cations that take into account the debt nancing on the Expansion Project as well as the e contribution requirements of plan members and the District are established by and may be amended by the Board. authorization for the City to operate the expanded Convention Center. Other terms contained in the Original Agreement remain unchanged in the 1998 Agreement. (c) Annual Pension Cost For scal years ended June 30, 2009 and June 30, 2008, the District recorded a total annual pension cost of $10.6 million Under the Purchase Option and Lease Agreement, beginning on the closing of the bond issuance for the Expansion Project and $9.9 million, respectively, for the SDCERS pension plan. ese amounts represent the payment in full of the and extending through July 30, 2012, the District is required to maintain reserves in the amount of $5.5 million, which may be District’s annual required contribution (ARC) and the o set. E ective June 30, 2007, the annual required contribution drawn upon by the City if the Transient Occupancy Tax (TOT) fails to increase for two consecutive years. If the TOT fails was determined as part of an actuarial valuation using the Entry Age Normal funding method. e District previously to increase for two consecutive years, the City may request the District to advance monies from the reserves in exchange for a used the Projected Unit Credit funding method. e actuarial assumptions include a 7.75% investment rate of return; property, which is acceptable to the District with an appraised value of at least $5.5 million. As of June 30, 2009, the District projected salary increases of 5%; and, the assumption that bene ts for certain members will increase after retirement. had restricted cash and restricted equity of $5.5 million for the Expansion Project. To date we have not been noti ed that the Both the investment rate of return and the projected salary increases include an in ation factor of 4%. Additionally, the City will be drawing upon this money. actuarial valuation of assets will be determined using the Expected Value of Assets, which uses techniques that average or “smooth” year-to-year market value returns for the purpose of reducing the volatility of annual contributions. 7. South Bay Cities Schedule of funding progress for SDCERS In June 1995, the Board of Port Commissioners approved a Memorandum of Understanding for each of the District’s South Bay (Expressed in thousands) - (Unaudited) cities of Coronado, Chula Vista, National City, and Imperial Beach (collectively the “South Bay MOU”). e South Bay MOU provides that the District shall annually set aside as restricted reserves of $9.0 million for each of the seven years beginning July 1, Actuarial UAAL as a Actuarial Actuarial value accrued liability Unfunded AAL Covered percentage of 1994 to be expended for certain District projects, as shown in the Tidelands Capital Development Program (the “CDP”) adopted valuation date of assets (AAL) (UAAL) Funded ratio payroll covered payroll by the Board of Port Commissioners on April 26, 1994. e total unawarded contract cost is periodically adjusted for in ation June 30, 2006 $203,286 $226,154 ($22,868) 89.9% $33,927 67.4% using the Building Cost Index (BCI). As of June 30, 2009, the District had set aside, expended, or committed to expend a total June 30, 2007 $230,585 $246,538 ($15,953) 93.5% $37,160 42.9% amount of $95.7 million under the MOU. is includes the initial set aside of $63.3 million, BCI escalation of $13.3 million and June 30, 2008 $245,580 $267,037 ($21,457) 92.0% $38,635 55.5% $19.1 million of additional funding from the CDP. As of June 30, 2009, $9.7 million remains unexpended. Entry Age Normal (EAN) method used. e funded ratio for the actuarial valuation date of June 30, 2008 decreased to 92% using the Expected Value of Assets (a) Plan Description method. e UAL for FY 2010 is to be amortized over several di erent periods. e amortization of the UAL due to e District’s de ned bene t pension plan, administered by the City of San Diego’s City Employees’ Retirement System assumption changes was over 30 years, the scal year ending June 30, 2008 experienced loss was amortized over 15 years, (“SDCERS”), provides retirement and disability bene ts, annual cost of living adjustments, and death bene ts to plan and the outstanding balance of the June 30, 2007 UAL was amortized over 13 years. Finally, there is an additional UAL members and bene ciaries. SDCERS is an agent multiple-employer public employee retirement system that acts cost component to ensure that there is no negative amortization in any year. as a common investment and administrative agent for the City of San Diego, the District, and the SDCRAA and is administered by the Retirement Board of Administration (“Board”). San Diego City Charter, Section 144 and San ree-year Annual Pension Cost (APC) trend information for SDCERS is presented below. Diego Municipal Code Sections 24.0100 et seq. assigns to the Board the authority to establish and amend the bene t provisions of the plans that participate in SDCERS. e plan is integrated with the Federal Social Security Program. Annual Percentage e Board issues a publicly available nancial report that includes nancial statements and required supplementary Pension Cost of APC Net pension (APC) contributed obligation information for SDCERS. e nancial report may be obtained by writing to the San Diego City Employees’ Retirement Fiscal year ended: System, 401 West A Street, Suite 400, San Diego, California 92101, or by calling (619) 525-3600. 2007 $12,267,961 100% — 2008 $9,949,888 100% — (b) Funding Policy 2009 $10,629,779 100% — e City’s Municipal Code requires member contributions to be actuarially determined to provide a speci c level of bene t. Member contribution rates, as a percentage of compensation, vary according to age at entry, bene t tier level, and certain negotiated contracts that require the District to pay a portion of the employees’ contributions, which is referred to as the “o set.” e weighted average member contribution rates for scal year 2009, expressed as a percentage of In addition to pension bene ts as described in Note 8, the District provides medical, dental, and life insurance coverage, and compensation, were 9.7% for general members and 12.49% for safety members. an employee assistance program, to all eligible current and retired employees. Employees hired prior to October 1, 2006 are eligible for these bene ts as retirees if they retire from active employment with at least 5 years of service. Employees hired on All or part of the member contribution rate is subject to potential o set. For employees hired prior to October 1, or after October 1, 2006 are eligible for these bene ts as retirees if they retire from active employment with at least 10 years of 2006, the o set rates, expressed as a percentage of compensation, are 8.8% for Safety employees, 8.5% for management service. e accompanying nancial statements re ect the implementation of GASB No.45 which requires local governments employees, and 7.0% for all other employees. For non-safety employees hired on or after October 1, 2006, the o set to start accruing the cost of OPEB incurred for employee service rendered to the District. rates are 6.5% for management employees and 5.0% for all others. Employees hired after January 1, 2009, other than Funding policy: Safety, are not eligible to participate in a new de ned bene t plan until the completion of 5 years of service. However, they are able to contribute to a 457 Deferred Compensation plan, where the District will match up to 4% of salary in a As of June 30, 2009, the District continues on a “pay as you go” basis and elected not to pre-fund its OPEB pending the 401(a) plan. outcome of the federal legislation relating to healthcare. e District contributes at an actuarially determined rate. e rates for scal years 2008, 2009 and 2010, expressed as To determine the Unfunded Actuarial Accrued Liability (UAAL) and the Annual Required Contribution of the employer a percentage of covered payroll, are as follows: (ARC), the District retained Sunlin Consulting, LLP, to prepare the actuarial valuation on the basis of GASB 45. e UAAL as of July 1, 2008 was $67,828,688 and the ARC for scal year ending June 30, 2009 was $6,681,339 which the District fully Actuarial Contribution Rates recognized as OPEB expense. Of this amount, $2,156,000 was paid toward the retiree premium and $4,525,339 remains as (Actuarial valuation approved by SDCERS) Net OPEB liability as of June 30, 2009. e required annual contribution and unfunded liability was determined as part of FY 08 FY 09 FY 10 an actuarial valuation that assumes: (a) 4.45 percent investment rate of return, and (b) Annual cost increase ranging from an General Members 18.10% 17.26% 16.95% initial rate of 10 % to an ultimate rate of 5 % from over a ten year period. e valuation was performed using the projected Safety Member 21.74% 21.31% 19.23% unit credit and the UAAL is being amortized over 30 years on a level dollar basis. Weighted total 19.08% 18.37% 17.57% 46 47
    • Notes to Basic Financial Statements Notes to Basic Financial Statements June 30, 2009 June 30, 2009 Projections of bene ts for nancial reporting purposes are based on the substantive plan (the plan as understood by the Since July 1, 2004, the District has participated in a loss-sensitive workers’ compensation program and is responsible for the employer and the plan members) and include the types of bene ts provided at the time of each valuation and the historical rst $500,000 of any workers’ compensation claim. e District is required to fund an escrow account totaling $2.0 million, pattern of sharing of bene t costs between employer and plan members to that point. e actuarial methods and assumptions which is held as security in the unlikely event the District fails to meet its required obligations. e escrow account is not used include techniques that are designed to reduce the e ects of short-term volatility in actuarial accrued liabilities and the drawn upon for the deductible payments. actuarial assets, consistent with a long-term perspective of the calculations. In scal year 2009, the District accrued $927,633 for workers’ compensation claims liabilities, which include anticipated future Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the expenses on open compensation claims based on estimates provided by the District’s workers’ compensation carrier. Changes probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and in the District’s claims liabilities for the year ended June 30, 2009 were as follows: the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions Claims Liability Claims Incurred of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are at Beginning During the Period, and Claim Claims Liability made about the future. e schedule of funding progress below presents information about whether the actuarial value of plan Fiscal Year of Period Changes in Estimates Payments at End of Period assets is increasing or decreasing over time relative to the actuarial accrued liabilities for the bene ts. FY 2008 $ 87,790 1,835,501 (576,992) 1,346,298 FY 2009 $ 1,346,298 981,915 (1,205,041) 1,123,172 Development of Annual Required Contribution (ARC) and Annual net OPEB Liability Cost Actuarial Unfunded UAAL as a % Amortization Annual Imputed Valuation Actuarial Covered of Covered Normal of Accrued Required Retiree Health NET OPEB Date Accrued Liab Payroll Payroll Cost Liab Discount Contribution Ins Payment Liability 12. Lease Revenues 7/1/08 67,828,688 43,202,534 157% 2,408,833 3,984,792 287,714 6,681,339 2,156,000 4,525,339 A substantial portion of the District’s land and water and some of its facilities, including marine terminal facilities and o ce and commercial space, are leased to tenants. e Port Act prohibits transfer of land ownership to the lessee and the leases are accounted for as operating leases. e majority of lease agreements are not cancelable and permit the District to periodically adjust rents. In addition, many of these leases are secured by letters of credit, which totaled approximately $2.3 million at June e District o ers its employees a deferred compensation plan created in accordance with Internal Revenue Code (IRC) 30, 2009. In the normal course of operations, it is expected that all signi cant expiring leases will be renewed or replaced by Section 457. e plan, available to District employees who are eligible for bene ts, permits them to defer a portion of their similar agreements. salary until future years. e District, at its discretion, can make employer contributions to the Plan. e District leases its land and facilities on both a xed (i.e., at) and variable (i.e., percentage) basis. Percentage rentals e deferred compensation is not available to employees until termination, retirement, total disability, death, or unforeseeable are received on the basis of percentages of sales and are protected by stipulated minimums. Such percentage rentals totaled emergency. Employees may borrow from their account but must repay the borrowed amount with interest. approximately $49.7 million in 2009 and $53.9 million in 2008. Both numbers exclude the minimum annual guarantees for e Plan is administered by the District and contracted to an unrelated nancial institution. Under the terms of an IRC the marine terminal facilities. Rentals received under at rate leases, including marine terminal facilities, totaled approximately Section 457 deferred compensation plan, all deferred compensation and income attributable to the investment of the deferred $35.8 million in 2009 and $35.2 million in 2008. compensation amounts held by the nancial institution, until paid or made available to the employees or bene ciaries, are held Stipulated minimum rents under non-cancelable operating leases having initial or remaining terms of more than one year are in trust for employees. as follows: As such, employee assets held in IRC Section 457 plans are not the property of the District and are not subject to the claims of Year ending June 30: the District’s general creditors. In accordance with Governmental Accounting Standards Board Statement No. 32, Accounting 2010 $ 60,669,648 and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans, which the District has 2011 59,981,427 implemented e ective July 1, 1998, employee assets are not re ected in the District’s basic nancial statements. 2012 59,608,744 2013 59,354,060 2014 58,458,279 ereafter 1,815,993,925 11. Risk Management Total $2,114,066,083 e District maintains a comprehensive Risk Management Program, which includes risk transfer, loss prevention, loss control, Future rents were determined based on minimum rents stipulated under the leases up to the lease expiration date assuming and claims administration. e District purchases excess liability, police professional liability, public o cials liability, workers’ that options to extend, for some Marine Terminal tenants, will be exercised. However, these rents may increase or decrease compensation liability, employment practices liability, property insurance, duciary liability, crime/public employee dishonesty, based on the periodic lease rental reviews, at which time new rents may be established. marine protection and indemnity, and automobile liability, as well as other miscellaneous insurance coverages. e District’s coverages include a variety of self-insured retentions or deductibles. e District’s self-insured retentions or deductibles as of e amounts in the above table are net of the rent credits for One Park Boulevard (OPB) dba Hilton San Diego Bayfront June 30, 2009, were as follows: Hotel. e 66-year lease commenced January 1, 2006; OPB is obligated to pay the District the greater of minimum rents versus percentage rents on a monthly basis. e District granted OPB rent credits of up to 60% of rent after construction and Self-Insured Retentions/Deductibles 100% of rent during 34 months of construction. Rent credits during construction totaled $8.3 million. e minimum annual (as of June 30, 2009) rent to the District after the hotel’s second lease year is $4.5 million before rent credits. e District will retain 40% of the total rent paid until OPB receives rent credits totaling $46.5 million or when the rent credit expires on December 31, 2016. Coverage Self-insured retention/deductible e District will receive an increase in percentage rental rates if hotel revenues exceed the projected lease revenues. OPB also Excess liability $1,000,000 leased 894 parking spaces in the adjacent District-owned Convention Center Hotel Public Parking facility. Police professional liability 500,000 Public o cials liability 500,000 Workers’ compensation 500,000 Employment practices liability 250,000 13. Lease Commitments Property insurance 100,000 Fiduciary liability 25,000 (a) Administration Building Parking Lot Crime/public employee dishonesty 10,000 e District leases the northeast portion of the property the District uses for its administration building parking lot from Marine protection and indemnity 5,000 Automobile Liability n/a CalTrans, the property owner since 1984. e most recent lease expired on August 31, 2006. Until a new agreement is reached, the District is following the terms of the prior lease and making monthly payments of $1,347 which totals e District does not purchase earthquake insurance. A reserve account was established July 1, 2008, and $300,000 is set aside $16,164 annually. each scal year for the exclusive purpose of covering losses that may occur as the result of an earthquake. e District also plans to rely on federal and state resources to pay for earthquake related losses. 48 49
    • Notes to Basic Financial Statements Notes to Basic Financial Statements June 30, 2009 June 30, 2009 (b) San Diego County Regional Airport Authority Employee Parking and Visitor Lot operations. ese enforcement e orts frequently include discussions with the District and consideration of adding e SDCRAA is sub-leasing a portion of the former General Dynamics (GD) leasehold to the District for use as an the District to the permits, as a responsible party, regulating the operations and cleanup obligations. employee and visitor parking lot. e lease is for 66 years commencing January 1, 2003. e rent is based on the same square foot rental rate determined for the entire former GD property leased from the District to the SDCRAA. Rental In addition, the District’s leases and operating agreements with these tenants typically include provisions requiring increases are determined by appraisal, review and negotiation. e District and SDCRAA agreed that the monthly rent the tenant/operators to indemnify the District for any damage to property or losses to the District as a result of would be $12,074 plus a $381 cost recovery for electricity for a total monthly rent of $12,455 or $149,460 annually. the tenant’s operations. Also, the leases and operating agreements typically require the District to be named as an additional insured under certain insurance policies of the tenant/operators. According to the District’s legal counsel, (c) Hybrid Vehicles when these types of claims are asserted against the District, the District not only vigorously opposes them but also In scal year 2008, the District entered into a lease agreement with Enterprise Fleet Management to lease 10 hybrid vigorously seeks contribution and/or indemnity from all tenant/operators or other responsible parties involved, vehicles for use by District sta . e lease term is for ve years and the annual amount to be paid each year is $59,233 including the tenant/operator’s and any applicable insurers. e District’s legal counsel can neither predict the net for a total of $296,165 over ve years. exposure to the District with respect to these matters nor the probability or remoteness of any outcome. However, the District believes that the recoveries discussed above will be su cient to reduce the District’s nancial responsibility Future rent payments under the above operating lease agreements as of June 30, 2009 are as follows: for any pollution remediation known as of the date of the nancial statements to amounts not considered to be material to the nancial statements of the District. erefore, no liability has been recorded in the District’s basic Year Ending June 30: nancial statements as of and for the year ended June 30, 2009, for any of these claims. 2010 $ 224,857 2011 224,857 (a) Contamination at NASSCO and Southwest Marine leasehold vicinity: On February 19, 2004, the California 2012 224,857 Regional Water Quality Control Board, San Diego Region (“RWQCB”), issued two Investigation Orders (“Orders”) 2013 165,624 both naming the District, among others, as a party required to submit a technical report showing cause why it 2014 165,624 should not be named as a discharger in a Cleanup and Abatement Order (“CAO”) for the cleanup of contaminated ereafter 678,798 Total $ 1,684,617 sediments that allegedly exist in the vicinity of the NASSCO and Southwest Marine leaseholds (the “Site”). e Orders state that the District is named in the Orders because the District is the “owner” of the lands occupied by (d) Phone and Network Equipment and Integration Services facilities, including NASSCO and Southwest Marine, which allegedly discharged or are suspected of discharging In scal year 2009, the District entered into the Master Tax-Exempt Lease/Purchase Agreement, with Key Government waste to San Diego Bay. e Orders further allege that the District “controls decisions regarding the sites and types Finance, Inc. to lease phone and network equipment and integration services. e network equipment installation is of facilities, which occupy lands adjacent to San Diego Bay through leases for the use of these lands” and that the expected to be completed and placed in service by March 2010. In accordance with Statement of Financial Accounting District has “the ability under its lease agreement with facility operators to impose controls, which could prevent or Standard No. 13 (FAS 13), this lease met the criteria for a capital lease. e lease term is for ve years and the annual reduce waste discharges to San Diego Bay.” For these reasons, the RWQCB required the District to show cause why amount to be paid each year is $592,767.50 for a total of $2,963,837.50, including principal and interest. it should not be named in the CAOs that will likely be issued for the cleanup of the contaminated sediments. e District’s report to the RWQCB was led with the RWQCB on July 15, 2004. A tentative CAO was issued in 2005. In April 2008, a revised tentative CAO and Technical Report to support the CAO were issued by the RWQCB. 14. Commitments and Contingencies According to the tentative CAO, the Site, which exists on state tidelands over which the District is the statutorily- mandated trustee, has been contaminated with a variety of pollutants over many years by shipbuilding operations, a (a) Commitments power plant, City storm drains and Navy shipyard operations. e cleanup of the sediments was estimated by the As of June 30, 2009, the District had signi cant commitments for capital expenditures and other matters as described below: RWQCB to exceed $120 million, although the named dischargers dispute the RWQCB’s ndings as to the nature, i. Capital Development Program (CDP): Beginning in scal year 1992, the Board of Port Commissioners approved a extent, and sources of the contamination as well as the scope of the appropriate remedy. e District was not named ve year CDP for the development of certain capital outlay projects located either on the San Diego Bay and Imperial as a discharger in the tentative CAO. However, the District was named as a “secondarily liable” party in the event Beach tidelands or on the uplands adjacent to these tidelands. Each project in the plan is reviewed and authorized by the dischargers fail to comply with the nally-adopted CAO. In mid-October 2009, the City of San Diego led a the Board of Port Commissioners. e CDP is updated as conditions and circumstances warrant but no less than lawsuit in federal court against the named dischargers and the District seeking contribution for cleanup costs. annually. e Fiscal Year 2009-2013 CDP was amended and approved by the Board of Port Commissioners on July 7, 2009. As of June 30, 2009, the remaining cost to complete all approved CDP projects was approximately $100.7 e District denies liability and intends to vigorously contest any alleged liability or claims. Because the nal CAO million. has not yet been issued and cleanup levels have not been established for the remediation of these sediments and based on presently available facts, the District is unable at this time to estimate the likelihood of an unfavorable In conjunction with the funding requirements for the CDP and for the costs of certain other projects, funds have outcome or the range of potential costs. been designated for the unpaid contractual portion of capital projects that are currently in progress, as well as for the contractual costs of upgrading certain major equipment and facilities. ese commitments totaled $22.0 million on (b) Former Campbell Shipyard: is matter involves industrial contamination from shipyard activities, which impacted June 30, 2009 and are classi ed in the accompanying balance sheet as Cash and Investments Designated for Speci c the land, groundwater and sediments at the site. In 1995, the RWQCB issued a Cleanup and Abatement Order Capital Projects and Commitments. (CAO 95-21) that named Campbell Industries, a former District tenant, and its parent, Marine Construction and Design Company (MARCO). e cleanup has been completed and the District is now implementing the long-term ii. Fire, Police, Emergency Medical and Lifeguard Services: e District enters into contracts with the ve member Monitoring and Reporting Program at an estimated cost of approximately $495,000. is amount is based on bids cities for annual re, police, emergency medical, and lifeguard services that are provided by the cities for the bene t received from outside consultants to perform the monitoring obligations, and includes both scal years 2009/2010 of the District. e combined cost for these services was $5.4 million for scal year 2009. In addition, the District and 2010/2011. Costs for future scal years are not yet estimated. has a contract with the City of Imperial Beach for Tidelands Maintenance Services at a cost of $0.8 million for scal year 2009. (c) Shelter Island Yacht Basin (SIYB): In 1996, the Shelter Island Yacht Basin (SIYB) portion of San Diego Bay was placed on the Clean Water Act section 303(d) list of impaired waters due to elevated levels of dissolved copper in (b) Contingencies the water column. A Total Maximum Daily Load (TMDL) Study was conducted for the site and found that the As of June 30, 2009, the District was subject to contingencies arising from legal and environmental matters as described below: majority of the copper was attributed to boat hull paint. e TMDL requires a 76% overall reduction of residual i. Environmental Matters: e District owns, in public trust, tidelands and submerged lands adjacent to San Diego copper loading to SIYB over a 17-year staged compliance schedule period. e TMDL identi ed the District, the Bay. Most of that land is leased to operators of facilities located on the properties. e operations of many of those SIYB marina owners/operators, persons owning boats moored in SIYB, and SIYB underwater hull cleaners as facilities have generated waste discharges either on the land adjacent to San Diego Bay or into the waters of the bay, accountable for the discharges of copper from boat hull antifouling paints to the waters of the SIYB. which threaten the bay environment. Administrative agencies such as the San Diego County Department of Health Services and the California Regional Water Quality Control Board are increasing enforcement e orts directed at e District has been actively involved in the search for alternative hull coatings, since this level of reduction can these operations to regulate ongoing activities and to clean up alleged environmental damage from past facility most likely be achieved only by using alternative paints. To this end, the USEPA has funded the District to conduct 50 51
    • Notes to Basic Financial Statements Notes to Basic Financial Statements June 30, 2009 June 30, 2009 a project to identify these alternative paints. In 2008, the District funded a second study, through the San Diego interest earnings from January 25, 2006 to June 30, 2009 totaled $1.7 million for a total cumulative balance of State University, to identify other possible sources of alternative paints. e District also funded a third project in $13.3 million. Should this amount be insu cient for demolition and abatement, the District and SDCRAA 2009 to test alternative paints not evaluated in the USEPA funded project. At the same time, the District and the agree to share the net remaining demolition and abatement costs equally. As of June 30, 2009, the Port has tenants of the SIYB have been cooperatively developing the SIYB Dissolved Copper TMDL Implementation Plan restricted $23.0 million in cash assets for the TDY site demolition, which exceeds the amount of the initial award approach to obtain TMDL compliance and describing the Best Management Practices that may be implemented in plus accrued interest. In accordance with GASB 49, the District capitalizes the demolition and abatement costs order to achieve a reduction. At this time, the District is unable to estimate the likely outcome of these actions or as these costs are incurred. the range of potential costs. (d) Lockheed Tow Basin: Tenant operations on this site in the 1950s and 1960s included the testing of hull designs and ii. e District has been named as a defendant in a lawsuit led by property owner SLPR, LLC in February 2006. e the hydrodynamic testing of aerospace prototypes for underwater performance in a large concrete pool, known as the complaint alleges that dredging in the San Diego Bay performed by the District and the Army Corps of Engineers “tow basin.” e tow basin pool and the former building on the site that housed the tow basin were coated with paint compromised the integrity of the “rip-rap” barrier and pool wall located on the plainti ’s Coronado bay front that contained Polycholorinated Biphenyls (PCBs). Regulatory oversight agencies believe that over the decades of property. Two neighboring property owners joined the lawsuit in late 2007, making similar claims. Each property the tow basin’s existence, PCBs from the paint washed into the storm drains, which drained into the San Diego Bay, owner is claiming damages of $60,000 to $1.0 million, depending on costs to repair alleged damage to their property. causing potential sediment contamination. is potential contamination requires investigation, assessment, and e District denies liability and intends to vigorously contest any liability or claims. A trial date has been set in June remedial action. e District led a cost recovery lawsuit on May 11, 2005, against the former operators at the site, 2010. Based on presently available facts at this stage in the litigation, the District is unable at this time to estimate General Dynamics Corporation and Lockheed Martin Corporation, for the investigation and ultimate remediation the likelihood of an unfavorable outcome or the range of potential loss. at the site. e District may bear liability only on the basis of its landowner status. An interim litigation cost- sharing agreement has been executed among the District, General Dynamics and Lockheed Martin to each share iii. On July 19, 2008, the Harbor Police Department was involved in a shooting incident that resulted in the death of a one-third of the current environmental investigation costs. e District’s insurers are currently responsible for swimmer during a confrontation with o cers. A lawsuit was led by the decedent’s parents demanding $20 million the District’s entire portion of these costs and any other future investigation costs for which the District may be dollars and named as defendants the District and the Harbor Police o cer who shot the decedent. Several months responsible. Site investigation and analysis are continuing. e current cost estimate of approximately $1,200,000 ago, the plainti parents led a motion to add the other Harbor Police o cer involved in the shooting as a defendant includes investigation, assessment, removal of contaminated sediment and possible post-remedial monitoring. ese as well as additional claims against all defendants. ere has been no ruling on this motion. e parties have costs should be directly borne by the District’s insurance carriers. erefore, no liability has been recorded in the commenced discovery which includes document production, depositions, and the designation of expert witnesses. District’s basic nancial statements as of and for the year ended June 30, 2009. At this time it remains di cult to ascertain whether a resolution of this action will have a material e ect on the basic nancial position of the District. (e) L Ditch Project – Chula Vista: is site is an 8-acre regulatory wetland in the midst of a proposed residential iv. On July 12, 2005, Traylor Brothers, Inc. was awarded a contract to construct an engineered cap for the purpose commercial development area. Regulatory oversight agencies have required the removal of chromium and other of complying with Regional Water Quality Control Board Clean up and Abatement Order No. 95-21 (Order) metal contamination in the unlined, tidally in uenced drainage ditch known as the “L Ditch.” e contamination as mentioned in Note 15 i (b) above. e Order requires the Port to mitigate speci c constituents of concern in drained into the ditch from the adjacent District leasehold, which was relinquished to the District by a former the sediments of the 9.2-acre former Campbell waterside leasehold. e scope of work for the project includes tenant in 2001. e ditch is considered a wetland area which will be destroyed as a part of the remedial action. e demolition and removal of debris and shipways, repair and reconstruction of a portion of an existing seawall, wetland loss will be mitigated elsewhere as a part of the Chula Vista Bayfront development. e District has entered dredging near the Tenth Avenue Marine Terminal to maintain navigation water depth, construction of a 7.7 acre into an agreement with the former tenant of the adjacent property which drains into the ditch to pay for half of the engineered cap, construction of 1.5 acres of eelgrass habitat cap, construction of a rock berm around the habitat cost to remediate the ditch, and the entire cost of the wetlands mitigation and new drainage requirements for the cap, construction of rock revetment behind the seawall for seismic upgrade of the seawall, and retro tting of the upgradient District property. e estimated cost for scal year 2009 is $4,072,110.81. Costs for future years are not existing mole pier. Traylor Brothers’ bid of approximately $16.0 million, which also included some dredging at the yet estimated. In accordance with GASB 49, the District capitalizes the costs as these costs are incurred. National City Marine Terminal, was the low bid for this public works project. Approved change orders to date total approximately $2.0 million bringing the revised contract amount to approximately $18.0 million. (f ) Teledyne Ryan Industries (TDY) Project: On November 18, 2003, the SDCRAA led suit in San Diego Superior Court against the District. e lawsuit challenged the adequacy of the District’s environmental review under the Traylor Brothers performed the dredging and capping operation and completed all contract work as of November California Environmental Quality Act (CEQA) for the proposed public parking project on the former Teledyne 30, 2007. However, on or about June 10, 2008, Traylor Brothers led and served its lawsuit against the District for Ryan (TDY Industries) property. e litigation grew to encompass other issues around the separation of the San additional work performed on the project. Traylor Brothers claims that engineering speci cations for the design Diego International Airport (SDIA) from the District. A settlement agreement, which became e ective June 1, and building of the remediation cap were vague and incorrect. e rm contends that bid documents were also 2004, resolved all of the issues raised in the litigation. e following major terms of the settlement agreement are not clear and that the work could not be performed within the engineered speci cations presented. e District still ongoing: has led initial responses. In the meantime, a series of mediation sessions were conducted in an e ort to resolve the matter without extensive litigation. e District intends to vigorously defend this matter. Traylor Brothers’ total claim to date exceeds $13 Million, plus possible accrued interest. e District may have some exposure, but the per year commencing January 1, 2005 and ending December 31, 2068. amount is unpredictable since expert analysis is preliminary. e District’s defense has recently been accepted by an insurance carrier on an additional insured endorsement. e insurer (USF&G) has led an action for declaratory relief contending that it has no obligations to defend and indemnify the District in this matter. e District has to recover clean-up costs and environmental damages from TDY Industries. Pursuant to the settlement, TDY led a cross complaint against the insurer for bad faith and the matter is currently scheduled for conferences in the Industries must pay all costs of environmental clean-up and remediation of the site. United States District Court. v. e District has certi ed claims against it and is named as a defendant in certain other legal actions arising from and entry of judgment on March 29, 2004 in Superior Court in the amount of $21.3 million (verdict). Of this transactions conducted in the ordinary course of business. e District’s legal counsel has indicated that it is not amount, $9.8 million represents an award of damages to the District for demolition of the existing improvements currently possible to estimate the amount or range of potential loss to the District related to these cases. However, and abatement costs on the TDY Industries site. e District agreed to contribute this sum, plus accrued interest, the District does not believe that the resolution of these actions will have a material e ect on the basic nancial for the demolition and abatement of the improvements. e accrued interest on $9.8 million from the date of position of the District. erefore, no liability has been recorded in the District’s basic nancial statements as of and the special verdict through January 25, 2006, which was the date the funds were received, was $1.8 million. is for the year ended June 30, 2009 for these claims. accrued interest amount was included in the verdict and was received from TDY Industries. Since then, the District has continued to calculate and accrue interest earnings on the funds. Interest earnings are calculated using the District’s yield to maturity on its investment portfolio and are compounded monthly. e additional 52 53
    • BOARD OF PORT COMMISSIONERS 2009 Stephen P. Robert “Dukie” Scott Peters Michael B. Bixler Lee Burdick Mike Najera Robert “Rocky” Cushman Valderrama Spane Commissioners Principal John Helmer Vilma Sevilla, Administrators Director, Land Use Director, Audit, Risk Stephen P. Cushman Planning Management & Safety Chair Charles D. Wurster San Diego President/CEO Steve Kirkpatrick Brian Stup Chief Engineer Director, Engineering/ Robert “Dukie” Duane E. Bennett Construction Valderrama Port Attorney Mary Ann Liner Vice Chair District Clerk Dave Thompson National City Ellen Corey Born Director, Procurement Executive Vice President Irene McCormack Services Scott Peters Assistant Vice President, Secretary Wayne Darbeau Government Relations & Rita A. Vandergaw San Diego Vice President, Communications Director, Marketing Administration Michael B. Bixler E. David Merk Karen Weymann Imperial Beach Dirk Mathiasen Director, Environmental Director, Real Estate Vice President, Services Lee Burdick Operations Yvonne Wise San Diego James R. Popham Director, Public Art Jeffrey McEntee Assistant Vice President, Mike Najera Chief Financial Officer/ Industry & Trade Relations Chula Vista Treasurer Member Cities Karen G. Porteous Robert “Rocky” Spane Brandy Christian Assistant Vice President, Cheryl Cox Coronado Director, Strategic Administrative Services Mayor of Chula Vista Management Services Ronald Powell Casey Tanaka Randa Coniglio Director, Communications Mayor of Coronado Assistant Vice President, & Community Services Operations Jim Janney Jeanette Sales Mayor of Imperial Beach Pedro Cruz Director, Financial Services Director, General Services Ron Morrison Kirk Sanfilippo Mayor of National City Leonard Fabor Chief of Harbor Police Director, Maritime Jerry Sanders Operations Robert Schuck Mayor of San Diego Director, Human Resources Paul Fanfera Assistant Vice President, Adolfo Segura Business & Technology Director, Information Technology 54 55
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