How the Port Succeeds as a Self-Sustaining City Entity

By Rodger Rees, Galveston Wharves Port Director and CEO

The Port of Galveston has been a self-sustaining city entity since the Galveston Wharf Company sold its private holdings to the city in 1940. But what exactly does it mean to be self-sustaining and how have we built this public entity into the successful economic engine it is today?

The port is self-sustaining, both financially and operationally, as prescribed by the City Charter, the city's governing document. We collect no taxes and receive no funds from the city. We rely on operational revenues, bonds and grants to maintain port property and make capital improvements to grow our business.

We run the port like a business. We control costs, strictly follow our budget and build up cash reserves for emergencies as well as opportunities, like matching funds for grants. We staff departments ranging from Administration and Finance to Port Police and Engineering with 121 employees.

I'm proud to say that our Wharves Board of Trustees and staff were able to navigate through the COVID pandemic without a negative fund balance or employee layoffs despite a $58 million revenue loss due to the suspension of cruises globally.

Thanks to the strong resurgence of our cruise business, in the last few years, the port has realized its highest revenues ever, allowing us to fund revenue bonds and win grants to pump more than $300 million into improvements. We leveraged reserves to issue bonds to renovate our oldest cruise terminal and to build a new one.

Fiscally Responsible

As revenues continue to grow, I feel it is prudent to fund an additional debt service reserve. We currently have funded an approximately $19 million debt service reserve held with a third-party trustee. This reserve was funded out of the debt proceeds of 2024 bonds. These bonds are being used to build a cruise terminal and parking garage. These funds are only accessible to pay debt service in the event of a total default (catastrophic event). I want to fund a second debt service reserve to fund debt service on these same bonds in the event there is a downturn in our business but not harsh enough to trigger usage of trustee-held funds.

We also need to build operating cash reserves of $20 million to match federal and state grants for port improvement projects, as well as for operating expenses. In 2023 we secured $42.3 million in state grants, the largest grant allocation in the port's history, to fund waterfront improvements but must provide $3.1 million in port reserves for the local match. We still have a way to go, but with our continued growth, I believe it is attainable.

City Benefits

As the port's revenues rise, the city benefits directly from sales tax revenues and fees from cruise passenger parking, as well as additional cruise passenger fees and other port payments to the city. As the port's cruise business has grown, payments to the city have increased from $1.6 million in 2023 to a projected $2.8 million-$3 million in 2024.

With the addition of a fourth cruise terminal and cruise parking garage in late 2025, that amount is projected to increase significantly.

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