Port decides to advance with Broadband LLC contract

The extended Port of Whitman County debate on forming a Port Broadband LLC ended at last Thursday's meeting when the port commissioners voted 2-1 in favor of making the move.

Last year there was a potential Port cooperative project, with Broadband LLC, that did not advance.

"This business model is a win-win for the Port of Whitman and the cooperative's member ports, but, most importantly, the resulting work of the cooperative will be a huge win for those in rural, underserved areas of our state, including Whitman County," Port Executive Director Joe Poire stated Monday in a press release

Port Board Chair Kristine Meyer noted it has been a long road and the port is moving forward.

At the Aug. 1 port meeting, Poire reported five other ports expressed a strong interest in the proposal.

Colfax CPA Terry Eng was then asked to come in and present his findings to the port commissioners.

"We've been asked to provide a cash flow analysis on future in-flows and out-flows should the Port of Whitman decide to enter an agreement with Broadband LLC with five other ports," Eng explained at last Thursday's meeting.

Eng said his calculations only looked at how the Port of Whitman would be impacted.

It was shown that the Port of Whitman County would be receiving two types of payments.

The first payment being a reimbursement of the salaries and benefits for two employees, the CEO and CFO. The first five years are reimbursed at a rate of 75 percent and years six through 10 are reimbursed at 100 percent.

The second payment would be for a value payment and that would be for the intellectual-property the Port of Whitman has already developed for the LLC and those payments would be for years one through three. Then the Port of Whitman County would be paying to the LLC 15 percent of their projected broadband revenues.

"I made some calculations from the years one through 10 and showed the payments that the Port of Whitman County would be receiving just showed what the positive net cash flow would be," Eng said.

Over a 10-year period the positive cash flow would be approximately $1.6 million, he said.

Eng went ahead and calculated the break-even values of gross revenues from the Port to pay the LLC.

"I calculated what the management fee on an annual basis would have to be and the gross revenues that would be required and compared that to the projected gross revenue," Eng said. "From basis of years one through 10 the break-even gross revenues would have to be anywhere from almost double in year one, anywhere between 60-79 percent of what the projected gross revenues would be."

Eng gave his recommendation that this would be a positive impact on the Port of Whitman County.

Port Commissioner Tom Kammerzell questioned the validity of the calculations.

"I do not see in here any place about the current contracts that we have in revenue from Port of Lewiston, Port of Clarkston, Garfield and Skagit," Kammerzell said.

Kammerzel noted the CEO and CFO will go from 100 percent working for the Port to 25 percent working for the port.

"I don't see anything in here about the added costs of the employees that we would have to hire to backfill that," Kammerzell said. "There are two pretty important pieces of information for you to make a good calculation, were not included in this and it's concerning to me that you weren't able to make a complete analysis without having all the right information in costs that would come to the port."

Meyer said she believed the port had a clear picture of what the revenue opportunity comes from Broadband LLC and could be utilized in the port's strategic planning and staffing going forward.

Kammerzell called for a motion to conduct a public hearing on the proposal and was rejected on a 1-2 with Meyer and Commissioner John Love voting opposed.

Love and Meyer pointed out all port meetings are available to the public.

According to the agendas and minutes on the port web page, Broadband LLC has been on the agenda or added six times this year

Disagreements continued through the meeting on interpretations of the contract and on the information presented at Thursday's meeting.

"The analysis that has been provided by a professional to us that concludes it is a profit-bearing entity, significantly and specifically to us singularly, to the tune of nearly $700,000 after three years when we have an out clause and the magnitude of $1.6 million at a projection of 10 years, I am comfortable with that," Meyer said.

The motion was made to authorize the executive director to enter into the LLC, including the execution of the intergovernmental agreement to proceed with that contract.

The concept of forming a Port Broadband LLC was discussed at the May 2, 2019, Port meeting.