Owensboro Riverport Authority | 1771 River Road | P.O. Box 21955 | Owensboro, Kentucky 42304
 
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Riverport has thrived through economy's darkest days

September 23, 2012


Ed Riney tours the aluminum ingots section at the riverport on Aug. 1. The riverport has managed to prosper since the country's economy hit the skids four years ago. Riney said he will retire in June.

The Sandra Brumley tugboat pushes barges down the Ohio River on Sept. 14 past the Owensboro Riverport Authority. The riverport currently has $4.5 million in the bank, according to port CEO and President Ed Riney.

By Steve Vied

Messenger-Inquirer

The Great Recession is a hard and cruel fact, but the Owensboro Riverport Authority has managed to prosper since the country's economy hit the skids four years ago this month, according to a report released late last month by the port's executive director.

In fact, between June 2007 — six months before the economic slide started — and June of this year, the riverport realized $9.6 million in net income before dividends, which accounts for nearly half (48 percent) of all the port's net income since 1976.

In other words, in the last five years the port has made almost as much money as it made in the previous 31 years.

The riverport's performance since the middle of 2007 is something to be proud of, port CEO and President Ed Riney said.

"I'm really proud of the management team and the support the board has provided," he said. "We've been aggressive the five to six years I've been here. I wish we had sold the east (former Green River Steel) property, but here at the west property we've improved the assets, and I'm proud of that."

The positive trend is expected to continue this current fiscal year. In May, the port's board approved a 2012-13 budget that predicts annual net income (revenue above expenses) to surpass $2 million. If that happens, it will be the first time. Revenues are expected to increase by 3.54 percent, while expenses should rise by 2.7 percent. The budget shows 2012-13 revenue from operations at $6.534 million and expenses at $4.71 million. Counting other income of $177,265, net income will be slightly more than $2 million, compared to about $1.878 million last year.

Riney, who has announced he will retire from the riverport next year, was hired to run the riverport in March 2007. Since then, the riverport has paid $1.36 million to the city of Owensboro in the form of a dividend, which is 60 percent of the total of dividends paid to the city since 1976.

"That is one of the most important things," Riney said. "Our dividends to the city and our financial performance has been extraordinary compared to the past."

According to Riney, the riverport currently has $4.5 million in the bank. The port had a payroll of 51 when Riney arrived. It has 31 employees now, with all of the reductions coming through attrition, with no firings or layoffs, he said.

The riverport's performance throughout the 2007-12 period was the subject of a lengthy report Riney presented to the riverport board in August. Bill Parrish, city manager of Owensboro and a three-year member of the riverport board through August, said the information relayed to the board by Riney "paints a picture of the riverport on solid ground."

"It's well-managed," Parrish said. "The people who work there really do an excellent level of work. Ed involves them: 'Here's the problem, here's what we're facing.' The people come up with a lot of ideas."

Parrish noted that the port's revenues have remained strong, even after its highly lucrative aluminum storage business mostly went away a few years ago and has not returned in full. And Parrish isn't worried about the $5 million the riverport spent in 2009 to purchase 106 acres adjacent to the riverport that includes a railroad loop.

"The key is investment in the future," he said. "If you are looking to spend $5 million and immediately have a return, that is a mistake," he said. "It is an excellent investment in the future."

The rail loop was purchased from Ohio Valley Terminal Inc. That investment hasn't completely paid off, but Riney said he believes it will.

"The intent was to expand the riverport property when we could," he said. "That loop complements us and turns us into a more intermodal port. We've not fully exploited it from a revenue standpoint, but I believe it is one of the best, long term strategic investments since I've been here."

The rail loop property was contiguous to the riverport and the rail facilities made it quite valuable, Riney said.

"That made it more attractive," he said. "We built the tank farm next to it, and Southern Indiana Growers gets about 15 percent of its liquid fertilizer by rail and Miles (now Crop Production Services) gets 15 to 20 percent of its liquid fertilizer by rail. We are getting some revenue, but it will take five more years to realize the true benefits."

The rail loop will be even more valuable to the riverport if the container shipping business grows, Riney said.

Another large riverport investment occurred during the 2006-07 fiscal year when it bought three warehouses totaling 92,500 square feet that it was leasing from Tom Poland.

"We've had those leased 80 percent of the time since we bought them," Riney said. "We control the destiny of those warehouses, so it's paid off."

A decision the riverport made that same year (2007) to cancel a previously board approved second floor to the port's administrative offices saved $750,000, Riney said. The addition was not needed, he said. The following year, the port executed a 15-year handling agreement with Miles Farm Supply and sold the remaining half of the Triad building to Pilot Steel for a profit of $176,246. In 2009, grain handler Bunge was recruited to the port and signed to a 20-year handling agreement. That same year, four acres were leased to Miles Farm Supply, which invested $10 million in a fertilizer blending plant.

In fiscal year 2010, Southern Indiana Growers invested $3.5 million and the riverport invested $350,000 to build a liquid tank farm. In 2025, the riverport will own the tank farm and still have a handling agreement with SIG.

"We are benefiting from the handling fees, and we'll own the tanks when the lease expires in 15 years," Riney said. "The $350,000 was our investment for a total investment of $3.8 million. It's a good deal. We get the current revenue and gain possession of the asset over time."

Bringing Miles, Bunge and SIG into the riverport have all been good decisions," Riney said.

The riverport's total capital debt is about $2.5 million, all of it owed on the large warehouse that includes the administrative offices.

Early in Riney's tenure, the riverport decided not to move forward with the building of a second terminal on the former Green River Steel property that was purchased when former Port Director Maurice Owen was in charge. Before and during the 2010 fiscal year, the board approved tearing down the steel mill buildings on the property, digging out the deep concrete foundations and putting the property up for sale. The land, some 90 acres, has yet to sell for asking price of about $4 million, but selling the metal buildings for scrap has generated $750,000.

Last year the riverport purchased a new material handler crane for almost $1.8 million, replacing a 1972 model that was bought used in the late 1970s. This fiscal year, 13.5 acres of land across River Road from the port was purchased for $175,000, and $200,000 was spent in partnership with the Army Corps of Engineers on a five-year port master plan.

Riverport board member Rod Kuegel credited Riney and his staff for being able to adapt to changes in the port's business climate, with the ability to move into profitable areas when formerly profitable ventures declined.

"Ed led the board in that direction and the board supported him," Kuegel said.

Adding a second dock could position the riverport to take advantage of the container shipping industry, and the port's new material handling crane has already enhanced efficiency in loading and unloading, Kuegel said.

"What is remarkable was the board's insight in hiring Ed," Kuegel said. "He had no experience with riverports, but he knew how to handle people and situations. That led to his ability not to be locked into metals and able to think outside the box. Ed has done an unbelievable job during a recession."

The decision to abandon the idea of building a second riverport at the former Green River Steel site is more evidence of Riney's foresight, Kuegel said.

"I think the (previous) leadership was locked into inside-the-box thinking," he said. "The only way (to grow) was a second port. It just didn't pan out."

While that property has yet to be sold, it holds great potential for economic development, Kuegel said.

"I feel very positive about it," he said. "I think it's the finest piece of prospective property in the county, with river and rail access. We may not make a lot of money on it, but it may result in a lot of employment."

Steve Vied, 691-7297, svied@messenger-inquirer.com.

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