The topic for this month is “surplusing” port district property.  The term “port district property” includes real property (land) and personal property (port equipment, vehicles and boats seized for non-payment of marina charges).  We will look at the statutory requirements and some practical considerations.

The Statute:  RCW 53.08.090 is the statute that governs the sale of port district property.  The statute provides that port property can only be sold when the property (real or personal) is “no longer needed for district purposes” which is commonly described as “surplus” property and the action is commonly called “surplusing.”

Executive Director Authority - the $10,000 Threshold:  The port commission, by written resolution, may authorize the port district’s executive director to sell district property with a value of less than $10,000.  This written resolution can only be in force for one calendar year.  The “best practice” is to routinely include this resolution in the list of actions the port commission takes during the first meeting of the year.  This will allow the executive director to sell old equipment or boats seized for non-payment of marina charges.

Before selling the property the port district’s executive director must itemize and list the property to be sold and make written certification to the commission that the listed property is no longer needed for district purposes.  Property worth $10,000 or more cannot be broken into smaller components to drop below the $10,000 level.  I do note that the statute was last amended in 1994 and provided that since 1994 the $10,000 threshold was to be adjusted annually using RCW 82.14.200 but RCW 82.14.200 was repealed in 2015 so the “best practice” is to stick with $10,000.

It is permissible for the port district to hold one auction and sell individually any number of items each with a value of less than $10,000.  Of course, when in doubt take the action to the commission. 

Commission Resolution - $10,000 or More:  For property that has a value in excess of $10,000, the statute provides that the port commission must adopt a resolution  declaring the property “no longer needed for district purposes.”  Thereafter it may be sold.

A Policy for Sale of Surplus Port Property:  The statute does not require any particular method of sale for ether real or personal property.  In theory, the executive director or the port commission could negotiate a private sale.  However, in my view the “best practice” is to adopt a policy that requires a transparent process to make sure the port receives fair value for its property.  A public auction, or an advertisement with requests for bids or the use of a real estate agent to market port real property are all methods that ensure the process is transparent and that the port receives fair value.  Whatever method a port district choses it is important to document the process and the facts that support the port receiving fair value. 

Port Employees and Commissioners Buying Surplus Property:  The policy should include a section addressing the ability of port employees (and their immediate family members) to purchase port surplus property.  In note that the “Code of Ethics for Municipal Officers – Contract Interests” found at Chapter 42.23 RCW prohibits port commissioners and likely the executive director from ever purchasing port property. Beyond that, anyone involved in the surplus decision should be precluded.  For example, the marina manager should not be bidding on boats seized for non-payment of marina charges.  To be clear, I think the best practice is to preclude any port employee from buying surplus port property but if the port commission decides to allow the practice, care should be taken to make sure the port receives fair value and the process is transparent.

Modification of the Port’s Comprehensive Scheme of Harbor Improvements:  If the proposed sale property (typically real property) is referenced in the port’s comprehensive scheme of harbor improvements the comprehensive scheme needs to be modified “to find the property surplus to port needs.”  This requires a public hearing held pursuant to RCW 53.20.010.

Real Property within an Industrial Development District:  If the proposed sale property is within the geographic boundary of an industrial development district the property must be sold in accordance with the procedures in Chapter 53.25 RCW or the property must first be deleted from the industrial development district as provided in RCW 53.25.040.

In conclusion, port districts routinely sell surplus personal property and occasionally sell surplus real property.  Care should be taken to make sure that the sales are done in a manner that ensures a fair value to the port and a transparent process.

As always, please contact your port counsel with any questions regarding this topic. And, if you have a particular question for a Knowing the Waters please email me at fchmelik@chmelik.com