Fernandina Port Authority Rejects Operator’s Refusal to Renegotiate as potential $5 million tax bill looms

By Mike Lednovich/Editor

The Ocean Highway and Port Authority (OHPA) voted Wednesday to formally reject a decision by port operator Relay Terminals to delay renegotiation of its operating agreement until the outcome of an ongoing property tax appeal.

During its meeting, OHPA commissioners directed Attorney Tammi Bach to send a letter to Relay stating that the operator’s position was unacceptable and that the authority expects negotiations to proceed despite the pending court case.

The action followed receipt of a letter that reiterated what it stated in a Feb. 25 letter from attorney Jon C. Lasserre of Rogers Towers, representing Nassau Terminals LLC, which does business as Relay Terminals/Nassau Marine Terminals. The letter stated the company would not renegotiate the agreement while the appeal of a Nassau County property tax ruling remains unresolved.

“Given the pendency of the appeal… our client respectfully declines to participate in such renegotiation at this time,” Lasserre wrote, adding that the company would reconsider discussions once the appellate court rules.

The disagreement is tied to a legal fight with the Nassau County Property Appraiser over whether the publicly owned special district port property should be taxed because it is operated by a private company.

A circuit judge ruled the port is taxable, leaving the authority potentially responsible for hundreds of thousands of dollars annually in property taxes and several million dollars in potential back taxes if the ruling stands.

During the meeting, commissioners said waiting for the appeal could expose the authority to years of additional tax liability - estimated at $600,000 per year - if the court ultimately upholds the ruling.

Chairman Ray Nelson warned the board could face significant financial consequences if no changes are made to the operating agreement in the meantime.

“If the ruling is not in our favor, that’s just two more years of taxes that are going to be owed,” Nelson said during the discussion.

"And we're worried about a $5 million tax deal coming up. We better wake up. It's not a good situation to be in," he said later.

Commissioner Scott Moore noted that appellate courts overturn lower court rulings only about a quarter of the time, suggesting the authority should not rely solely on the appeal.

“We’re gambling on being part of that 25 percent,” Moore said.

Commissioners also discussed the potential financial impact if the tax ruling ultimately stands.

Commissioner Justin Taylor told the board that the port authority could face roughly $5 million in back taxes plus about $600,000 annually going forward, depending on the final outcome.

“Obviously there’s only one place it can come from,” Taylor said, referring to port revenues and fees.

Commissioners said renegotiating the operating agreement could potentially address issues raised by the property appraiser, including how port revenues flow through the authority and how control of the public asset is structured.

Several commissioners expressed frustration that Relay would not enter discussions while the appeal is pending.

Commissioner Miriam Hill said the board is asking only for reasonable modifications to the contract.

“I think what we’re asking for is very fair,” Hill said. “We should get a substantive response… not just ‘we’re not going to negotiate."

Hill also said revising the agreement could help address the property appraiser’s concerns and potentially restore the port’s tax-exempt status in the future.

The board unanimously approved directing its attorney to send a letter rejecting Relay’s position and requesting negotiations on potential amendments to the operating agreement.

The authority plans to finalize a draft memorandum outlining proposed operating agreement changes at its next meeting on March 25 and provide it to the operator for review.

If negotiations fail, some commissioners suggested the authority may consider other options related to the appeal.

“For the first time in a while, the Ocean Highway and Port Authority has leverage,” Moore said. “It’s not good leverage, but it’s leverage.”