December 2004 Financial and Tonnage Results
  

Port of Galveston and GPFC								POG		POG
Combined Income Statement								GPFC		GPFC		Over
December 31, 2004								December		December		(Under)
								Combined		Combined		Budget for
								Actual		Budget		December
Operating Revenue								$1,300,234		$1,338,367		($38,133)
Operating Expenses								$1,056,292		$950,445		$105,847
Net Income (Loss) from Operations								$243,942		$387,922		($143,980)
Other Income								$221,660		$112,529		$109,131
Other Expense								$326,932		$336,746		($9,814)
Net Income (Loss) After Other Income and Expense								$138,670		$163,705		($25,035)
Deduct Depreciation and Amortization								$241,514		$262,688		($21,174)
Net Income (Loss) for the Period								($102,844)		($98,983)		($3,861)
Revenues are on Budget. Operating Expenses are over Budget due to the high cost of contract labor in the Cruise operations, cost of contract security at the former Todd Shipyard property, recording Insurance Expense on the shipyard property from October 25th to the end of the year and Tools & Vehicles, etc., cost of shuttle service operating two parking lots. Other expenses that were over budget were Direct Sales due to December employee-relations event and timing on Advertising and Professional Services due to the payment on agreements to review dredging costs and inspect and survey Port Property.
Cargo Report	November	December		Pct. + / -			December		Pct. + / -		Y-T-D		Y-T-D	Pct.
	2004	2004		Last Mo.			2003		Last Yr.		2004		2003	YTD + / -
Total Cargo	265,383	227,874		-14.13%			316,114		-27.91%		3,384,776		3,429,084	-1.29%

Cargo Increases for December 2004 - The Port experienced a gain over December 2003 in Other Bulk (Cement) and Incidental Containerized Cargo handled outside of the Pier 10 Container Terminal.

The Port experienced a gain over November 2004 in Bulk Grain Export Cargo, Other Bulk (Cement), Refrigerated Cargo – Bananas and Fruit, and Incidental Containerized Cargo handled outside of the Pier 10 Container Terminal.

Cargo Decreases from December 2003 occurred in Bulk Grain Export Cargo (down by 88,240 Short Tons), Miscellaneous Dry Bulk Cargo (Fertilizer), Refrigerated Cargo – Bananas and Fruit, General Cargo and Ro-Ro Cargo.

Year-to-Date Embarkations end-December 2004 vs. 2003: Up 16.48% (61,510 Passengers)

Year-to-Date Disembarkations end-December 2004 vs. 2003: Up 16.10% (60,057 Passengers)

Year-to-Date Port-of-Call Passengers end-December 2004 vs. 2003: Up 100% (2,076 Passengers)

December 2004 vs. November 2004: Down 7.2% (-497 Vehicles) (6,405 vs. 6,902 vehicles)

December 2004 vs. December 2003: Up 54.23% (+2,252 Vehicles) (6,405 vs. 4,153 vehicles)

Year-to-Date end-December 2004 vs. 2003: Up 13.88% (+7,051 Vehicles)(57,853 vs. 50,802 vehicles)

The Port User Permit Tariff Item, which was approved by the Board of Trustees in November 2003 and incorporated into the Galveston Wharves Tariff Circular No. 6 is currently being implemented.   Port staff conducted an in-depth survey during April and May 2004 of commercial entities accessing Galveston Wharves’ property, specifically the Texas Cruise Ship Terminal on Galveston Island®. A total of thirty-four (34) companies were identified at that time. Hotel and Motel operators sending shuttle buses to the Cruise Terminal accounted for approximately 30% (10 out of 34) of the commercial entities picking up and dropping off passengers at the Cruise Terminal Complex. Four (4) bus lines and six (6) taxi operators were also identified. There were also a number of limousine services, rental car companies and off-Port parking lot operators with commercial vehicles.

Port staff is preparing to invoice for the Port access in October-December 2004.  Port staff is also working to identify who the “unknown” users are and to notify them that they must obtain permits, and also to invoice them if possible.  The outstanding issue remains regarding the invoicing of the User Fees to the Hotel/Motel shuttle vans that make pick-ups and drop-offs at the Cruise Terminal.

The Port and Cruise Terminal are currently in Maritime Security (MARSEC) Condition I. The next meeting of the Area Maritime Security Committee will be January 27 in Houston. Port representatives will meet with the Coast Guard on February 2 to discuss cruise terminal and cruise ship security related issues.

The CY2004 Projected Cruise Revenues for Carnival cruises were based on 1,600 passengers and 250 vehicles per cruise average for cruises of Celebration; 2,100 passengers and 300 vehicles per cruise for Elation; and 2,500 passengers and 150 vehicles per cruise for Grand Princess. Projected

revenues for Royal Caribbean cruises were based on 2,000 passengers and 300 vehicles per cruise average for Rhapsody of the Seas; 1,700 passengers and 120 vehicles for Splendour of the Seas 11/12-day cruises and 200 vehicles for the 4/5-day cruises; and 1800 passengers and 120 vehicles for Celebrity’s Galaxy. In 2004, average passenger numbers for all cruises with the exception of Galaxy (3% less) finished ahead of projections. The total number of embarking passengers for CY2004 was 434,289 or a 16% increase from CY2003.

On November 22, a fourth amendment to the Design-Build Agreement relating to Terminal No. 2 was entered into between the Galveston Port Facilities Corporation and CH2M Hill Constructors, Inc. for $4,261,898. This amendment was for Phase 2C-2, which included additional terminal renovation work not included in Phase 2C-1 such as electrical upgrades necessary to support the passenger loading bridge, escalator and elevator; installation of interior restrooms; Customs and Border Protection inspection areas; additional building finishes and mechanical work. Wharf work continues. All concrete and steel pipe piles have been driven and the scour repair in the vicinity of the underwater area affected by the cruise ship bow thrusters has been completed. 90% of the pier apron panels have been installed and the pier expansion should be completed by the first week of February. The water station has been completed and is being used by the cruise ships. The passenger bridge was delivered November 27. Construction of the concrete pedestals to support the loading bridge and the footings of the vertical core necessary to support the bridge has been completed. Ceiling painting has also been completed and the studs for the insulated wall panels installed. Final completion of all Terminal No.2 work is scheduled for July 1, 2005.

The bid opening for the surveillance camera project funded by Round 2 of the Federal security grants program was held on April 27, 2004. Johnson Control, Inc. was the low bidder at $407,405. This includes the procurement, installation and integration of the cameras with the surveillance system being designed by L-3 Communications for the Port. 38 of the 40 cameras for the project have been installed. An Interim Progress Review for the project will be held on January 20. A month long intrusion vulnerability test is also scheduled to begin on January 20 to test certain detection aspects of the L-3 system. TSL representatives will be in attendance to observe the first phase of the test. The installation of the electrical system necessary to support the system is complete.

The Federally funded project to build a new Port Police Headquarters and a secondary Emergency Operations Center was advertised for bid during the week of September 20. A bid opening was held October 21. All bids exceeded the grant amount provided for this project. On November 3, Port staff and the design engineer, CH2M Hill, met with the three lowest bidders to determine which elements of the bid specifications were causing the costs of the project to exceed the initial estimate. Based on the comments of the bidders, the Police Headquarters was redesigned in an attempt to get a bid within budget. The project was re-advertised on November 14 and the second bid opening held December 2. Six bids were received with the lowest bid submitted by Brazos Commercial Constructors (BCC), Inc. for $588,000. This bid was within budget and a Notice of Acceptance was sent to BCC on December 28. The pre-construction meeting is scheduled for January 20 and work should begin by the first week of February. Final completion of the facility is estimated to be late summer 2005.

Demolition of Section G at Plant No. 3 is required to provide for a west end road capable of handling trucks and cargo in this part of the Port in conjunction with the opening of the 40^{th Street Gate as the only entrance into the west end of the Port. Sections G and H at Piers 39 and 40 are safety hazards and should be demolished. Bids were opened on May 25. JTB Services, Inc. submitted the low bid of $404,873. A Notice to Proceed was issued on August 19. The demolition of Plant No. 3 is 95% complete. The warehouse has been demolished and demolition on the floor at the south end has begun. This area must be cleared to accommodate the new roadway. Sections G and H of Piers 39 and 40 have been demolished and the site cleared. JTB has 180 days to complete the project.}

The fuel cell became fully operational on January 12. There is an additional installation to the fuel cell that will ensure it does not feed into the power grid. This installation must be checked by CenterPoint after it is completed. The installation cost is $133,961 and is payable through a Federal security grant.

In addition, to the demolition of Sections G and H at Pier 39 and 40, a Request for Proposals for the demolition of the remainder of Pier 39 and 40 was issued and bids opened on August 17. Five companies submitted bids ranging from approximately $817,000 to $343,000 with one bid at $198,000 that did not include a price for crushed concrete. At the August 20, 2004 Board meeting, the Board approved award of a contract to the lowest bidder, demolition only. However, since that Board meeting, the scope of the project changed, with fewer warehouses to be demolished and the possibility of the Port obtaining additional crushed material with GRLP paying for it. A second Request for Proposals was issued and bids received on December 7. Three bids were received ranging from $209,266 to $219,200 to include demolition of Pier 39 Warehouse, Sections E and F and Pier 40 Warehouse, Sections A through F. Han-Padron Associates also completed a Conceptual Planning Report that included developing Pier 39 and 40 for ro-ro cargo. Their Engineer’s Estimate of Probable Construction Cost was $17.5 million for development of this area. Of this cost approximately $7 million was for a 120,000 square foot warehouse and $6 million for bulkhead repairs, fendering and moorings. Port engineering staff estimates that a useable facility could be developed for this area for approximately $1 million including demolition costs. Costs would include repair of the pier apron as the area below the apron has washed out leaving it unsafe for any traffic. These repairs will be done in-house using some contract labor. Board of Trustees approval on any funds expenditure will be obtained.

Based on Board direction, plans to improve Pier 34 and the uplands area have been initiated to accommodate ro-ro cargo in this area. Engineering design work at Pier 34 by Goldston Engineering has resumed and a draft plan for this facility is expected by the first week of February. The Board has directed that Wallenius Wilhelmsen be back at this site by April 1, 2005. $600,000 has been budgeted in the FY2005 Capital Improvements Budget to pave the 6.4 acres and install lighting.

An Invitation to Bid Proposal was advertised on November 7 and 14 and a pre-bid conference held on November 16. The project is to construct four crash proof gates at the various vehicle entrances to the cruise terminals at Pier 23, Pier 26, Pier 28 and Pier 29. This project is funded by a Federal grant. The bid opening was held December 2. Two companies submitted bids and the low bidder was Commercial Fence Co., Inc of Pasadena. Their bid was $264,645. A pre-construction meeting was held on January 5. Work should begin in mid-February and final completion is expected by April 30, 2005.