_{Thumbnail photo: Crescent City Harbor’s inner boat basin. | Photo by Gavin Van Alstine}

Harbor Board Chairman Rick Shepherd insisted that a plan to both make a loan payment to the U.S. Department of Agriculture and address maintenance issues would “save our ass,” though he admitted it was convoluted.

The plan involves a trust account with the county that houses the transiency occupancy tax (TOT) revenue the Measure C has generated for the Harbor District since voters approved it in 2018.

On Wednesday, CCHD Fiscal Officer Sandy Moreno informed commissioners that there is $602,396 in that trust account — more than enough to make two loan payments to the USDA. She proposed using roughly $263,888 to satisfy a delinquent payment the Harbor District should have made to the USDA in September 2025 and using $129,841 to address the district’s maintenance needs.

“We are required to have a reserve account in the amount of (about) $260,000,” she told Redwood Voice Community News. “We’re going to ask the county to make our September 2025 payment and we’re going to ask the USDA to deem that as reserve funds used.”

Four CCHD commissioners approved sending a letter to USDA Rural Housing Service proposing to make a $263,888 payment from a debt service reserve account and then replenishing that account through annual payments of $26,030.

The letter states that CCHD would make the payment to the federal agency by Friday, however that money would actually come from Del Norte County, which oversees the trust account. Moreno said she would call Auditor-Controller Clint Schaad on Thursday to remit that payment.

The Crescent City Harbor District should have had a reserve account since it received the $5 million USDA loan to rebuild the marina following tsunamis in 2006 and 2011, according to Moreno. The Harbor District also should have put money aside for about 10 years until it added up to one full annual payment of $260,000, she said.

The Harbor District now has enough money in its trust account to be able to create that reserve fund, Moreno told commissioners. Once the 2025-26 fiscal year ends, she said she would work with Del Norte County to create a separate account.

“I think the payment is going to happen this week,” Moreno said, adding that she was meeting with Schaad on May 21. “Clint already told me a year ago that all I have to do is ask for the money, give him the form and it’s done. I feel like we have no problem making this happen, but I don’t know if something will happen on the other side.”

Still, while Moreno said USDA Asset Risk Management Specialist April Dahlager had been supportive of the proposed “debt service reserve fund” plan, it hinges on the USDA’s official authorization.

Harbor Commissioner Annie Nehmer, who voted against the proposal, also noted that Del Norte County officials haven’t indicated whether they support the plan.

“This is a bunch of language to maybe satisfy the USDA without any proof this is what they’re asking for when you failed to make the payment in September,” Nehmer told Moreno. “It’s due. Make the payment.”

Moreno and CCHD Harbormaster Mike Rademaker have been working with the USDA since before September 2025 to restructure the terms of the Harbor District’s loan. 

They had initially requested either foregoing loan payments or reducing them to about 10% of the annual balance for 2025 and 2026 and using the remaining funds for maintenance. 

According to Moreno, Dahlager suggested that creating a debt service reserve fund using the Measure C dollars that are currently in the trust account with the county would be a better option.

There’s also a question about whether the USDA requires the inner boat basin to be insured. Rademaker and Moreno have been discussing this issue since they convinced the Board of Commissioners nearly a year ago to forego insuring the marina against collision and fire. The policy had included a $181,500 premium and a $250,000 deductible and hadn’t offered insurance protection against tsunami, wave or wind damage.

On Wednesday, Rademaker said that decision saved the Harbor District hundreds of thousands of dollars.

With a new budget year approaching, CCHD will be evaluating whether to renew all of its insurance policies, Moreno said.

“That’s going to give us another opportunity to look at what it will cost,” she said. “It will probably be more than last year and that’s just going to strengthen our argument for wanting to be self funded.”

The harbormaster also spoke to whether the USDA would allow the Harbor District to use its reserve dollars.

“You have to demonstrate a financial need,” he said. “Fortunately, they’re willing to work with us on the replenishment of that (account) over 10 years, which I think is way more than I expected. I was hoping for three years.”

In its letter to the USDA, the Harbor District mentions its financial challenges arising from the Fashion Blacksmith arbitration and settlement obligation of $5.2 million. It also refers to the existing state of emergency that came from the July 30, 2025 tsunami.

During her presentation, Moreno said the Harbor District will have transiency occupancy tax dollars coming into its trust account this summer. TOT revenue has increased from $265,000 in 2023 to $312,000 in 2025, according to her report. For fiscal year 2026, CCHD has received $309,266 in TOT dollars, according to Moreno’s report. She said she was projecting an additional $30,000 in TOT this year.

Moreno said if the USDA doesn’t approve the proposed debt restructuring reserve account plan, the Harbor District would use its “regular TOT” in September 2026 to make its regular annual payment. However, she said, CCHD could still try to negotiate reducing the payment and refinancing the rest.

The problem, according to Nehmer, is that CCHD also owes an additional $3,600 in interest to the USDA due to the missed payment from September 2025.

Shepherd, who insisted that the Harbor District had been in contact with the county and the USDA on a weekly basis and wasn’t “hiding anything,” asked Nehmer what her suggestions were. 

Nehmer said a second insurance quote should have come a year ago.

The ongoing negotiation with the USDA “has allowed us to not suffer any adverse action on the insurance or the (missed) payment and be able to take advantage of a 10-year payback period,” Rademaker said.

“That’s a huge advantage,” he said.

Nehmer continued to argue that the Harbor District was stiffing taxpayers because of the missed payment and insurance

“You’re taking $3,600 more of taxpayers’ money, putting it on interest that you could have used on maintenance because you didn’t make the payment,” she said. “And you’re justifying it by calling it debt reserve when it’s the trust account. But you got to use the language to finagle.”

Nehmer’s colleague, Gerhard Weber, argued that the proposal to make a payment from the CCHD’s debt reserves, using a portion of it for maintenance and then replenishing it over 10 years would help with the district’s cashflow issues. 

This is important as the Harbor District embarks on grant-funded projects that involve making expenditures up front and then waiting for reimbursement, Weber said.

“This frees up the other money we would normally be using to pay maintenance,” he said. “Guess what, if we’re using this money for maintenance costs, the money we could have used for maintenance we now have for cash flow.”

Shepherd, who spearheaded the Measure C campaign in 2018, said he and others who worked to get voters to approve it wanted to use that TOT revenue for paying off the USDA loan and funding maintenance and repairs. 

“It’s taken years to come to this place,” he said. “But it’s the reason the voters voted on the TO tax, to save the harbor.”