Lydia E. York Delaware State Auditor
Diamond State Port Corporation FY23
Financial Statement Audit, Fiscal Year Ended June 30, 2023
Report Summary
Background
Diamond State Port Corporation is a separate entity that is reported as part of the State’s overall financial statements. The corporation serves the state by operating the Port of Wilmington, which is a full-service deep-water port and terminal.
This engagement was performed in accordance with 29 Del. C. § 8786, which requires that the books and accounts of the Diamond State Port Corporation be audited annually by an independent certified public accounting firm that is mutually agreed upon by the State Auditor and the Secretary of State.
Key Information and Findings
Previous Lease (Gulftainer)
- Requirement to invest $580 million to redevelop existing port facilities and establish new port facilities at Edgemoor.
- Concession fee minimum of $3 million per year for first 10 years, $13.1 million for the eleventh year, and up to $12.0 million per year during the remaining 39 years.
Current Lease (Enstructure)
- Requirement to invest $87 million to redevelop existing port facilities.
- Agreement to collaborate with DSPC to establish new port facilities at Edgemoor.
- Concession fee minimum of $1 million per year for the first seven years and a minimum of $1.5 million per year for the remaining 48 years.
- Initial capital contribution of $21.5 million.
The 2023 financial statements of Diamond State Port Corporation (DSPC) reflect the concession agreement as it currently exists between DSPC and Enstructure. The concession agreement has always been accounted for as a leveraged lease in DSPC reports. The 2023 report reflects the Third Amendment to the concession agreement (Third Amendment) that was entered into in July 2023. The amended agreement is for 50 years, a period that began in the fiscal year 2024.(see page 14, Note 3).
Even though the Third Amendment was entered into after the end of the fiscal year 2023, accounting principles require the amended agreement be reflected in the 2023 report of DSPC because the Third Amendment provided for a material change in the financial terms. The new terms were known prior to the publication of this report and affect the year-end balances. (see page 14, Note 3).
Leveraged lease accounting is the proper form of accounting for the terms of this concession agreement. This manner of presentation does not reflect any of the operations of the port. Leveraged lease presentation will reflect whether the concession payments are being made by the concession holder. (see page 13, Note 3).
The Third Amendment gave rise to changes in the balances reported by DSPC that are related to the leveraged lease. The overall loss due to the change in concession holder reflected in the Statement of Revenues, Expenses, and Changes in Net Position is $97.3 million. (see also page 14, Note 3).
Even though the report is otherwise compliant with generally accepted accounting standards, the report as presented is not fully compliant with government accounting standards. The report is accurate regarding 2023 results; however, Government Accounting Standards also require the report to include Management Discussion and Analysis. This section would include the comments of management concerning the results presented. This report does not include commentary from management. AOA hopes that future reports will comply with this standard of reporting. (see page 2 of the Independent Auditor’s Report).
In fiscal year 2023, DSPC received a $30 million grant from the State of Delaware to finance the early engineering and early construction of a new container port in Edgemoor, Delaware. The State funding for the grant was awarded by way of the American Rescue Plan Act. (see page 12, Note 2(g)).
On November 30, 2001, DSPC entered into a loan agreement with DelDOT where DSPC borrowed $27,500,000. During the year ended June 30, 2023, the Transportation Trust Fund was due to receive $1.8 million from the corporation; however, the loan was restructured to allow for the deferral of debt service principal and interest payments.(see page 20, Note 8).
The calculation in the following graph is based on data from the current and prior year to arrive at the present value of the losses from the concession agreement. Because this report presents one year of financial activity, users of the financial statement will need to review the prior year report. Going forward AOA anticipates that future reports will be presented with comparative statements as a standard of reporting.