Federal Bureaucracy is Sinking Port Deepening Projects

When the deepening of the Panama Canal is complete in 2014, ships from Asia will be able to unload their cargo at Atlantic Ocean ports. Currently, electronics, clothing, and other products shipped from Asia are unloaded at Pacific Ocean ports, such as Long Beach, Los Angeles and Oakland, and then carried by truck, train, plane or some combination of these to reach East Coast markets. This increases costs for consumers and decreases profits for producers. The deepening of the Panama Canal could speed up the movement of goods and be a boon for consumers. Unfortunately, with the exceptions of New York and Norfolk, no East Coast ports are currently deep enough. As a result, these ships will have to come in only half-full to avoid running aground.

With the federal debt soaring, there is little money for harbor deepenings. Public-private partnerships can help supply the needed port funds. Most ports do not have the local funds to deepen their harbors. The cost of deepening ranges from $600 million for the port of Savannah to $1.3 billion for the port of New York. Ports must go through a cumbersome, lengthy, and unpredictable process to obtain federal funding that is governed by the Water Resources Development Act of 2007 (WRDA 2007). The Port of New Jersey/New York is the only port to have received sufficient funds -over $600 million- to deepen its harbor. And it took the port almost 10 years from the start of the process until the port began the dredging process in 2008.

Port PPPs would deliver needed infrastructure, raise new sources of capital, shift risks to investors, provide a business-like approach, and encourage innovations.

How would a PPP process work at US ports? The private company would pay for and perform the initial deepening and future maintenance of the harbor. To recoup this investment, the company would likely operate the port. Often times, the private company would rent the port from the state via a fixed annual payment to the state, a variable payment or a partial lease.

Public-private partnerships (PPPs) can bring much-needed money to ports at this critical juncture. Busy ports such as Charleston, South Carolina and Galveston, Texas would likely attract a lot of interest from private companies willing to finance expansion and improvement projects.

For more information see my full commentary here.