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Jaxport's financial bind: excellent insight from local paper

 

'Tough times ahead' for JaxPort

Economic realities present problems for growth plans.

 PICT0014

 

 By David Bauerlein

 

The drive to make Jacksonville one of the East Coast’s top-tier ports could be knocked off course by a number issues.

 

  • Waterway currents: The biggest ships face restrictions on when they can enter Jacksonville harbor because of strong currents at the Intracoastal Waterway. A fix will cost $60 million.

 

  • Hanjin on hold: Plans for building a cargo terminal for Hanjin are on hold while the company negotiates a labor contract with the International Longershoremen’s Association.

 

  • Shallow harbor: Deepening the harbor to 48 feet will cost several hundred million dollars and Jacksonville faces stiff competition for the money.

 

  • Aging infrastructure: Existing port docks and equipment are aging and will require repair and replacement to fulfill the needs of current tenants.

 

  • Weak economy: Cargo and revenue have been on the upswing in 2010 but still haven’t recovered to pre-recession levels of growth.

 

 

After Monday’s meeting of the Jacksonville Port Authority board, Chairman David Kulik talked for a few minutes with state Rep. Lake Ray about the challenges facing JaxPort as it pushes to become one of the East Coast’s biggest ports.

 

“Tough times ahead,” Kulik said, summing up the conversation.

 

That sentiment captures the port authority’s outlook as it enters a crucial phase in the quest to become an international gateway like ports in Savannah, Ga., and New York City.

 

JaxPort officials say the recession has kept revenue from growing at a rate the port authority was counting on, leaving it with less money on hand. State spending likewise is tight. At the federal level, competition has always been fierce for the big-dollar construction projects like the $500 million harbor deepening Jacksonville would need to accommodate the jumbo-sized cargo vessels that will soon be heading through the Panama Canal.

 

But JaxPort officials say they’re not backing off from their expansion goals.

 

“We are on the right track but the locomotive is not moving as fast as I’d like,” said JaxPort Chief Executive Officer Rick Ferrin. “That is simply a function of the world economy.”

 

The most pressing need is fixing navigation obstacles at Mile Point, which is the area where the Intracoastal Waterway intersects the ship channel. The force of the currents limits passage of big cargo vessels to two 41/2-hour periods each day.

 

The port authority pledged to get that navigational problem corrected when JaxPort convinced Mitsui O.S.K. Lines to build a cargo terminal operated by subsidiary TraPac. Kulik said the Mile Point restriction is a “real and present threat” to Jacksonville attracting cargo in competition with other Southeast ports.

 

The port authority, working with the corps, originally wanted to get the $60 million project done by the end of 2011. But the Army Corps of Engineers extended the Mile Point study to get more information about how much future cargo traffic would go through Jacksonville.

 

JaxPort wants to fast-track the review by retroactively adding Mile Point to a previously completed report by the corps that resulted in deepening the harbor to 40 feet.

 

The corps is considering JaxPort’s request, said Barry Vorse, spokesman for the corps.

 

“At the moment, we’re seeing what we’re allowed to do and looking at the options, and we’ll go forward from there,” he said Tuesday.

 

If the port’s strategy succeeds, Ferrin said the authority would borrow $60 million to pay for Mile Point. JaxPort would seek $39 million in reimbursement from the federal government in future years. That would put more debt on the JaxPort’s books in the short term, but it would eliminate the usual wait for federal funding before construction starts.

 

JaxPort isn’t alone in feeling the squeeze from the recession. For example, the Alabama State Port Authority doubled its debt since 2006 to expand the Port of Mobile and get an inside track on the expected boom in cargo coming through a widened Panama Canal in 2014. But Fitch Ratings downgraded that port authority’s bond rating to BBB+  from A-  with concerns about the large new buildings generating enough revenue for the port.

 

Fitch Ratings recently maintained an A rating for JaxPort’s bonds. But Fitch but said the outlook for keeping that rating is negative unless slow revenue growth picks up. Ferrin and Kulik said retaining the A rating will be paramount in JaxPort’s financial decisions.

 

Ferrin said JaxPort needs a return to pre-recession growth rates for international trade and analysts forecast that will occur in 2014, which is the target date for opening a planned new cargo terminal for Hanjin. Ferrin said Hanjin’s lease agreement for port-owned land will generate money to pay off debt for building that cargo terminal.

 

The big enchilada for JaxPort is deepening the harbor to 48 feet, which would involve blasting through parts of the river bottom. JaxPort officials have said it could cost around $500 million, with the port authority’s share at $150 million. In the best-case scenario, an ongoing Army Corps study would result in congressional authorization in 2012 followed by funding in 2014 and completion by 2016. But the best-case timeline seldom pans out for such huge undertakings. Miami waited almost a decade for study of a 50-foot harbor to get through the corps review and is still seeking federal money to do the deep dredge.

 

Closer to home, it took a decade for deepening a 4.5 mile section of the St. Johns River to Talleyrand to get through the corps studies, congressional approval and construction. Scheduled for completion this month, that dredging cost $62 million and didn’t involve blasting, but it still was a struggle to get the federal backing.

 

Ray, who has pushed fellow state lawmakers to boost funding for state ports, said Jacksonville cannot afford to wait so long for the next phase of deepening. He said the state needs to fill the void or “we’re going to miss the market” for cargo flowing through a bigger Panama Canal.

 

“The reality is that we’ve got to step up to the plate,” he said. “The state has got to figure out how to help the ports.”

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