Kinder Morgan Deal is Dead Part III
Let’s call this part The Secret of the Ooze. Sunday’s NJ provides a front page followup to the Kinder Morgan aftermath. If you’ve been following this story, there’s a few questions that are unanswered and the News Journal DOES NOT ask them, either.
Let’s start with Speaker Pete noting that the Port Director wants $156M over 10 years to keep the facilities in some competitive position:
House Speaker Peter Schwartzkopf said it will be a stretch for the state to even come up with the $156 million Port Director Gene Bailey says is needed over the next 10 years just to keep the current facilities up to par.
“I think the state of Delaware just shot themselves in the foot,” Schwartzkopf said Friday.
DSPC wanted an expansion to happen:
The port corporation sought bids for a private partner that could help make an expansion happen. In December, the port corporation entered into exclusive negotiations with Kinder Morgan, of Houston.
KM offers ONLY $40M to keep the facilities up, leaving a $106M deficit for upkeep:
Critics said the $40 million Kinder Morgan promised for upkeep wasn’t nearly enough. Bailey’s list of needs includes $48 million for new warehouses, $25 million to buy two new container cranes and $15 million to replace a floating dock.
(Critics? Critics? You don’t need to be a critic to see that the $156M wanted by the Port over 10 years was greater than the $40M offered by KM implies to pretty much everyone that something that the Port ED wants won’t get done.)
And a DSPC Board Member was “hoping” that KM would provide a plan to build on the Delaware — seriously, a DSPC Board member is reduced to HOPING that their selected contractor would someday have a plan to get to the Board’s long-term ambition, the one they were selling as the reason for this lease action in the first place:
DiPinto said Friday he was disappointed to hear that Kinder Morgan had suspended its efforts. DiPinto said he was holding out hope that Kinder Morgan would outline plans to eventually build on the Delaware.
So are you following me here?
- How come no one is asking about the obvious disconnect between the $156M need and the $40M offer by Kinder Morgan?
- How come no one is asking how it is that the DSPC choose to negotiate with someone who would not commit to either short or medium term upgrades to the Port OR to building out on the Delaware?
- How come no one is asking how this Board could have been this inept? Not just in pursuing a deal that appears to not even get the Port to any medium or long term competitiveness; but also in not having a fallback plan. There are customers at this port with options, there are businesses and workers who are generating plenty of tax revenue here and it wasn’t worth someone’s time to have a backup? What if none of the bids were satisfactory?
Wouldn’t you want answers to these questions? Maybe the rest of the lease payment was a way to funnel those funds back to KM for more building, but that would mean that KM was getting that facility basically for free, which doesn’t make sense for a state that is telling its taxpayers that it can’t afford to invest in an already tax-generating asset. Who knows. What is plain to be, based on all of the information and documents we’ve been able to put our hands on is that KM wasn’t committing to the kind of long term improvements partnership that this Administration was selling to us.
The President of ILA 1694 reminds us that the Port of Paulsboro is under construction over in New Jersey, not far from the Port of Wilmington, meaning that more competition is definitely imminent. It is probably a little further away that planned, since they rejected their bids to build two berths. I don’t know if that Port would be set up to handle the fruit business that Wilmington does. Still, the thing I want to point you to is that this facility was built from scratch –approx. $250M price tag — financed by the State of NJ, Gloucester County Redevelopment Authority and the City of Paulsboro. Not private investment. NJ seems to hope that this facility will be a hub of offshore wind development. They’ve taken quite a risk and made a serious investment in their own future. Unlike the State of Delaware who still can’t quite come to grips with the fact that they have a great asset that needs investment to increase its competitive standing — they aren’t starting from scratch like Paulsboro is.
Good questions Cassandra. Like Bill Clinton says, it’s just math, and it doesn’t add up.
Kinder Morgan’s Explanation:
“”Simply put, we have choices in terms of where we will invest substantial resources and the current union leadership at your facility does not make Delaware a good choice at this time,” wrote Kinder Morgan president John Schlosser”
Which doesn’t explain how the DSPC could have been negotiating a lease with someone who wasn’t going to spend their substantial resources at that Port.
“the current union leadership at your facility does not make Delaware a good choice at this time,”
What more red flag do we need that KM isn’t planning to do right by Delaware workers? That is a signed admission and warning to stay away from the deal.
“What more red flag do we need that KM isn’t planning to do right by Delaware workers? That is a signed admission and warning to stay away from the deal.”
Maybe union leadership isn’t doing right by Delaware workers.
And it still doesn’t explain how the DSPC could have been negotiating a lease with someone who wasn’t going to spend their substantial resources at the Port.
Great blogging. KM was in love with this deal when it looked like it was going to close over a backroom handshake and a glass sherry. (Is one of the KM guys Levin’s old frat buddy? I would not be at all surprised to find that out.)
That it crumbled under this very light scrutiny is all you need to know about how much Delaware was about to be screwed.
KM said they were ready to invest “at least $200 million” in the deal. Maybe I’m missing the point somewhere.
“This may have been an opportunity for increased jobs as a result of additional capital investment beyond what the state can afford,” Gov. Jack Markell said in a prepared statement. “It is unfortunate that the port will not be able to capitalize on that potential opportunity at this time.”
Sounds to me like they were willing to spend “substantial resources”, cassandra.
I’m sure your indignation alone will be enough to convince the state of Delaware — which, you might have noticed, lacks the resources of the state of New Jersey — to free up several hundred million dollars to invest, so it can secure its annual cash-flow profit of $2 million.
Have you used your math skills to calculate how long it would take to make that investment pay off?
Geezer is right in pointing out that I am probably naive to think that there shouldn’t be two economic development tracks; one for the well connected that typically results in contracts, and one for everybody else that typically results in bupkis.
No, my point is that $200 million is a boatload (pun intended) of money, and there is scant evidence than anyone in power, either the administration or the joint money committees, has any intention of ponying it up.
Some of us were skeptical of the deal because we needed more information. Others, apparently, were against ANY deal. Those people now have to come up with another way of improving the Port. Just complaining that the state should do it is not a strategy.
Remember something: Most economic development deals with the state involve no money changing hands; the funds cited are usually in the form of tax waivers.
This one requires large amounts of actual capital. That is something the state usually doesn’t hand out.
KM said they were ready to invest “at least $200 million” in the deal. Maybe I’m missing the point somewhere.
As usual, you are missing the point. KM would be spending its vast resources as follows:
$142.5 M lease payments over 50 years to State
$16.5 M upfront payment to the State
$12.5M infrastructure improvements
$24M O&M funds over 20 years
$5M expansion funds
So that is only $41.5M that they were planning to put directly into the port. Way short of the $156M that the Port’s ED says is needed. Way short. So why would the DSPC be negotiating with a firm that doesn’t even get them to the funds they think they need over the long term?
NJ floated bond issues to pay for Paulsboro. And the funds for upgrading Delaware’s port are also from bond issues. But Jason is right — two economic development tracks doesn’t make any sense. Delaware is a river of bond funding to the university for its upgrade needs. Why should the port be treated differently?
“So why would the DSPC be negotiating with a firm that doesn’t even get them to the funds they think they need over the long term?”
What KM put on paper was what it was willing to guarantee by contract. That doesn’t mean that’s all it was willing to invest. Nobody else, it should be noted, has offered to invest anything.
“Delaware is a river of bond funding to the university for its upgrade needs. Why should the port be treated differently?”
Really? You really can’t see any differences between a university and a port? Please tell me that was a rhetorical question.
All of which is beside the point. You can’t seriously believe that your shabby bit of false equivalency is your strategy for funding port improvements.
“there is scant evidence than anyone in power, either the administration or the joint money committees, has any intention of ponying it up.”
Maybe taking privatization off the table will remove a distraction and concentrate their minds. Ports have been funded with bond issues for nearly a century.
The governor has surrounded himself with the best and brightest advisors, but apparently their skill set is limited to selling off businesses rather than actually running them.
I think the problem rather is that the port is small and its future uncertain. A bond issue usually takes 20 years to pay off, and people in Dover think the Port won’t be here in 10 years.
Beyond that, I’m not the one you have to convince. A bond issue and continued state ownership was my preferred solution to this.
The opposition comes from those who point to our already-high bond indebtedness and those who prefer selling or leasing it off to investing in it.
I worry that a lot of people who thought no deal was better than dealing with KM don’t have a next move.
What KM put on paper was what it was willing to guarantee by contract. That doesn’t mean that’s all it was willing to invest. Nobody else, it should be noted, has offered to invest anything.
Awesome. The Trust Me business plan. Remind me to recommend you to the board of the DSPC, because you are exactly the kind of business mind that will find a comfy place there. If you aren’t willing to put it in a contract, it doesn’t exist. The End. And if you aren’t getting a deal on paper that doesn’t get you close to your stated need then you’ve screwed the pooch pretty badly. Which would explain why they wanted to keep this under wraps so badly.
The similarity between the Port and the University is that they are both drivers of economic activity. If you are out and about selling Delaware as a place to do business and you can’t keep a competitive port facility then you’ve undermined your argument. But I get that the difference between the Port and the University is blue collar vs. white collar and how dare the blue collar ones not just do what they are told, right? Sheesh.
The governor has surrounded himself with the best and brightest advisors, but apparently their skill set is limited to selling off businesses rather than actually running them.
Actually, I think that this group of people were over their heads for this privatization plan. But the deal that it looked like they made wasn’t the kind of deal Levin would have taken to sell off Happy Harry’s, I’ll guarantee you.
My point is that I am skeptical about the amount of effort that was put into attempting to make a state-operated port financially viable, as long as the backroom deal was on the table. Now that the deal is off, it’s time for another look.
“If you aren’t willing to put it in a contract, it doesn’t exist. The End.”
Right. Because you’re such an expert at negotiations. Please.
“And if you aren’t getting a deal on paper that doesn’t get you close to your stated need then you’ve screwed the pooch pretty badly.”
Which would have come out when the deal went up for approval, no?
“Which would explain why they wanted to keep this under wraps so badly.
Now you’re way off base. Our government keeps everything under wraps, in case you hadn’t noticed.
Your antagonism has made you even less rational than usual.
But don’t worry. You own this one now, Ms. Know It All.
“I think that this group of people were over their heads for this privatization plan.”
And I think you are over your head on the whole issue. Of course, you’re used to it, so there’s that.
What’s fun is that Geezer is at his most antagonistic when he hasn’t a bloody clue. Too bad you won’t take the time to educate yourself, rather that make a fool of yourself carrying Alan Levin’s water. But hey. This is the disease of people who get paid to talk for a living, rather than know something for a living.
I’ve read everything you have written on the issue. If I don’t have a bloody clue, blame yourself.
I have many, many doubts. You have many, many certainties. I don’t trust your certainties, or Julius Cephas’, any more than I trust Kinder Morgan’s.
I do, however, trust Alan Levin, because I’ve known him for almost a decade and he has not lied to me in any lie I have caught him in. That doesn’t mean I trust Kinder Morgan, but you cannot be certain they are lying any more than Alan Levin can be certain they’re telling the truth. Meanwhile, you have put your trust in a guy who makes his actual living by “advising” politicians on the “black community” (which is just what it sounds like — selling influence).
By the way, what is it you actually do for a living, as long as you’re taking shots at mine?
Regardless of the whether the KM deal was the right deal, there remains the question of whether the operation of the port is an inherently governmental function.
There are many models that should have been discussed, including GOCO, public/private partnership, privatization, and purely public. Privatization of a public resource is not my preferred model because it requires the private entity to act in the public interest which often conflicts with their interest in profit. Conversely, a government operation often has less of an interest in and experience with economic considerations.
Even though it’s a public resource, the port really should not operate at a loss. Still there are public interest reasons why it may be appropriate for the state to subsidize the port. Regardless, it seems to me that sometimes folks forget to ask the question “What problem are we trying to solve?”
Right, Geezer, contracts are highly overrated. Lets go with a handshake, nod n a wink.
Naturally its the unions fault, just look at the math: Port “needs” $156m improvements KM offers $41.5m. Yeah, thats got labors fingerprints all over it.
I would really like to know what Pete meant when he said he thought Delaware was shooting itself in the foot. Bad deal better than no deal? Or that someone needs to step up and rescue this deal through fierce negotiations?
An Opinion
All of this going on, all of this, and waiting for someone to mention – guess what?
What politicians never mention.
Well, never heard it mentioned.
Seems there’s been an oily, coal black, gaseous elephant in the room,
There over in that corner…but quite unmentionable you know, because
politicians are the ones who enabled, helped produce it and it’s called Denial.
It’s what comes home to roost when politicians ignore nature and oblige special interests.
Denial’s the mother of Climate Change, who’s now raising Sea Levels,
which will be making it increasingly tough for politicians
to keep their calculating heads above water through the coming decades of stormy weather.
Seems the State of DEnial had a Plan to have a big fossil fuel Daddy, float them some cash.
But the fossil fuel family have been quite the dead beats when it comes to owning Denial and footing bills.
You know the type, earning plenty of money, but unwilling to pay
to help out, to help cover some Denial expenses, and it turns out, as has been said for decades,
Denial really is one costly mother.
Big Daddy Denial did what his fossil fuel family does best. Deny.(Too costly, too costly, I’m not paying for that,
one imagines they heard.)
The fossil fuel family is in the money making business and the DE port is headed under water.
According to DNREC’s Sea Level Rise vulnerability Assessment, 7/12,
“Port of Wilmington: Between 36% and 73% of the Port of Wilmington’s property is within an area that could be
inundated by sea level rise by 2100.”
For the parameters and visuals of Fossil Fuel Denial, Momma Denial, Climate Change and the red haired child, Rising Sea Level, see their carbon footprints here:
pages 58, 63, 80, 92, 100, 156, 157, 158, 159, 160, 161
http://www.design.upenn.edu/files/Climate_Change_-_Delaware_River_Basin_-_web.pdf
DNREC – Office of the Secretary, Coastal Zone Heavy Industry, had this to say:
“Potential Economic Impact: Limited or changed functionality of the Port of Wilmington and supporting facilities
may temporarily or permanently affect the needed workforce causing a loss of jobs to the region. The port may
also see a decrease in revenues due to sea level rise impacting importing/exporting operations which will have
an effect on city, county, and state tax revenues.
For facilities that are not appropriately protected, either by elevation or by structures, rising water levels pose
an increased risk of chronic flooding, leading in the worst case to permanent inundation of marine terminal
facilities, either completely or in part, and rendering them inoperable (CCSP, 2008).
Navigable depths are likely to increase in many harbors and navigation channels as a result of rising sea
levels. This could lead to reduced dredging costs, but higher costs where rising water levels require changes to
terminals (CCSP, 2008). Transportation costs may also increase due to impacts to supporting businesses (auto,
chemical, food, minerals, etc.) which may impact the prices consumers pay for products.
One impact of sea level rise not generally mentioned is the decreased boat clearance under bridges. Even with
precise timing of the stage of tide and passage under fixed bridges, sea level rise will affect the number of low
water windows available for the large vessels now being built (Gill, Wright, Titus, Kafalenos, & Wright, 2009)”
…
“That doesn’t mean that’s all it was willing to invest.” Now there is a faith based statement if I’ve ever heard one. It doesn’t matter what the evidence is. What matters is what could conceivably happen. It’s on par with “God could have put all those fossils there to test our belief that the world is only 6,000 years old.” Yes, that’s conceivable (as are many possibilities when someone blithely commits the fallacy of arguing from silence). But do you really think so?
And do you really think KM would invest the full cost (or even nearly the full cost) of those improvements when they never agreed to in the first place?
So Geezer’s argument comes down to this: he likes Levin and dislikes Cephas. Therefore, it doesn’t matter what all facts indicate. If Levin says it’s a swell deal, it must be. I also like Levin, and I know nothing about Cephas. But as an argument and an analysis, that is pathetically sophomoric.
I never said it was a swell deal. I never said Levin was right. Neither you nor I have “all the facts,” so we have no idea what “all the facts” would indicate.
My argument comes down to this: People who opposed the deal made a lot of negative assumptions about KM, and they may have been right to do so. But most of them also made a lot of positive assumptions about the arguments being put forward by a man who has a dog in the fight.
I trust Alan Levin because I have never caught him in a lie. I don’t trust Julius Cephas because he took $80,000 from Chris Coons in a series of no-bid contracts, which means I trust him as little as I do Bill Bell, who took a phony job during the first Gordon reign as a “liaison to the volunteer fire community.”
“Liking” has nothing to do with it.
Have you ever argued with me without relying on inaccurate assumptions about my motives?
“Have you ever argued with me without relying on inaccurate assumptions about my motives?” I don’t exactly know what you mean by this. All I am saying is that arguments and positions are not convincing or unconvincing merely because we trust or mistrust the persons who make and hold them. I like Levin also. He seems like a person of integrity, but that is totally irrelevant to his position and the arguments and presentation of facts that he offers in support of his position–so irrelevant it is remarkable that you or anyone would cite it as factor in favor of the validity of his position. I don’t know Cephas. But assuming he did what you claim, so what? What possible relevance does that have to do with his position *on this issue*?
Trust me on this, do not trust Mr. Levin. I also like Alan, but in this case he was either very misinformed, he was stretching the truth or he was lying. How could you trust someone who wanted to do a deal like this, without any public input, behind closed door, with a group of people who were all appointed by the governor. None of the voting board members had any maritime experience. Didn’t Alan say several times in press releases that after they had a contract, it would go before the legislature for approval. Isn’t he the same guy who later said that lawyers would have to decide if it had to go to the legislature. Was he flip flopping or lying? Whether you want to call it misleading statements, (we are looking for a partner to expand the port onto the Delaware) or lying, Mr. Levin is not to be trusted.
“How could you trust someone who wanted to do a deal like this, without any public input, behind closed door”
This is the natural impulse of anybody in power, even in our democracy. You should see what’s happening in education. Critical decisions from the smallest to the largest are being done without parents even knowing about it.