Why Privatize the Port Now?

The Kinder Morgan proposal to privatize the Port of Wilmington ought to be much in the news this week — their Bond Bill Hearing is set for 10AM this Wednesday (in Dover) and the Wilmington City Council will conduct a hearing into this action on Thursday 28 February at 5pm in City Council Chambers. I know that the Wilmington hearing will be live streamed online, and I don’t know what access we’ll have for the Dover hearing other than in person. One of the things I want to point out today, and I’m hoping that decision-makers keep in mind, is that while DEDO was publicly touting an investment partnership to build out the Port, their RFP (released approx 2 months prior to this article) included a privatization option that customers and businesses at the Port did not know until months later. And still, this privatization deal is quite different than from the talking points DEDO was using to promote this deal as an expansion opportunity.

WDDE took a look at the Port of Wilmington in April 2012 — Port of Wilmington: A gateway to Delaware’s economic development:

According to Bailey [DSPC Executive Director Eugene Bailey – ed.], the port is looking for a commercial partner to expand operations to the Delaware River side of the port property. Currently, ships dock along the Christina River for loading and unloading. “Considering the funding requirements to go to the river and expand our facility, we will need a partner in order to be able to do that. That’s what we’re exploring right now,” Bailey said.

The cost of moving to the Delaware River is estimated at half-a-billion dollars.

“I think if we find the right partner, we will double the capacity of the Port of Wilmington, which will increase the jobs, which will increase the tonnage coming in, and I think will create a great opportunity for Delaware,” Delaware Economic Development Office Secretary Alan Levin said. He also stressed that in no way would pursuing a private sector partner indicate that the state is interested in selling the port.

“It’s too valuable of an asset to sell,” Levin said. “What we’re looking at is a joint venture, a lease of a portion of the port to another company, to help us.”

Read that again — because the business relationships being described by Bailey and Levin is NOT the deal that is currently on the table. And I am hoping that those who go to the Dover hearing on Wednesday find out EXACTLY why the nature of the deal originally wanted changed. Because what is on the table hands over a very valuable state asset for a fire sale price, doesn’t seem to provide any protection for the current interests/customers of the Port beyond whatever contracts they currently have, and does not do what everyone says is needed — expand out into the Delaware.

I had the chance for a tour of the Port facilities — inside and outside of the fence — last week. It was very instructive — especially since I’d never seen it before. What you do see, though, are a number of businesses that are importing products and/or adding value to imported products and businesses that are exporting products. All told, that is approx. $337M in revenues generating approx. $31M in state and local taxes. That’s pretty good, considering that the Port (like the rest of the world) is in the recovery end of the Great Recession. KM may add some revenues and taxes to that number by whatever additional work they can bring to the port — which (if you remember their presentation) is largely limited by the what they can add inside the fence. The current port footprint is pretty much 80% full — meaning that DEDO and the DSPC were quite right in the early stages of this process to focus on expansion of the Port.

One of the other things that you see via this tour, is that while we worry about what the KM deal does for the fruit and juice operations that are a big deal here, but not in KM’s skillsets, we should worry as much about the businesses that are outside of the fence, managing imports and exports of the kind of materials that is in the KM wheelhouse. In other words, privatizing the Port would hand over not just a monopoly to the Port, but would specifically bring a competitor to businesses that are already there. And since KM would have control of the Port, they could easily rejigger fees, access agreements or any other terms handled by current contracts to throw these firms under the bus.

Sound far fetched? Maybe. But it answers the reason why KM would be interested in running a terminal where there is a healthy and growing business that looks alot like their own WITHOUT making any commitments to expand the terminal. But there is still the question of why DEDO and the DPSC are looking to just turn over this asset without any real protections for the current businesses at this Port. You can’t overstate the work going on outside of the Port — bringing in materials for packaging and repackaging, autos that are customized for shipment overseas, export of petroleum coke from DE City, export of scrap materials — and the value added by these businesses. There is some growth in bringing in chemicals from Turkey and there is even a small startup looking to find markets for a product dug up from the ocean around the Bahamas. There is a great deal of entrepreneurial energy going on here and I wonder why the entrepreneurial Governor and his DEDO Director aren’t tapping into this energy in plotting out a way for this Port to take better advantage of some if its niche capabilities.

There’s a good number of people working at these facilities too. And they aren’t all union jobs as the detractors want to portray. This isn’t an effort to just save some union jobs, it is an effort to save a large pool of jobs held by a group of people who are working hard to make the Port (and themselves) a success, and providing a decent amount of revenues to the State while they’re at it. According to the Port’s own economic analysis, there are approximately 2200 direct jobs generated by Port business (maybe a third of these are union jobs?), 444 indirect jobs and a total of 12.5K of related jobs related to Port activity. This is alot of economic activity to lose control over via privatization effort. This is alot of economic activity ripe for building on — not turning over to collect a pittance on.

What’s next? Time to contact the Bond Bill committee to demand that they ask the tough questions that it looks like DEDO hasn’t. Tell us what you think the Bond Bill committee ought to be asking DEDO and Kinder Morgan this week?

Economic Impacts of the Port of Wilmington: