Today is the Port of Wilmington Bond Bill Hearing
It started at 10AM in Dover and it doesn’t look like it is being live streamed anywhere — which is a pity. I’m hoping to hear from those of you who did go in the comments below. But in the meantime, I want to repeat what I think is one of the two most compelling reasons why the port shouldn’t be privatized — having over a monopoly for the running for the ONLY port shipping terminal that Delaware has to a private entity is not a business decision that is in the best interests of taxpayers.
You’d also think that the Governor and DEDO wouldn’t want to hand over this asset to a private firm, either. I can’t imagine that you could still run around the world telling people about how great it is to do business in Delaware, when you have to tell them that your only Port facility is in the hands of Kinder Morgan and you need to make sure it would be OK with them before making an new import or export deals. And given what we know about this deal — which admittedly isn’t much — people who have been at briefings note that the state is planning to do this lease deal with minimal oversight of Kinder Morgan. The Port will be pretty much theirs to do what they need to do to make money — and the only protections businesses and workers may have are limited by the length of current contracts. And handing over a port monopoly without getting an iron-clad commitment to extend out into the Delaware ought to be considered malpractice of some kind.
A monopoly interest at the Port lets one firm extract a great many taxpayer resources, while reducing the competitive environment the Port, its clients and stakeholders live in. And this monopoly interest doesn’t even compensate taxpayers for their significant interest in this asset, much less commit to the kind of big improvements that would fundamentally change the competitive stance of this port. I’ll also remind you of our current experience with casinos — where the State is apparently enough of a “partner” in these operations that casinos can improve their profitability by getting the State to reduce its cut when the going gets rough, rather than figure out a better way to compete. Even though the money is paltry, I don’t imagine it would take much of a downturn for KM to come back looking for the State to reduce its lease payments.
So what to do? If I were in charge, I’d send KM packing, since they can’t get to the real change the Port needs. I would also convene a working group of Port customers and businesses led by an outside group to work through a structured planning process — one focused on short term, medium term and long term improvements and initiatives that would help current operations be more competitive. Make a commitment to implement these changes. I would also revisit the DSPC’s Board. The current board is clearly political appointees, with Alan Levin as the only one that I can ID as actually running a significant operation and one emeritus member who has maritime experience. I’d try to professionalize this board, by bringing in better expertise in logistics and/or transportation and give this board the charge to make sure that the results of the planning process got implemented. A more professional board probably won’t be so quick to throw away this asset, either.
Are you hearing anything about the hearing yet? Let us know in the comments or email me if you prefer to send info that way.
Tags: Port of Wilmington
WDDE reports that the surprise at the Bond Bill hearing was that the Port actually made a capital budget request:
Counting their chickens, apparently. And not paying attention to ongoing requirements while they were at it. I hear that the container crane is a longstanding need — and is in hurry up and do it mode to try to buy the support of one of the unions.
And then there’s John Kowalko:
I hope you appreciate that I object to the Port being privatized and believe there is no need for it to be leased and the point I’ve been making at this hearing and at the recent board hearing is that the State should fund and keep solvent the Port without any privatization. A used terms like “fire-sale” and “discount city giveaway” because I believe that this Port is not losing money and any economist above the pay-grade of cashier will tell you that is true despite Sec. Levin’s disingenuous remarks and analysis of the facts and because I wished to strengthen my closing remarks from this afternoon. I’ll quote ” a pessimist might view the failure to fully utilize available funds (economic development fund, strategic infrastructure funds) to stabilize the Port as a suspicious step toward making a “suitor” such as Kinder Morgan appear to be a magnanimous benefactor
I was at the meeting and was surprised to hear Levin announce to the Bond Committee that the administration does not support this request. That explains why the Port never made a request until now. They were told not to by Levin (Markell).
The fiscal picture was passed back and forth like a football and still remains somewhat murky. A whole lot of spin going on. I will try to recap through my notes later today.
Here’s the AP story with a lot more information than WDDE offered:
http://www.star-telegram.com/2013/02/27/v-print/4648463/wilmington-port-seeks-20m-from.html
@John Kowalko — I definitely get that you are opposed to this deal. My only point for your comment was that the price publicly on offer from KM as lease payment is *already a fire sale price.
@Nancy — thanks for posting the AP article.
Here is the NJ account: Port talks in choppy waters [yikes – Ed.]
Port officials were asked why they hadn’t spent money already allocated to them — because repairs and upgrades are certainly needed to support the business that is currently at the Port, right? And it looks like they were just planning to hand off this entire thing to KM and take the money back. Seriously, if I ran a business at the Port, I’d be in Jack Markell’s office this week asking why it is that businesses already here and working in Delaware can be so obviously shafted people who supposedly make business a priority.
The other thing is this:
That’s from Levin — except that KM has certainly not put deeper pockets on the table, right? KM’s own presentation provides for ONLY $5M for expansion in the first 5 years; $12.5M for infrastructure improvements and $24M for maintenance capital over 20 years. That’s $41.5M over 20 years, where the state capital funds (unused plus proposed) is $41.4M that can be spent NOW. KM hasn’t proposed any *deep pockets* spending, and unless the KM deal has changed, Levin shouldn’t still be trying to sell this BS. The deep pockets needed is a commitment to build out into the Delaware SOON and anything less than that makes this deal an incredibly bad one.
Thanks to everyone posting on this thread, and to Cassandra for another informative post. Great blogging!
Markell opposes Wilmington port’s $20M request
By Randall Chase, Associated Press
DOVER — The state board that oversees the Port of Wilmington asked Delaware lawmakers Wednesday for $20 million in the coming fiscal year for capital projects. However, the head of the Diamond State Port Corporation also told lawmakers that the administration of Gov. Jack Markell doesn’t back the funding request.
DSPC chairman Alan Levin, who also is Delaware’s economic development director, said the administration still believes the best approach is to finalize a deal with Houstonbased energy giant Kinder Morgan to privatize operations at the Wilmington port. “It’s merely a Band-Aid,’’ Mr. Levin said of the requested $20 million in capital funding. “It does not get us to where we want to be. We need deeper pockets.’’
“The port continues to bleed red ink each year,’’ Mr. Levin added. “The truth is, we are continuing to lose money on an annual basis.’’
Officials said that if the Kinder Morgan deal falls through, they will need the additional money from the state to keep the port operating.
If the request is approved, officials said they would use the funds for a new container crane, berth repairs, minor capital improvements and other expenses.
Lawmakers and unionized port workers who have concerns about the proposed Kinder Morgan deal urged members of the capital budget committee to support the port’s funding request, implying that privatization would be a bad deal for taxpayers and port workers.
Rep. John Kowalko, D-Newark, told the committee that failing to provide adequate funding for the port will lead to a “fire sale’’ to Kinder Morgan.
Rep. Kowalko also took issue with Mr. Levin’s contention that the port is losing money, saying that claim, supported by state budget officials, is based on an accounting for depreciation expenses. Union officials said that if Kinder Morgan signs a long-term lease deal with the state, the company will cut jobs at the port and the workers who remain will lose benefits.
“They will cut jobs, there’s no doubt about that … God only knows what they’ll do with the wages,’’ said Paul Cutler, vice president of the International Longshoremen’s Association Local 1694-1. Mr. Cutler said his union is not opposed to a partnership at the port, but that Kinder Morgan is “not the partner that we need.’’
Kinder Morgan has proposed investing at least $200 million at the port, including $142 million in lease payments and an upfront payment of $16.5 million. The company also has said it would spend millions more on infrastructure, maintenance, and expansion.
“It’s not an investment, it’s a steal,’’ Rep. Kowalko said of the Kinder Morgan proposal.
Mr. Levin noted that no final deal has been reached yet, but that the Markell administration hopes to have a proposal by April “that makes sense for everyone going forward.’’
Sen. David Sokola, a member of the budget committee, asked why port officials were asking for $3 million more for berth repairs when they’ve spent only $1.1 million of a $10 million appropriation they were provided last year for those repairs.
“I feel like we wasted a $10 million allocation… I feel like a chump,’’ said Sen. Sokola, D-Newark.
Mr. Levin said port officials were trying to preserve funds while working out a deal with Kinder Morgan, suggesting that it wouldn’t have made sense to spend $10 million to repair berths if Kinder Morgan decides to spend $60 million to replace them entirely.
“We would have repaired it for naught in the end,’’ he said, adding that the process of trying to work out a deal with Kinder Morgan has taken longer than officials expected.
Why not sell the port back to the city or county since over 60% of the ports’ residents live in the these areas if the state does not want to own it. New Castle County and the City of Wilmington will stand to loose the most revenue in taxes from job loss and/or low wages. It is still unclear of the criteria in which Kinder Morgan was chosen as the preferred bidder. Was this process discussed ever at any meeting or hearing??? What was KM’s score compared to the other Requests for Proposals (RFPs)? Just simply a bad deal and a sham. I also agree with Cassndra that a Workforce Advisory Committee made up of members who actually work and do business at the port along with a port economist is sorely needed. This would be just one strategy to move the port on the right direction to stay competitive and diversify their operations. Lets not forget that these suggestions come from people who just use their common sense. Not bad for a product of the public school system. The DSPC board humm……………………..?????
Where are the 8.9 million dollars? Just roughly speaking if you take the original 1 million dollars this port “supposedly” cost the state on a yearly basis, and added Sokola’s $10 million, it means the port “officially” made a profit of $7.9 million dollars. I know there is a lot of quibble room on the accounting, but still, if you receive 10 million to improve the local economy, and don’t, then say you are in the hole because unknown to everyone else you didn’t use the $10 million already given to you, you are not in the hole.
As a result of this manipulation, you are cutting everyone’s wages down to $12 an hour, putting the feeder businesses of the port in financial jeopardy, giving away a vital public asset away for free, and using mis-perception to accomplish your ends. I just saw Shrek 3 for the first time yesterday, and that exactly that is what is being proposed.
If Delaware’s chief executive has any further ambitions, he needs to stop being silent now. He needs to say, “bad deal; its over; let’s move on” before this issue brings him down. You can’t run on a national Democratic ticket on the position you drove out Unions.
And he can’t let it happen behind the scenes either. Sometimes that is good to do, but as I’m sure he is aware, it is the ‘kiss of death’ for anyone running on his “decisiveness”…..
Like who ever gets married to their first date? Duh! Where are our other options?
“I think the way this happened, I don’t think it sends a great signal to Kinder Morgan.” – Markell via WDEL
Presumably what Markell meant is that, ONLY by misrepresenting KM’s actual investment in the Port, grossly misrepresenting the improvements that would allegedly be made to the Port by KM, keeping anybody and everybody out of the loop when it comes to sharing information about the deal, and cutting a fire sale deal with a predatory company for a state asset, could you send a great signal to Kinder Morgan.
Yo, Jack, you were elected by us, not Kinder Morgan. What we’ve learned, thanks to that pesky disinfectant of sunshine that you sought to prevent, is that either you misled us on this deal, and/or you didn’t understand it yourself.
Oh, well. At least, you’ll always have Greg Lavelle when it comes to ‘trusting the Governor’. You and the Pope, Jack. That’s who Greg Lavelle trusts. Neither of whom are infallible, to say the least.
Beat me to it, El Som. The real crime of this thing is that he doesn’t seem to have any idea that he isn’t sending an especially good signal to the businesses THAT ARE ALREADY THERE. He should be cheering on the home team here — a home team that is sending a decent amount of revenue to state coffers.
“Why not sell the port back to the city or county since over 60% of the ports’ residents live in the these areas if the state does not want to own it.”
Because there’s no such thing as unicorns. The city has no money, which is why it no longer has the port.
this morning i inadvertenantly posted my comments on the city port meeting thread. As you’ll see from those comments, I totally agree with the sentiment expressed here particularly by el som and cassandra. The Port meeds to go on the river 10 years ago. The widening of the Panama Canal and the deepening of the channel will minimize and eventually eliminate the port;s advatages over other delaware river ports.This situation is further exacerbated by the port’s reliance on Federal dredging. Since the Corps onsite dredge soils is full trhe corps requres significantly more expensive drtedging disposal to accomplish the dredging required every two years. It is not inconceivable that with the budget cuts in Washington, the corps may have funds to dredge less frequently. If that happens edither the state pays for the dredging or the port loses business becauser it can’t guarantee adequate and reliable channell depth.