Virginia Ports “Financially Unsustainable”

If you wonder why the McDonnell administration official are giving serious consideration selling the Virginia Port Authority to private interests, there may be more to their thinking than a fetish for privatization. As Transportation Secretary Sean Connaughton the Virginia House Appropriations Committee yesterday, port operations are “financially unsustainable” under its current setup.

The commonwealth is subsidizing port operations by $60 million to $70 million a year, Connaughton said. Meanwhile, Virginia ports have been losing market share to other East Coast ports since the end of the recession. “If we go the way we are, we will see slow, steady growth” in port traffic, he said, “but we will be eclipsed by the ports to the north and south.”

The administration had been entertaining proposals from four groups to take over operation of the report. However, one of them, the Carlyle Group, has dropped out of the competition. APM Terminals, a global port operator, has proposed a 48-year agreement to operate the state ports in a deal that it says could be worth $3 billion to $4 billion over the life of the agreement. Peter Bacque reports on the committee hearing for the Times-Dispatch here.

Bacon’s bottom line: Many local interests in Hampton Roads oppose port privatization, but here’s how the administration could make the deal palatable. Take that $3 billion to $4 billion and use it to fund the transportation improvements like the U.S. 460 Connector and the Third Crossing, both of which are said to be justified on the basis of projected container traffic from the ports. Committing to the improvements would make the ports more competitive, which, presumably, would help fetch a higher price.


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  1. re: the ports are currently unsustainable


    the questions that is dying to be answered is WHY, what it would take to make them sustainable and finally, is this a valid function of taxpayer money?

    I do not rule out investments that ultimately lead to more jobs but we need to see an ROI and we need to better understand that subsidies – need to be primarily infrastructure and not operational and myself, I’d rather see such an analysis NOT coming from the state or VDOT but rather organizations like Fluor or Transurban or Macquarie.

    And for the NoVa folks – think of your “donor” status taxes going for things like Ports and Education to pull up RoVa to a healthier economic, i.e. taxpaying status.

  2. DJRippert Avatar

    “And for the NoVa folks …”.

    Tidewater is not the problem. They are another victim of the Imperial Clown Show in Richmond.

    I believe you will find that the Virginia ports are not sustainable for the same reason that the transportation system in NoVa is not sustainable – the roads suck.

    Finally – Mr. Bacon …

    Whatever happened to the marvel of Panamax ships and the exquisitely deep channels in Tidewater? I thought Virginia’s ports were poised to kick the asses of all the other ports on the East Coast. Don’t tell me that was all hype!

  3. thebyurokrat Avatar

    Let me get this logic:

    1) The state is currently subsidizing port operations.
    2) The state could make money by privatizing port operations.
    3) The private sector will pay us billions, because port operations will be very profitable after the third locks at Panama open.

    This is absurd. Why would the state forego the potential revenue bonanza of traffic expansion for a piddling, one-time cash infusion. These long-term lease deals do nothing but transfer the wealth of future generations to the present, and allow the private sector to profit handsomely from huge public sector investments.

    The fact that JLARC or other entities haven’t been asked to look at this deal leads me to believe that VDOT’s analysis is shoddy, and that the State will be a big loser in this deal. Have people already forgotten VITA? How about Governor McDonnell’s laughable plan for ABC privatization?

  4. Peter Galuszka Avatar
    Peter Galuszka

    I plan on posting my own item on this when I get the time, but I am highly suspect of the idea that VPA is “financially unsustainable.” I also am puzzled about why there is such an outcry if New York and New Jersey pull ahead — they are much bigger. Hampton Roads’ competitors are Savannah, Charleston and Baltimore.

    If anyone bothers to take a cursory inspection of TEU tables, he or she will find that ALL ports’ cargo fell dramatically after 2007. Why? The recession, that’s why! Is it so hard?

    If one believes Connaughton, VPA took a dump, losing money in 2008 and then less and less to last year. Could that be some kind of recovery trying to take hold?

    Either this privatization material is too difficult for any mere mortal to comprehend… or it isn’t.

    Why the dire spin? Why is The Big Bacon suddenly advocating money on U.S. 460? Whatever happened to those hundreds of millions Norfolk Southern invested to expedite HR traffic to the Midwest? And as Don the Ripper notes, why has all the hype go about Hampton Roads having such a wonderfully deep port in light of the so-called Panamax boom?

    The questions are troubling.

  5. Peter, All good comments/questions. Except for one thing. I’m not advocating money for U.S. 460 — except as part of a privatization deal. 460 is hard to justify under the current plan. (The CTB will take up the issue tomorrow.) But if the state privatized the port and plowed back the proceeds into a highway project designed to help the port, that’s very different from borrowing $1 billion or so at the expense of other state projects that could be funded.

  6. ” But if the state privatized the port and plowed back the proceeds into a highway project designed to help the port, that’s very different from borrowing $1 billion or so at the expense of other state projects that could be funded.”

    suppose the state did an ROI for that scenario?

  7. Peter Galuszka Avatar
    Peter Galuszka

    Big Bacon,
    When I read what you write and then your comments, it is like listening to “Let’s Do The Twist” by Chubby Checkers.

    1. Yeah round ‘n around ‘n up ‘n down we go

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