In the early days, it didn’t take big money or even a feasibility study to develop a profitable port. The 18th century pirate Jean Lafitte, for instance, seemed to know instinctively that if he plopped a simple warehouse at a key point along the lower Mississippi River, his special brand of “commerce” would thrive.
Louisiana’s many rivers, lakes and outlets to the Gulf of Mexico have for centuries provided a vital means of getting products to people, and the ports built alongside the waterways have become hubs of commercial activity. Today, economists estimate that trade related to more than 30 deep-draft, coastal and inland ports around the state accounts for nearly a fourth of Louisiana’s total economic output and upward of 250,000 jobs.
But modern maritime commerce is far more complex than it was in the days of Jean Lafitte. Today’s cargo businesses are part of a vast trade network that spans not only the United States but the entire globe. The major ports of south Louisiana now compete with huge, well-funded cargo facilities in neighboring states and even on other coasts.
Competition has grown particularly fierce in the last few decades as more cargo has begun moving in the large steel boxes generically known as “containers.” Thousands of container-carrying ships ply the world’s sea lanes, their decks stacked high with the 20-foot-long “boxes” that hold cargoes ranging from clothing and textiles to food products and construction materials. At the major ports, giant cranes offload the containers from ships and transfer them to flatbed rail cars, trucks or barges for journeys toward their final destinations.
Containerization and the demand for faster delivery of goods have dramatically raised the stakes in the competition for cargo, and playing the game requires a steep ante.
Proposals for $100 million to billion-dollar expansions are more the rule than the exception among major ports of the world. In states like Louisiana that traditionally have not provided much direct support for such activities, port managers are feeling the heat.
“The most significant issue for the ports year-in and year-out is to find adequate funding,” says Joe Accardo, executive director of the Ports Association of Louisiana.
Accardo says Louisiana ports “have pretty much exhausted most of their discretionary funding” as they’ve upgraded facilities with funds cobbled together from various sources. During the last five years, the ports have built some $700 million worth of projects and covered more than 65% of the cost from their own revenue, he says. The state kicked in about 20% of the tab, with the rest ?coming from federal programs, grants and other sources.
The most reliable state funding for ports has been a limited program overseen by the Department of Transportation and Development, which annually reviews port funding requests and ranks them based on their potential to generate revenue and create jobs. The department recommends projects to the Legislature, but lawmakers determine how much gets appropriated. No single project may receive more than $15 million from the program.
Last year, eight Louisiana ports shared $62 million allocated under this program. For the current fiscal year, the Transportation Department recommended nine projects to receive a total of $78 million.
Accardo says the priority program is important, but its limitations leave the state’s ports facing a long-range problem. “They do not have a reliable and substantial source of funding to plan and build larger projects,” he says.
The point is not lost on Gary ?LaGrange. The CEO of the state’s largest general cargo and container port seems locked in a constant scramble — first, to convince shippers that they can save money by moving their cargo through the Port of New Orleans, then to find the money to ensure the port can deliver on the promise.
At the moment, LaGrange is pondering how to fund the first stage of a $500 million expansion of the port’s container-handling capacity. But before he gets to that, he says finding $40 million to cover the relocation of a cold-storage plant from a canal just east of the city to a downtown wharf on the Mississippi River is an absolute must.
“Everything at the Port of New Orleans, which operates like private business, is generated by the port itself,” he says. “Our budget is about 40% of what (the Port of) Houston’s is, but 50% of their budget comes from public sources. I’d be in heaven if I had that.”
LaGrange says coastal ports to the east and west have received substantial public funding in recent years. He points to the Houston port, which has so far put $450 million into a massive expansion of its container capacity and construction of a new cruise ship terminal. A $300 million expansion is under way at the Port of Mobile, funded in part by the state of Alabama.
Last year, Mississippi Gov. Haley Barbour announced plans —which have drawn opposition and at least one lawsuit—to use $570 million of federal post-Katrina housing ?assistance to expand a container terminal at the Port of Gulfport.
“That’s what we’re up against,” LaGrange says. “We’ve got to be creative with the state and leverage everything we do.”
In 2008, the New Orleans port won a promise of just $25 million from the state against the $250 million needed for the first stage of its container complex expansion. Noting that a widening of the Panama Canal slated for completion around 2014 will produce a “huge escalation” of large container ships in the Gulf of Mexico, LaGrange says, “We can’t wait until 2014 to expand our capacity.”
He says adding a new container ?terminal would add as many as ?4,000 direct jobs to the estimated 60,000 local and 160,000 statewide jobs the Port of New Orleans already generates.
Job growth is the goal of all six deep-draft ports of South Louisiana—from the Port of Lake Charles in the west to the Plaquemines Port, Harbor and Terminal District in the east—and all feel financial pressures. To remain competitive, they must spend heavily to maintain the docks, storage structures and equipment that serve ocean-going vessels, from petroleum tankers and bulk freighters to container ships. Because the ports are “intermodal” cargo complexes, they must also maintain their links to the railroads, highways and rivers that carry cargo to and from inland destinations. Meanwhile, they must keep a tight rein on their own pricing.
“It all boils down to economics these days: How can shippers move their cargo most ?efficiently and at a reasonable price?” says Dan Loughney, director of marketing and trade development, at the Lake Charles Harbor and Terminal District.
Like all the ports, Lake Charles tries to make its case with lawmakers and outside funding sources by touting the port’s wider impact. “The port is a major economic engine not just for the city of Lake Charles but for surrounding parishes and the whole region,” Loughney says.
He says the port has worked closely with state economic development officials to ?attract business, “and it’s starting to pay off.” One result is a new lease by a joint venture of Baton Rouge-based Shaw Group Inc. and Westinghouse Electric Corp. Their planned manufacturing plant will make modular ?components for the nuclear power industry and ship them worldwide.
Loughney says the venture, partially funded by the state, will create 1,500 full-time jobs. “In times like these, it’s very encouraging,” he says.
Jay Hardman, executive director of the Port of Greater Baton Rouge, says a benefit of gaining private investment for big projects is that it helps ease the financial pressure of basic port maintenance, such as keeping waterways dredged to minimum depths and rehabilitating older docks and warehouses.
A large chunk of the Baton Rouge port’s business is handling liquid bulk cargoes for the many petrochemical companies that line the Mississippi River in that area. The port also handles large volumes of grain, molasses and other agricultural products, along with general cargoes such as steel plate, pipe and manufacturing components.
Hardman says the port is working to develop more ways to build transportation business around local products. “We need to find outlets for what is being produced here to help bring ships to the docks,” he says.
The fruits of one such effort may surface soon. Hardman expects to announce shortly that a private company will develop a wood pellet plant on port property. The plant would take timber grown in Louisiana and convert it into pellets that likely would be shipped to Europe, where governments are urging wider use of renewable fuels.
At the Port of South Louisiana, which stretches along the river between Baton Rouge and New Orleans, the Globalplex Intermodal Terminal is a centerpiece for development. The public terminal, owned by the port and operated by private stevedoring companies, accommodates both ships and barges, and provides handling and storage for bulk cargos such as grain, cement, mineral ores and wood chips, along with general cargoes
Just downriver from New Orleans, the Chalmette Terminal is the shipping and receiving point for a range of users at the St. Bernard Port Harbor and Terminal District. An adjacent industrial park houses tenants from lumber and stone importers to ship cleaning services.
All together, five ports along the lower Mississippi River—from Baton Rouge to lower Plaquemines Parish—handle close to a half-billion tons of cargo each year and ship almost a fourth of all waterborne commerce in the United States.
As New Orleans port CEO ?LaGrange notes, the Mississippi River and Louisiana’s vast network of other waterways make every port in the state in some way dependent on the others.
“We take cargo off ships in New Orleans and in many instances send it by barge up to Natchitoches or West Monroe. We’re may be sending steel, or plywood to a plant that employs 500 people,” he says. “If I can’t get that cargo to West Monroe and offload it at the Port of Ouachita, then that cargo’s not going to come to New Orleans to begin with. The ports need to be looked at as a network. We’re all parts of an engine.”
LaGrange hopes recognition of that concept will help the Port of New Orleans get help to relocate one of its largest tenants.
New Orleans Cold Storage & Warehouse Co. exports poultry from a plant that shippers access via a shortcut to the Gulf called the Mississippi River Gulf Outlet. Because the outlet is blamed for some of the post-?Hurricane Katrina flooding of the city, the U.S. Army Corps of Engineers recently began work to close the waterway. To retain New Orleans Cold Storage and its 600 local jobs, the port must move the plant to the riverfront.
“They’re the largest exporter of poultry in the U.S., and almost 40 percent of those chickens come from Louisiana chicken growers,” LaGrange says.
Louisiana Agriculture Commissioner Mike Strain is one of the port’s strongest allies in seeking state help for the relocation. He says the poultry industry puts $1.5 billion a year into the state’s economy, and Louisiana can’t afford to let the New Orleans facility slip away. “We’re concerned that if the cold storage plant can’t be relocated, the poultry plants will build outside the state,” he says.
The challenges of relocating New Orleans Cold Storage touch on the complexities of operating a major port within an urban center that is also a tourism hub. Some local ?residents oppose putting the exporter along the riverfront because they fear it will increase truck traffic through their neighborhood, which borders the historic French Quarter. Through the years the port has had to adapt to such concerns and has worked with the city on designs that give over old, unused wharves for redevelopment into pedestrian parks and tourism attractions.
The port and city also have cooperated in courting the passenger cruise ship business. Before Katrina struck the city, New Orleans was the fastest growing cruise ship port in the country. As it works to rebuild the business, which feeds local hotels to the tune of thousands of room-nights per year, the port has added a new $37 million cruise ship terminal and laid plans for a third terminal later on.
Over the decades, the port has funded major improvements primarily by issuing bonds and paying them off with revenue generated through operations. But for increasingly high-dollar projects such as the container terminal, the bond route has become less viable. “We’ve got to get outside sources,” LaGrange says.
The port is studying new funding alternatives, including the idea of recruiting partners who would take partial ownership of and share revenue from some port facilities. LaGrange acknowledges that the concept is “new to the port world,” but he says given the frenzied pace of competition, no idea should be considered off-limits.
Money matters
No port in Louisiana is immune to money problems. While deep-draft ports tend to consume more dollars, shallow-draft and coastal ports can also find the going tough.
Joe Accardo, executive director of the Ports Association of Louisiana, says the association soon will complete a master plan that recommends finding “a long-range, sustainable source of funding” for ports. He says the association may eventually offer legislation to develop a five-year capital infrastructure and revenue program, though no bill is yet in the works.
In the meantime, lawmakers may be asked to consider measures designed to assist ports in attracting new business. Accardo mentions the possibility of a tax break for Louisiana businesses that use the state’s ports to import or export cargo. A similar measure has been used successfully in Alabama and South Carolina, he says.
Another measure lawmakers may discuss this spring is a tax incentive also modeled after one in Alabama. Under this proposal, a private company that agrees to lease a port facility could receive a lucrative tax credit throughout the term of the lease. Accardo says the program helped the Port of Mobile lure a tenant away from New Orleans in recent years.
In an era of tight money and big demands, Accardo says the state should thoroughly vet all port proposals to assess their impact on jobs, revenue and maritime trade. He says the state should invest only in projects that clearly will expand on a port’s existing strengths. “Our state cannot afford to spend billions of dollars in the wrong place,” he says.
