Commentary: Port monopoly — no thanks
To hand over a major container port to a private operator, whose sole focus is on profit and not to be a business and job-creating entity for that region, would create a very dangerous precedent for America’s ports.
The result would undoubtedly increase costs to shippers if they were to fall from favor of this port operator with the mindset of pure profit. The customers’ choice to select and negotiate terms in that port would also vanish.
There is not a major container port in the United States that is single-handedly controlled by a for-profit private company.
For all the buzz about privatization in our transportation circles, this is a fact. Why you ask? The answer is because competition is a fundamental cornerstone of doing business in America’s ports.
We all should take notice that the State of Virginia is considering to allow a single private operator to take away this principle.
Two unsolicited bids to operate the port have been received and were warmly embraced by Virginia’s transportation secretary.
(In April 2012, Virginia’s Department of Transportation received an unsolicited proposal from APM Terminals to operate all the state-owned terminals. As part of the deal, APM Terminals offered to transfer ownership of its modern, highly efficient terminal in Portsmouth, which it leased in 2010 to the state and the Virginia Port Authority for 20 years. It says the net present value of its offer is worth $3.1 billion to $3.9 billion to the state.
RREEF, the real estate arm of Deutsche Bank, responded to a subsequent state solicitation by submitting a similar offer to run the port. Private equity firm Carlyle Group also made a bid, but withdrew it in mid-October.)
Virginia, like other states, has experienced dwindling tax revenues and less federal economic support. However, unlike most other states, Virginia has embarked on a frenzied pace to privatize as many state assets as possible, generating funds to patch its aging transportation infrastructure.
The state’s Transportation Secretary Sean Connaughton has advocated that the Virginia Port Authority (VPA) facilities, operated by Virginia International Terminals (VIT), should be turned over to a private, for-profit company.
In the process, the secretary has created a contentious atmosphere and has rightfully drawn fire from an overwhelming majority of port customers and stakeholders.
Many of those in our shipping community understand that because legislators do not have the appetite to raise taxes, selling the port concession is the true underlying reason that the transportation secretary has this valuable state asset on the auction block.
Furthermore, customers and stakeholders contend that a concession of the port, if the interests of these private for-profit companies does not coincide with that of Virginia’s, could actually divert cargo to other areas where the bidders have operations or, worse, discriminate against the prosperity of those ocean carriers and port stakeholders in competition with the bidders’ “sister companies.”
Today, in a sense, the Virginia Port Authority facilities are privatized, being operated for the past 30 years by VIT. However, the clear distinction is that VIT is a non-stock, not-for-profit company, returning all after-operating revenues to the taxpayers of Virginia.
While VIT operates the terminals for VPA, it “enjoys” a 30-day notice clause if it were to fail in its mission to VPA.
This is important to note because this privatized scenario could be changed quickly and provides Virginia with a “quality control of its port operation.”
Coincidently, a study ordered by some Virginia legislators, performed by the independent Joint Legislative Audit and Review Commission, exalted VIT’s past and current performance and exonerating the terminal operator from many disparaging remarks made by Transportation Secretary Connaughton.
If Virginia were to award a concession to a private, for-profit company, the length would be for 40 to 50 years. What Virginia decides going forward could set a dangerous precedent and have far-reaching implications country-wide.
Virginia desperately needs funds for its crumbling transportation and infrastructure.
The need for fast cash, however, should not drive the privatization of ports in this country. Port customers, given a choice, would not desire a private monopoly where they do business. That’s why those customers in the Port of Virginia prefer to keep the present operating model.
Coalition for Virginia’s Port,