The Virginia Port Authority has an aggressive timetable for making structural changes designed to improve the competitiveness of the Port of Virginia and justify the recent rejection of private bids offering guaranteed income to operate the port for up to 48 years, officials said at Thursday's Virginia Maritime Association conference in Norfolk.
The VPA Board of Commissioners expects to announce how it will reorganize the VPA and Virginia International Terminals (VIT), the state's in-house terminal management company, at its next meeting on May 28, Chairman William Fralin said. The board also plans on that date to announce the hiring of a search firm to help find a new executive director for the VPA, which has been led on an interim basis since early last fall by Rodney Oliver.
"We've got to beat the bushes to find somebody that has port experience, finance experience and economic development experience. That's a unique set of qualifications" necessitated by the new course set for the Port of Virginia, Fralin said.
Oliver, who is expected to throw his hat in the ring for the top post, said the majority of the reforms and development of a new strategic plan will be completed within the next three to six months and be fully in place by the middle of next year.
The VPA board members, appointed in 2011 by Gov. Bob McDonnell in a housecleaning move designed to bring more business acumen to port oversight and identify structural barriers that were impeding growth after container volumes plummeted 17 percent in 2009, were in the process of restructuring the organization when the state received an unsolicited offer from APM Terminals for a long-term concession valued at $3.1 billion to $3.9 billion to run the entire port.
That triggered a year-long review process under Virginia's Public Private Transportation Act, which many interests complained was too rushed and drew overwhelming opposition from the maritime community in Norfolk and the Hampton Roads region.
Fralin said the board's initial review "was never an indictment of the VPA or VIT," but rather an effort to enhance a good operation.
The March 26 decision to spurn the privatization offer was weighed against the potential of a reorganized port, not the status quo, Fralin stressed. Ultimately, the board determined the offer from APMT and one from a consortium led by JP Morgan did not reflect the full future value of the port, which could be best achieved by the state maintaining control of a key economic asset.
Virginia has gone "all in" as an operating port, Oliver said. The port is one of a rare handful of U.S. ports - Savannah and Charleston are notable others - that have hands-on management of their marine terminals. Oliver noted the previous structure actually was more like a traditional landlord port, with the VPA as the VIT's landlord. The reorganization effort, which was endorsed by the General Assembly in Richmond during the recent legislative session, includes creating a single level of management and consolidating administrative functions so that there is one controlling entity, point of contact and communicator.
Under the existing arrangement, the VPA and VIT each had their own human resources, procurement, finance, and accounting departments.
Oliver said the Port of Virginia has submitted the tax paperwork necessary to convert the VIT from a non-stock, not-for-profit corporation, to a limited liability company that is more accountable to the VPA.
The restructuring was motivated, in part, by a need to lower the Port of Virginia's cost structure, which is higher than in Savannah and Charleston, two of its main rivals for cargo, Oliver said. Officials also felt changes were needed to strengthen the port's ability to raise capital for infrastructure through private partnerships and be better prepared in the event of another economic downturn, he added.
McDonnell has instructed that outside auditors conduct a comprehensive review of VIT prior to the VPA assuming all liability for port operations. He also asked for a detailed plan for meeting the cargo volume, revenue and cost-reduction targets that the Board promised it could achieve more easily than a private operator.
A new package of legislative measures that take effect July 1 will support the restructured VPA, expand its economic development mission and help coordinate infrastructure development vital to moving cargo to and from the port.
The General Assembly gave the VPA more budget flexibility to control its own revenue rather than depending solely on appropriations from Richmond, increased its power to act as an industrial development agency with bonding authority, provided relief from rigid procurement rules such as having to buy furniture from the Department of Corrections, named the executive director of the Virginia Economic Development Partnership an ex officio
member of the VPA board, and gave the VPA executive director a seat on the Commonwealth Transportation Board.
Fralin said the VPA needs to move quickly to implement the reforms.
"We can't wait. We have to move with all deliberate speed. The competitive environment is changing very rapidly and we've got to to make sure we're positioned as best we can to take advantage of that," he said, referring to changing shipping patterns, the advent of mega-size container vessels, the expansion of the Panama Canal in 2015, and efforts by other East Coast ports to raise bridges or dredge channels to handle the bigger vessels.
The Port of Virginia, which enjoyed its second best year for container volumes in 2012 with 2.1 million TEUs on 9.8 percent year-over-year growth, is poised to move into the upper echelons of world ports, Fralin claimed.
"I firmly believe we will become the gateway for our nation," he said. - Eric Kulisch