2011 will see the beginning of a paradigm shift in the way public port infrastructure projects are financed in the United States. Port projects are very capital intensive and have become increasingly more challenging to finance. Traditional financing has become risk adverse and, if you can find funds to borrow, it will be based on past financial performance — not future earnings.
Federal, state or local funding for port infrastructure is virtually nonexistent. Unless there is a sudden and dramatic change in these funding mechanisms, the path will naturally lead us to the increased use of concession agreements or other forms of public-private partnerships.
Last year, the port chose not to increase tariff charges despite significant increases in operating costs, including a triple-digit increase in property insurance premiums. The port chose to absorb those increased costs to help the industry in a down economy. When certain tariff charges were recently approved to increase next year by approximately 3 percent, the industry had a natural response. They did not want any fee increase. In this business climate, how can a public port raise the necessary capital to invest in its facilities?
Port authorities will need to identify new sources of funding to invest in infrastructure while meeting their core mission to facilitate economic growth and create jobs in their communities. True public-private partnerships between the capital marketplace and publicly owned port assets will emerge. These will provide financial management of downside risks, sharing of upside benefits and allow a stable path for continued economic growth.
2011 will emerge as a year where we work together to build a solid foundation to allow our economy to prosper and compete within the global marketplace.