Port of Miami contemplates public-private ventures
The Port of Miami has held informal discussions with several pension funds and private investment firms to explore opportunities to finance, design, build and operate new infrastructure to meet the port’s $300 million to $350 million, 10-year capital budget plan for landside improvements, Director Bill Johnson said.
Ports across the country are actively courting private equity markets following a string of high-profile, lucrative financial sector acquisitions last year of marine terminal operators with long-term leases. Port authorities now want to reap some of the benefits that previously went to their sale-side tenants.
Johnson said the new upgrades and further deepening of the harbor are necessary for the port to realize its goal of doubling the amount of cargo it handles to 2 million TEUs. In 2006, container volume dropped 7.4 percent to 976,514 TEUs.
The port, which is a major hub for Latin American trade, generates $2.2 billion in total economic impact for the city and is directly or indirectly responsible for nearly 17,300 jobs, according to a recent study by Washington Economics Group. The ripple effect across South Florida is several times larger, according to port officials.
Johnson spoke about his efforts to modernize the port and generate more revenue for Miami-Dade County at last week’s North American Port and Intermodal Finance and Investment Summit, held by Infocast Inc. in nearby Coral Gables, Fla.
That includes the strong possibility of building a five-star hotel, offices, a retail complex and a parking garage on port property, although he later clarified that he is only considering locations that cannot be used for cargo because of depth restrictions and other factors. Cargo facilities occupy 217 of the port’s 528 usable acres.
“Cargo is a major producer for us. I look at every single acre” to maximize use, Johnson said.
“The way to get productivity is to go vertical. We’re going up,” he said of existing practice to emulate the container stacking operations of Hong Kong and Singapore.
The Port of Miami plans to spend about $225 million to $250 million in the next five years on a variety of cargo and cruise projects financed from a variety of possible sources, including port revenues, bond indebtedness, private financing, state funding or contributions from tenants, he told Shipper’s NewsWire.
Cargo improvements on the horizon include a new sea wall, better drainage, stronger concrete and asphalt to withstand the load of stacking containers, lighting, fencing and a new maintenance facility.
The port has been negotiating with its three cargo tenants to renew their leases and is near conclusion on deals with Seaboard Marine and APM Terminals that will be presented to the board of county commissioners in the first quarter of 2008, Johnson said. Talks are still ongoing with the Port of Miami Terminal Operating Co. (POMTOC) joint venture that includes Ports America.
The leases are for 15-year terms with two five-year options — shorter than such contracts typically have been in the port sector to justify significant investment and attract necessary bank financing.
Steve Erb, vice president of Ports America Florida Inc., said the existing 20-year POMTOC lease still has a couple of years to run but that the partners are looking to nail down an extension to give them the certainty necessary to go ahead with future capital investments.
The transactions are not simple rollovers, but would substantially restate terms and conditions, port officials said. Johnson made clear that he is pricing the volume-based deals at higher values to capitalize on the investment community’s recent demand for ports assets with strong, stable returns.
“These new agreements reflect today’s market in financial terms by providing the kinds of safeguards to best protect our port as the years go on,” he said, in apparent reference to clauses that would allow the port to share in any windfall gained by a terminal operator through a sale of the company.
A deal with one of the leading cruise lines that would result in the development of a new waterfront cruise facility and related support infrastructure is also near at hand, he said. Johnson brushed off Royal Caribbean’s recent decision to base its two latest mega-vessels at nearby Port Everglades, saying the port couldn’t afford the modifications to accommodate the vessels. Nonetheless, the port plans to refurbish Royal Caribbean’s existing facility, which handles about 1.7 million passengers per year.
Meanwhile, Miami officials are excited that the Water Resources Development Act that recently passed Congress over President Bush’s veto authorizes dredging the port to 50 feet. The new depth will accommodate the extra-large containerships that are being built and will be more prevalent on the East Coast once a wider set of locks at the Panama Canal is completed in 2015.
“It was probably my most important initiative as port director working with Congress,” said Johnson, who has been on the job for 18 months.
The Army Corps of Engineers had just finished the port’s second dredging phase to 42 feet when he started. Johnson met last Thursday with John Paul Woodley, assistant secretary of the Army for civil works, to discuss the next phase of dredging and the final accounting for the $70 million previous round of work to determine how much, if anything, the port owes the Corps. The new dredging project will take six years and cost about $180 million, of which $72 million to $80 million is expected to be the federal portion. Congress still must appropriate the money in future spending bills.
In other developments, the Port of Miami plans the week of Dec. 17 to inaugurate the 10 inbound gates for its high-tech, automated gatehouse for checking trucks in and out of the facility. The six outbound gates, complete with radiation portal monitors, have been in operation since last year.
The truck gate, which cost nearly $20 million, is one of the most modern in the nation, and Johnson said it will be able to process a truck in less than two minutes while also improving security.
The gates are mostly unmanned and electronically tied to a “kitchen-type” complex where centralized attendants can check whether the driver has a valid identification and has a reason for doing business on the docks. The trucker must present his booking number and scan his port ID card while optical character recognition readers capture the license plate, chassis and container numbers to match up the shipment and driver with the appointment. The readers, which have accuracy requirements of 90 percent to 95 percent, are backed up by video cameras.
Gate personnel interact with the drivers by intercom to clear up any informational inconsistencies and ask basic security questions such as the driver’s origin and destination.
One or two lanes will probably be staffed as a customer service option for infrequent haulers who may lack port IDs or accounts, said James Maes, assistant port director for safety and security.
The gates also have biometric readers in anticipation of a federal Transportation Worker Identification Credential and state port access pass with embedded fingerprint identification. The Miami system was built to the existing specifications of those cards and may have to be modified to accommodate any changes once the biometric capabilities of the cards are successfully developed, Maes acknowledged.
The gates also have automatic scales to weigh the trucks so the cargo weight can be added to the ocean carrier’s manifest or to check for overweight loads that could be headed for public roadways. To increase efficiency, truckers can have the $10 process automatically deducted from prepaid accounts, Maes said.
Seaboard Marine and APM Terminals are nearing completion of separate gates for their own facilities. POMTOC completed a $5 million gate interchange last May. ' Eric Kulisch