Port in a Storm

The behind-the-scenes business of sea ports will become much more center stage in coming years as Florida ports spend frantically to meet a coming wave of demand.

The $5.25 billion expansion of the Panama Canal is the trigger. When it is finished in 2014, the new canal is expected to generate an additional three million containers annually. Even before that, containers through Florida ports are expected to jump from three million today to about five million by 2013.

That is causing the frenetic building, including $750 million at Port Manatee, one of the state's smaller container shipping ports.

“Time is money,” says David McDonald, Port Manatee's executive director, speaking recently to the Manatee Tiger Bay Club.

That McDonald's talk about port business was one of the first programs of the new club testifies to the increasing significance of the port's expansion to the region's hopes for an economic rebound.

Eight million residents live within a two-hour drive of Port Manatee, the fifth largest of Florida's 14 ports, 11 of which handle containers. But the Port of Tampa makes the same eight-million-resident claim, and it is much bigger and also adding container capacity, along with many other Florida's ports.

Despite Port Manatee's smaller size, container activity grew 113% last fiscal year and has matched that figure already this year. That is helped by SeaBridge Freight and Martin Marietta Materials, two relative newcomers to the 39-year-old county-owned complex. To attract such companies, the Port Authority has been aggressively investing in facility improvements and making zoning changes to the surrounding area.

The port handles roughly nine million tons of cargo a year on its 1,100 acres. It exports orange juice, automobiles and fertilizer, and imports everything from fruit to forestry and cement products to petroleum and natural gas.

The port is also part of the Port Manatee Improvement District, a tax increment financing district that includes both the 3,700-acre Port Manatee Encouragement Zone. A major highway project to connect the port directly to I-75 is “midstream” in the design and engineering phase, says McDonald, but could be 10 years away.

The port recently purchased its second mobile harbor container crane with a $2 million state grant paying half. The multi-purpose cranes handle containers, plus other cargo, and can lift 100 tons.

Steve Tyndal, Port Manatee's senior director of trade development and special projects, says having two cranes gives the port a theoretical container capacity of 365,000 20-foot long containers — the common measurement for shipping amounts. It is about half the size of a typical container carried on an 18-wheeler or on a train bed.

With the coming growth in container shipping, the ports are trying to prepare. “You don't want to react; you want to plan,” says McDonald.

Looking south
Although Florida ports won't accommodate the larger “post-Panamax” ships with 50-foot drafts that the Panama Canal is being rebuilt for, Port Manatee will have container capacity roughly equal to 13 times the current demand.

Only six ports, mostly on the U.S. West Coast can accommodate the post-Panamax vessels. The size of an aircraft carrier, these mega-ships can be 1,200 feet long and 160 feet wide. That compares to today's gold standard: Panamax ships of 965 feet in length and 106 feet wide.

To handle the hoped-for demand, the port is extending Berth 12 from 1,000 to 1,584 feet, and adding a 50-acre terminal.

The $750 million facility along the southern end of the port will allow ships with a 40-foot draft, comparable to depths at other Florida ports. The job is expected to be awarded in May.

One big reason for building new capacity: One post-Panamax ship carries a maximum of 13,000 containers, compared to only 4,800 containers for a Panamax vessel. Because it's much cheaper to ship by ship than by rail or trucks, three million additional containers are expected to come through Panama instead of offloading along the U.S. west coast.

Port Manatee is banking on that and its proximity to the Panama Canal — it's the closest U.S. deepwater seaport to the gateway — to justify the big investments.
By comparison, the port increased its capacity during the last 10 years by 50%, spending $150 million. Florida exports nearly $1.5 billion of goods to Panama annually. “Panama expansion is the catalyst,” says Tyndal.

'hub and spoke feeder'
Now, McDonald says the port plans to further add to capacity. The Manatee County Commission, which is also the Port Authority, approved the port's master plan March 30.

Plans call for a new berth and terminal on the north side of the site that will raise container capacity to 500,000 containers. That's another $750 million investment, but Tyndal says market demand will dictate the timing.

Even with all this current and planned spending at the port, some at Tiger Bay were disappointed to learn that the port won't be able to accommodate the post-Panamax ships requiring depths to handle a 50-foot draft.

“It makes absolutely no sense to me why they don't do a 50-foot basin,” says Terry Romine, a semi-retired lawyer active in the community. Romine took the microphone at Tiger Bay to ask McDonald about the issue.

The answer, in short: Too expensive.

Bob Christopher, a Bradenton CPA, and treasurer of Tiger Bay, says the port, which has a $16.9 million budget this year, would have had a $3.1 million deficit for 2009. But it received $3.16 million in grants and $446,500 in sales tax revenues to pay off bonds. Those funds helped the port post $511,586 in net income after depreciation expenses.

Port Authority Chairman and County Commissioner Larry Bustle says, “Revenue exceeds expenses. We're making money.” But that is only because of grants, which McDonald says were less than half what they were in 2008.

Though the port has had operating losses since 2003, according to Dan Wolfson at the county clerk's office, its increased net assets every year. Depreciation expenses exceeding $4 million a year offsets grants and sales tax revenues resulting in operating losses.

So making the port post-Panamax ship ready, the berths would need to be dredged another 10-18 feet and the Manatee Harbor Channel and Tampa Bay's main channel would require major dredging. Tyndall estimates it could all cost another $750 million.

As McDonald explains, the post-Panamax ships will transfer cargo to smaller ships in the Dominican Republic, or maybe someday at a Cuban port. Tyndal says this “hub and spoke feeder system” includes Freeport and Kingston.

But if that's the case, and cargo transfers are taking place closer to the Port of Miami and Port Everglades — ports that handle a combined 1.8 million containers — it would seem to negate at least some of the competitive advantage Port Manatee hopes to gain by its proximity to Panama.

Port Manatee is counting on a two-year strategic alliance it agreed to with the Panama Canal Authority last May. That plan includes a targeted marketing initiative to attract container lines, third-party logistics providers and distribution and warehouse developers.

Competition heats up
There's also growing competition from the Port of Tampa. On March 29, the Tampa Port Authority announced its completion of the latest phase of the expansion of its container terminal, increasing the paved storage area from 25 to 40 acres.

The terminal now includes 2,100 feet of berth length, three rail-mounted container gantry cranes and a 100-ton mobile harbor crane, all on a 43-foot deep-water channel. Another phase is already underway and includes a further extension of the container gantry crane rails and lengthening the berth to 2,800 feet.

The Tampa Port Authority has plans to quadruple the size of the terminal to exceed 160 acres. This planned build-out will be on adjacent land and ready to be developed as market demand grows. That expansion would provide capacity to handle more than a million containers per year — larger than Miami right now — and “comfortably accommodating the long-term demands of the West Central Florida market,” according to a recent press release.

And $650 million transportation artery linking the Port of Tampa to I-4 via the Selmon Crosstown Expressway comes with the first truck-only electronic toll lanes. Apparently, Port Manatee's closest competitor also understands time is money.

And so does the Port of Miami, where a $610 million tunnel getting underway this spring will connect that port to the South Florida highway system. The tunnel is set to be completed by 2014, in time to take advantage of the canal project.

Both the Port of Tampa and the Port of Miami also have alliance deals with the Panama Canal Authority, as do at least seven other U.S. ports that compete with Port Manatee too. And according to Tyndal, the Tampa, Miami and Jacksonville ports all have petitions filed with the Army Corp of Engineers to dredge deeper.
In the meantime, the 14 port members of the Florida Ports Council are lobbying for legislation to encourage even more port investment.

House Bill 1169 creates the Florida Ports Investment Act offering incentives for insurance companies to invest in the not-for-profit Florida Ports Investment Corporation created by the legislation. In exchange, insurance companies would be eligible for future insurance premium tax credits.

“We find that to be a bill that may offer some of the revenue solutions that we are all looking for,” says Tyndal.

Whether or not all this investment turns out to be air inflating a ports' bubble, is something for the ports to watch on the horizon. For now, the consensus seems to be that the new Panama Canal will increase demand to meet the growing supply.