The Port of Savannah needs hundreds of millions of dollars to deepen its harbor and take advantage of the Panama Canal expansion. That expansion is expected to double its capacity and accommodate ships carrying three times as much cargo. Bigger cargo ships will help businesses move goods more quickly, especially from China, and could lower the prices that consumers pay. But with the federal debt and deficit soaring, there is little taxpayer money available for harbor deepening at American ports.
Deepening the Port of Savannah is expected to cost $650 million. The state is contributing $252 million and hopes the federal government will pay the rest. But Georgia’s leaders need to be realistic about the funding shortfalls.
The port netted just $600,000 in President Barack Obama’s budget last year, $2.5 million in supplemental 2012 funds, and the president just proposed giving $2.8 million to the port in his 2013 budget. At this rate, it will take decades to finish the deepening project.
Georgia needs another way to permanently deepen harbors. One solution is public-private partnerships, which deliver needed infrastructure including ports, raise new sources of capital for modernization, shift risks away from taxpayers and onto investors, and encourage innovation.
The Port of Savannah could team with a private company, which would pay for and perform the initial deepening and future maintenance of the channel. To recoup this investment, the company would manage the port and generate revenue from the shipping companies that use it. Three possible rental-lease types include a fixed annual payment to the state, a variable payment or a partial lease.
Maryland is showing how successful these partnerships can be. In 2010, the state signed a 50-year lease with Ports America to operate the Port of Baltimore. The company, Ports America, will invest $500 million in the project and provide another $140 million to fund highway, bridge and tunnel improvement projects near the port. The state received a $105 million payment upfront and gets annual lease payments of $3.2 million. Maryland also can cancel the agreement if certain performance metrics related to the construction and management of the port aren’t met.
Could this type of lease work in Savannah? Yes. Savannah’s deepening involves a river channel, not a port berth, but the potential partners and the process are the same. Savannah is a bigger, busier port, so the lease likely would be more attractive financially. The process of getting and approving bids for the project should take Georgia about a year. The private sector’s construction efficiency could have the port deepened and ready by mid-2013.
Leasing the port also would provide other benefits. First, Georgia would be free to use the $240 million it plans to spend on the port on other construction projects instead.
Second, the port operator in Maryland provided the state $120 million to pay for infrastructure improvements near the port. Contrast this with Georgia, where taxpayers through gas taxes are funding the $73 million Jimmy Deloach Parkway Connector connecting the port of Savannah and I-95. With a public-private partnership, the port operator, not Georgia taxpayers, could pay the bill for these needed infrastructure improvements.
Third, many public-private partnership agreements have annual lease payments. These go to the state and could help pay for construction and maintenance of infrastructure projects that lack funding.
The deepening of the Panama Canal is going to bring great economic benefits to ports capable of handling larger ships. Will those benefits go to Miami, Jacksonville or Charleston? Or will the Port of Savannah be able to take advantage of the opportunity and bring the economic rewards to Georgia?
Instead of sitting and hoping for the deficit-riddled federal government to find hundreds of millions of dollars for the deepening project, Georgia needs to pursue a public-private partnership deal that can move the project forward right now and benefit everyone in the region.
Baruch Feigenbaum, a Georgia Tech graduate, is transportation policy adviser for the Reason Foundation.