Wednesday, October 2, 2013

Race to the Bottom....of the Channel

Published in The Folio Weekly, October 2, 2013.

The Army Corps of Engineers has completed its study of the St. Johns River deepening project and has approved the "local preferred plan" of dredging from the current depth of 40 feet to the 47 feet requested by JaxPort. At an estimated total cost of $750 million, a local taxpayer share of $380 million, and a long illustrious record of such public works projects promising far more than they ever deliver, it is important for citizens of Jacksonville and Northeast Florida to be informed on the meaning of the report, the costs/benefits on which it is and is not based, and to approach the project with a critical eye.

The first point to emphasize: Citizens should not confuse the Army Corps' report, and its recommendations and approval of the deepening project, with a true and complete cost-benefit analysis. The sole and singular benefit that is calculated by the Corps is based exclusively and narrowly on savings in transportation costs as a consequence of larger vessels having access to the port terminals. These benefits accrue primarily to retailers, shippers and carriers — many foreign, rather than domestic. While these are the primary beneficiaries of the project, it is the public that is being asked to bear the financial and environmental cost. Further, there is no necessary or automatic relationship between transportation cost reductions and broader economic benefits 
for the local and regional economy.

One thing we do know: Reducing transportation costs will ensure the continuing profitability of offshore, rather than domestic, production. In short, U.S. taxpayers are being asked to financially support maritime infrastructure projects that, perversely, subsidize and reinforce a global trade system that contributes to the continuation of large trade deficits with Asian producers, as well as the further loss of manufacturing jobs to lower-wage countries. As long as these transportation costs can be kept low, the advantage of shifting production offshore will be retained, and there will be no economic incentive to produce these goods domestically.

On the cost side of the Corps' analysis, the sole and singular cost factored into the analysis is the dollar cost of the project — now estimated to be around $750 million. This does not include the significant environmental costs to the water, wildlife and air; the inevitably large costs of upgrading the terminal infrastructure — bigger wharfs, more and larger cranes, wider turning basins to accommodate the larger vessels; the local transportation infrastructure to accommodate the trucks moving containers on and off the terminals; or the ongoing costs of maintaining channel depth. If these uncalculated costs are added to the total, it is likely to be a $1 billion-plus project.

In short, most all public interest considerations are entirely ignored in the 
cost-benefit equation used by the Army Corps.

Supporters of the deepening project consistently claim that it will create many jobs for the local and regional economy. This is often regarded as the only needed justification for any economic development project, no matter the cost, and it is designed to disarm any critics of the project who, in raising critical questions, can conveniently be labeled "job killers."

But, again, there is nothing in the report that addresses the jobs claims. In fact, of the 338-page report, there is only one paragraph devoted to "Regional Economic Benefits" with a single reference to jobs. There are no figures, only that the deepening is expected to "create new private sector port jobs in Jacksonville, while supporting operations in trucking, distribution and related services that could generate direct and indirect local jobs throughout the region."

The only actual job numbers that have been produced in defense of the project are provided by Martin Associates, a port consulting firm hired by JaxPort. Because this firm works on behalf of JaxPort, and is largely a public relations firm for the port industry, the job numbers and projections cannot be accepted at face value and the assumptions built into their models have not been subjected to independent peer review for this project. More generally, job numbers and projections for public works and associated infrastructure projects are notoriously inaccurate and unreliable, and invariably err on the inflated side.

Ideally, given the large costs and the high environmental stakes, the most responsible action would be for local officials and development authorities to commission an independent and comprehensive cost-benefit analysis that includes not only the quantity but also the quality of jobs generated by the project. But instead, our public officials, as has become the custom, are incapable of questioning, let alone opposing, any project supported by the corporate business community and their chamber of commerce boosters.

The "dredge it and they will come" scenario offered by advocates of the deepening might have some credibility if Jacksonville were the only port on the East Coast. But in addition to JaxPort, we have Miami, Savannah, Charleston, Norfolk and New York/New Jersey. Each of these ports is also investing hundreds of millions of dollars to be the top port on the East Coast, and vying for the same position and the same cargo, in what can only be described as a frenzy of destructive competition. Each of these other ports is already receiving more cargo than Jacksonville, two (Norfolk and New York/New Jersey) already have channel depths of 50 feet, and the port in closest proximity (Savannah, less than 150 miles away) is far ahead of Jacksonville in progress toward channel deepening to 47 feet.

Yet port consultants like Martin Associates advise JaxPort, as they do all their clients, to keep digging deeper channels (at the public's expense). When asked whether there is any guarantee that such a mammoth investment in coastal infrastructure and environmental degradation will produce the desired outcome, Martin Associates answers "no" and can only suggest that JaxPort pursue an aggressive marketing campaign to capture cargo from other, better-established ports. So, after competing for and spending billions of taxpayer dollars to deepen channels and build infrastructure, the East Coast ports are then advised to compete with each other for a finite amount of cargo. And who will benefit from this further port competition? Again, the retailers, shippers and carriers, who will now have their bargaining position further strengthened by the existence of multiple deep-water ports financed at the public's expense.

The fact is, there is very little chance that JaxPort will emerge, after spending up to a billion dollars of scarce federal and local public funds, as the coveted "first in/last out" port receiving the largest container vessels. Even 47 feet will not be deep enough for the largest fully loaded new Panamax vessels, which will desire access under all load conditions and under all tidal conditions 24/7, 365 days a year. These vessels will also require an air draft that may not be met due to the inadequate height of the Dames Point bridge.

Is there a more rational solution to this competitive madness? Yes. And it happens to come from the same Army Corps. In a widely neglected report on East Coast ports produced by the central headquarters in 2012, the Corps suggests a sensible distinction between "post-Panamax ready" ports (those with 50-foot channels) and "cascade-ready" ports (those with 40- to 45-foot channels). They emphasize that not all ports need to be post-Panamax ready. Rather, some can be cascade-ready ports that will continue to serve an important and vital function in international trade and logistics, but serving smaller ships and feeder vessels. Jacksonville is a prime candidate for "cascade-ready" status.

This might save about $1 billion and, not incidentally, prevent the St. Johns River from experiencing any further environmental destruction. 

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