Portsmouth Port Development study task III : Detailed evaluation : Draft Report

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PORTSMOUTH PORT DEVELOPMENT STUDY

TASK III: DETAILED EVALUATION

DRAFT REPORT-

Prepared for:

OFFICE OF-STATE PLANNING
STATE OF'-NEW HAMPSHIRE
2.1/2 BEACON STREET
CONCORD, NEWHAMPSHIRE 03301

Prepared by:,

TEMPLE,,BARKER & SLOANE, INC.
-31-HAYDEN AVENUE
LEXINGTON, MASSACHUSETTS 02173

-April 11, 1986

PORTSMOUTH PORT DEVELOPMENT STUDY

TASK III: DETAILED EVALUATION

DRAFT REPORT

Prepared for:

OFFICE OF STATE PLANNING
STATE OF NEW HAMPSHIRE
2 1/2 BEACON STREET
CONCORD, NEW HAMPSHIRE 03301

Prepared by:

TEMPLE, BARKER & SLOANE, INC.
33 HAYDEN AVENUE
LEXINGTON MASSACHUSETTS 02173

April 11, 1986

CONTENTS

I. EXECUTIVE SUMMARY

11. MAJOR ISSUES

III. OVERVIEW OF MARKET DEMAND

IV. EVALUATION OF OPTIONS

V. RECOMMENDATIONS

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1. EXECUTIVE SUMMARY

A. INTRODUCTION

o This document presents the results of Task III: Detailed Evaluations of
Development options for the Portsmouth Port Region Development Study.

e The Task III effort focused on the evaluation of the three development
options selected by the Advisory Committee from the list of 16 options
presented by the consultants.

* The three options selected for evaluation were as follows:

1. Development of Dredge Spoil Containment area

2. Development of a second berth with Roll-On/Roll-Off (Ro/Ro) capability
at the existing State Pier

3. Management options for improving or terminating the State Port
Authority and its facilities

e The remainder of this chapter presents the findings and recommendations of
the Task III effort. Chapter II identifies key issues relevant to the
Task III effort; Chapter III provides an overview of market demand for
selected water dependent activities; Chapter IV presents the evaluation of
.each development option; and Chapter V contains TBS's recommendations.

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Executive Summary

B. FINDINGS AND RECOMMENDATIONS

Market Potential

� An assessment of current and emerging trends in cargo tonnage indicates
that significant growth potential exists for both scrap steel and
containerized cargoes. Significant increases in scrap steel tonnage have
already begun to occur at the Port Authority facility. These increases are
the result of a shift of those cargoes from Boston to Portsmouth following
the closing of the Schiavoni scrap terminal in Boston.

� Potential increases in containerized cargoes are associated with the New
Hampshire State Liquor Commission, increased imports of wine products by
New England distributors and container tonnages identified in the 1983
Reebie Market Survey.

� The Port Auth!ority will realize increased revenues over the next five years
due to the signing of a new lease between the State and Viking Cruises.
Based on Viking Cruises' market outlook, this lease could generate upwards
of $100,000 per year.

Development Options

option 1, Development of a Dredge Spoil Containment Area, is estimated to
cost $14.0 million (Exhibit I-1). This option includes construction of
10-acre and 1.5-acre sites with dredgings from the Piscataqua River
dredging project. Facilities included in the option are one 750-foot by
35-foot deep berth, two 350-foot berths with 25 feet alongside, and one
200-foot berth with 9-12 feet alongside.

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Executive Summary

Development Options (continued)

� Annual capital costs based on 30-year general delegation bonds and a
10 percent interest rate equal to $1.6 million per year. Addition of
.annual capital costs for the existing facility add an additional
$0.1 million to these costs.

� Based on TBS's market analysis, potential revenues to be realized
approximate $0.5 million annually (Exhibit 1-2). The total economic return
to the State from these activities is estimated between $7-$8 million.

� option 2, Development of a Second Berth with Ro/Ro Capability at the
Existing Pier, is estimated to cost $11 million (Exhibit 1-3). Included in
this cost is a 700-foot extension of the existing berth and a 250-foot
Ro/Ro berth capable of handling stern, bow, or side-ramped vessels.

� Annual capital costs, based on 30-year general obligation bonds and an
interest rate of 10 percent, are estimated at $1.2 million. Included are
$13 million of existing facility capital costs.

� Although the Port Authority has received numerous inquiries from carriers
interested in providing RO/Ro service to Portsmouth, TBS has been unable to
identify an existing service or documented flow that supports projection of
a revenue stream. Therefore, revenue projections are based on the data
provided for option 1, excluding revenues from other bulk cargoes and
commercial fishing vessels or $0.3 million per year.

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Executive Summary

Development options (continued)

e TBS's evaluation of option 3 focused on alternative methods for improving
the operation of the Port Authority or terminating its operations within
the context of existing facility and lease constraints.

e Short-term options for improving the Port Authority's operations include
increased emphasis on marketing to specific cargo opportunities and
expanding the scope of the Port Authority's operations.

o A long-term option for improving the operation of the Port Authority is the
assumption of the terminal operations.. This option would increase the
State's control over pricing, operating, and marketing of the terminal and
potentially increase its revenues. This option could only be implemented-
after 1992--the expiration date for the Clark contract.

'Recommendations

o The Port Authority should actively pursue the creation of the dredge spoil
containment area--Option 1.

--This option provides the Port Authority with the greatest potential for
diversifying its cargo and revenue base, rationalizing industrial and
commercial waterfront uses within the Portsmouth Port Region, and
attracting new users (fishing, cruise ships, industrial tenants, etc.) to
its facility.

--Due to the long lead time associated with this option, i.e., approxi-
mately two years before dredging would begin, it affords the Port
Authority ample time to identify and attract potential users to the
facility. If by the time the State is required to commit substantial
sums to the project, additional demand has not materialized, the State
has the option to proceed with or terminate the project.

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Executive Summary

Recommendations (continued)

--Assuming the State were to proceed and sufficient demand did not
materialize, the maximum exposure to the State would be from 1989 to
1992, during.which time it would incur two to three years of unamortized
debt or about $4.8 million. However, this amount would in all likelihood
be recaptured through the sale of all or a portion of the Port Authority
property.

--Consequently, the dredge spoil containment area provides the least
downside risk of the two capital development options.

� option 2: Addition of a second berth with Ro/Ro capability at the existing
pier does not represent the best use of State resources.

--option 2 provides limited diversification opportunities relative to
option 1--principally Ro/Ro which could be added in the containment
area.

--The upside potential (primarily Ro/Ro) for Option 2 is less and the down-
side risk (inability to recover investment) greater--unless the State
chose to sell the existing facility to retire the debt.

� Given the potential opportunities to expand the Port Authority's operations
and improve its performance, the Port Authority should not be terminated.
The absence of maritime expertise in other State agencies, combined with a
lack of credibility within the industry, would hinder the pursuit of the
existing opportunities.

--Recent improvements in the Port Authority's financial performance, com-
bined with substantial increases in scrap indicate potential exists for
continued improvement. This improvement could be further enhanced if the
Port Authority/Hapag-Lloyd are successful in capturing a share of the New
Hampshire State Liquor Commissions' cargoes.

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Executive Summary

Recommendations (continued)

e The Port Authority should develop a detailed plan for attracting additional
cargoes to its existing facility and for marketing the dredge spoil
containment area. Key components of the plan should include:

--Maximum effort in the short-term to obtaining a major share of the New
Hampshire State Liquor Commissions' cargoes

--Identification and solicitation of bulk cargoes that could be accommo-
dated in the dredge spoil containment area--Granite State Minerals repre-
senting a priority flow

--Initiate discussions with the Port of Halifax and Hapag-Lloyd regarding
the marketing of the Yankee Clipper to major lines with particular
emphasis on lines serving areas other than the United.Kingdom/Continent.

--Pursuit of the potential opportunities identified in the Reebie market
survey with particular emphasis on export cargoes

--Increased cooperation and coordination of marketing efforts among the
Port Authority, John T. Clark, Boston Overseas, and Hapag-Lloyd

0 During the next four years, the Port Authority and its Board should begin
to explore its options as they relate to the expiration of the Clark lease.
Specifically, the Port Authority should:

--Explore modification of the lease in order to remedy existing
shortcomings as they relate to pricing and control of the premises

--Assess the managerial, technical, and financial aspects of becoming an
operating port

--Initiate preliminary discussions with a number of terminal operators
regarding leasing of the facility (post-1988)

Exhibit 1-1

COST OF CONSTRUCTION AND IMPROVEMENTS OF NEW TERMINAL
.IN CONTAINMENT AREAS NORTH OF MAINE-NEW HAMPSHIRE INTERSTATE BRIDGE

(Option 1)

Construction Cost Site No.1 Site No. 2 Other Total

Containment Site $8,450,000 $1,650,000 $10,100,000
Bridge $400,000 400,000

Total $8,450,000 $1,650,000 $400,000 $10,500,000

Improvements Cost

Dredging $ 470,000 $ 220,000 $ 690,000
Site work (utilities,
security, surfacing,
drainage) - 900,000 140,000 1,040,000
Apron, fenders, etc. 1,340,000 220,000 1,560,000
Transit shad 1,000,000 1,000,000

Total $3,710,000 $ 590,000 $ 4,300,000

Total Cost $14,800,000

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Exhibit 1-2

SUMMARY OF ESTIMATED DIRECT REVENUES TO PORT AUTHORITY
DREDGE SPOIL CONTAINMENT AREA AND EXISTING FACILITY

Projected Annual
Activity Revenue Basis Units/Year Revenues
Scrap Metal $150,000 base revenue 300,000 tons $150,000b
80% of dockage/wharfage 30,720
in excess of $150,000
Containers $7/20 ft. unit 100 units 560a
$14/40 ft. unit 900 units 10,0808

Commercial fishing $650/vessel 3 vessels 1,950

Viking Cruises $27,500 base revenue - 27,500
$0.75/passenger 100,000 passengers 75,000
Other bulk cargo $130,000 base lease 130,000b
$0.25/ton dockage 250,000 tons 62,500
Miscellaneous revenues 10,000C

Total $498,310

a80% of dockage and wharfage fees from Yankee Clipper.
b
Based on estimated annual per acre containerization cost of site No. 1.
cDockage from miscellaneous vessel calls and fees.

Source: TBS.

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Exhibit 1-3

COST OF CONSTRUCTION AND IMPROVEMENTS
OF EXISTING TERMINAL EXTENSION

(Option 2)

Construction Cost

Foundation $2,075,000
Curtain wall 2,810,000
Superstructure 3,105,000
Earthwork 1,500,000

Total $9,490,000

Improvements Cost

Dredging $ 535,000
Fender system, etc. 350,000
Utilities 250,000
Miscellaneous site work 375,000

Total $1,510,000

Total Cost $11,000,000

II. MAJOR ISSUES

A. INTRODUCTION

� The New Hampshire State Port Authority (Port Authority) is at a critical
juncture, facing serious challenges to its existence, including:

--A recommendation by the State Sunset Committee to terminate the Port
Authority

--A lack of direction and support from the State regarding its mission, the
the resources required to support its mission, and the criteria by which
its performance is measured

--The potential loss of New England traffic to other ports due to regula-
tory and technological factors

� While each of these challenges is formidable and has potentially negative
implications for the Port Authority, there also exists potential opportun-
ities to expand both the Port Authority's scope of operations and economic
contribution to the local and'state economies.

� Realization of these opportunities requires investment in physical facili-
ties and improved management.

This chapter addresses the challenges confronting the Port Authority.
Major opportunities that are potentially available to the Port Authority
are addressed in Chapter III: Overview of Market Demand.

Major Issues

B. SUNSET COMMITTEE RECOMMENDATION

o In summary, the Sunset Committee's recommendations were as follows:

1. Terminate the Port Authority.

2. Transfer Port Authority property management to another state agency.

3. Transfer Port Authority economic development functions to the
Department of Resources and Economic Development (DRED) and general
economic development programs.

4. Transfer Port Authority regulatory functions to local jurisdictions or
another state agency.

o The Sunset Committee based these recommendations on several factors,
including:

1. The Port Authority's mission is too broad--responsibilities in areas
where there is probably no need for State involvement

2. The Port Authority's lack of visibility within State government

3. Lack of control over the Port Authority's principal asset--the State
Pier

4. Limited staff resources

5. overlapping responsibilities

6. Lack of leadership by the Port Authority Board

Major Issues

B. SUNSET COMMITTEE RECOMMENDATION (continued)

e The first three items suggest that the State has not clearly def ined and
implemented the enabling legislation that created the Port Authority. The
last three items suggest that both the State and the Port Authority Board
have not provided direction and support to the Port Authority.

However, the solution is not necessarily to terminate the Port Authority,
but to clearly define the State's mission in managing its coastal resour-
ces. Without a clear definition of the State's mission (i.e., what it
wants to do with its coastal resources), it is impossible to establish a
coherent management program. The duplication of responsibilities for
coastal resources between the Port Authority and DRED serves to highlight
this problem.

Once the State clearly defines its mission or role in managing coastal
resources, it can then establish criteria for evaluating how effectively
the State and individual agencies are fulfilling their roles. At that
point, if the Port Authority does not support the State's-role or meet its
performance criteria then it should be terminated or consolidated into
another agency.

C. STATE SUPPORT

e As cited by the Sunset Committee, the State has not provided the level of
support necessary to enable the Port Authority to perform its perceived
mission.

Major Issues

C. STATE SUPPORT (continued)

e, The historical lack of capital improvements and a marketing position within
the Port Authority, and the use of ports other than Portsmouth by the State
Liquor Commission exemplify this lack of support.

* Without the facilities and staff to plan port and commercial development;
and promote shipping, port-related industry, commerce, and commercial
fishing, these missions are impossible to achieve.

0 During the course of this study, suggestions have been made that the Port
Authority should be managed as a business, i.e., bottom-line financial
performance. This represents one approach--the private sector business
approach. Another approach taken by many port authorities is the public
policy approach--creation of employment and economic benefit.

Both approaches have been successfully applied in the port industry. Both
also imply specific criteria by which the success or failure of a port can
be measured.

0 Regardless of the approach taken in evaluating the Port Authority,
resources and support must be committed to provide it with a reasonable
chance of meeting the criteria set forth.

Major Issues

D. REGULATORY AND TECHNOLOGICAL ISSUES

� Deregulation and technological change have.brought profound changes to the
U.S. transportation (air, truck, rail, and marine) industry. The Task I
report discussed these changes in detail.

� The major changes as they relate to the Port Authority are as follows:

--The cargo routing decision has shifted from shippers to-carriers.

--The expansion of carriers' contracting and rate setting authority have
enabled them to concentrate their operations in a few hub centers.

--Oversupply, depressed rates, and the capital-intensive nature of the
maritime industry have resulted in reduced port calls.

The net result of these trends has been the elimination of captive markets
for ports, i.e., it has become cheaper for ocean carriers to serve local
markets via distant load centers.

While these factors have had a negative impact on the Port Authority's
ability to compete for New England cargoes, market studies performed by
Hapag-Lloyd and Reebie Associatesi suggest that potential opportunities
still exist.

To date, such potential has not been realized, due in part to the Port
Authority's lack of a marketing function. Now that that function has been
established, pursuit of these identified opportunities must become a
priority.

lPortsmouth Port Marketin2 Survey and Strategy Study, Reebie Associates,
1983.

III. OVERVIEW OF MARKET DEMAND

A. MARINE CARGOES

� Historicallyj the Port Authority facility has handled two cargoes--steel
scrap and containers (Exhibit III-1). All other cargoes represented
11 percent of total activity between,1978 and 1983.

� Scrap metal exports are generated throughout the New England area and are
exported via Portsmouth by Madbury Metals and Tewksbury Metals. Historical
tonnages shipped via Portsmouth, as reported by the Army Corps of Engi-
neers, are shown below in Table III-1.

Table III-1

PORTSMOUTH SCRAP EXPORTS

1980-1984

(short tbns)

1980 171,850
1981 146,107
1982 151,427
1983 145,829
19B4 197,022

Source: Waterborne Commerce of the
United States, Part 1, U.S.
Army Corps of Engineers,
1980-1984.

e Over the last five years, the volume of scrap exported via Portsmouth has
displayed little growth (a 9 percent increase). This small increase
reflects the negative impacts that the world economic recession and major
structural changes in the world iron and steel industry have had on the
demand for scrap steel.

Overview of Market Demand

A. MARINE CARGOES (continued)

e In the near term, scrap exports through Portsmouth are expected to increase
substantially due to the closing of the Schiavoni steel scrap facility in
Boston. Discussions with Tewksbury Metals have indicated that the volume
of scrap they export through Portsmouth has doubled as a result.

* The closure of the Schiavoni facility has resulted in Portsmouth becoming a
major New 'England gateway for scrap metal cargoes. This factor, combined
with the Port's low-cost position relative to Boston, should enhance its
ability to handle increased volumes of scrap.

Containers

Container cargoes handled at the Port Authority pier are associated with
Hapag-Lloyd's feeder service. This service comprises a triangular trade
between Halifax, Boston, and Portsmouth.

9 Containerized cargoes moving through the Port of Portsmouth comprise
spirits, consumer goods, and manufactures, and are carried between New
England and the United Kingdom/Continent.

The Port Authority, the Clark Company, and Boston Overseas--Hapag-Lloyd's
agents, have been unable to provide data on container tonnages for the
period 1980 to 1983. For 1984 and 1985, container tons handled at the Port
Authority pier totaled 8,471 short tons and 13,387 short tons,
respectively.

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Overview of Market Demand

Containers (continued)

Container traffic through the Port Authority facility has been disrupted on
several occasions for two major reasons: the berth was unavailable because
another vessel was loading scrap steel, and Hapag-Lloyd suspended service
for six months during 1984. The suspension was a result of a combination
of factors, including berth congestion and a lack of cargoes.

e Three potential growth areas for Portsmouth container cargoes are:

--New Hampshire State Liquor Commission shipments

--Expanding spirit imports by New England shippers

--Other cargoes

9 Discussions with the New Hampshire State Liquor Commission and Hapag-Lloyd
indicate that the Commission imports between 400 and 600 containers of
liquor each year. By contrast, the Port Authority handled 484 inbound
containers in 1985.

o Historically, the Commission's cargoes have moved via New York and Boston
because of the Commission's purchasing procedures, e.g., it purchases from
bonded brokers, which enables the Commission to store inventory duty free.

9 The completion of the Port Authority's Foreign Trade Zone application now
permits it to offer a similar service to the Commission. In addition,
analyses performed by Hapag-Lloyd have indicated that the Commission could
save trucking costs by using Portsmouth.

Overview of Market Demand

Containers (continued)

TBS understands that the Commission is considering using Portsmouth in lieu
of other ports. Such a shift could nearly double the volume of container
traffic through the Port Authority facility.

e Hapag-Lloyd has indicated that several major New England spirits dealers
have begun to expand their mix (wine coolers, for example) and volume of
shipments through Portsmouth due to increased demand and cost/service
factors. while this expanded trade is in its initial stages, Hapag-Lloyd
has indicated that it represents long-term potential for Portsmouth.

The shipper survey conducted by Reebie Associates showed that the Port
could.attract significant volumes (23,833 tons) of New England container-
ized cargoes. To date, this potential has not been realized, due in part
to Port Authority staff constraints.

0 Together, cargoes handled by the New Hampshire Liquor Commission, other
spirit shippers, and shippers targeted by the Reebie Study represent a
market potential of 1,500-2,000 containers. In contrast, the 1985
containertrade approximated 700 containers. -

Assuming the Port Authority could only attract half of this total, it would
still represent an increase in traffic of 100 to 150 percent.

Overview of Market Demand

NONMARINE ACTIVITIES

e Nonmarine,.water-dependent cargo activities in the Portsmouth Port Region
include the following:

--Tour boats

--Commercial fishing

--Recreational boating

In addition to these ongoing activities, occasional visits by military
vessels and tall ships create a demand for waterfront facilities.

Quantifying the demand for nonmarine cargo activities is complicated
because of the fragmented nature of these industries, i.e., large numbers
of small firms and/or entrepreneurs, and the rate at which companies enter
and leave the market.

e Tour boat activity provides significant revenue to the Port Authority.
Viking Cruises, the Port Authority tour boat tenant, recently signed a
five-year lease with the Port Authority. this lease provides for a base
rent to the Port Authority of $27,500 per year and a per passenger sur-
charge of $0.75. This latter fee covers the amortization of $375,000 in
capital improvements that the State is making at the Viking Cruises facil-
ity. Viking Cruises expects to double its activity at the new facility
over the life of its lease. Such an increase would represent an additional
$45,000 in revenues to the Port Authority.

Overview of Market Demand

B. NONMARINE ACTIVITIES (continued)

9 Commercial fishing activity in the Piscataqua River region has expanded
significantly over the past few years (17 percent between 1982 and 1984).
The Piscataqua River accounts.for approximately 80 percent of all fish
landed in New Hampshire. The State Fish Pier handles approximately 60 per-
cent of total State landings.

Interviews with the Portsmouth Co-op and the Portsmouth Chamber of Commerce
have indicated that at least one company is looking to locate commercial
lobster boats on the Piscataqua River. Because these vessels require
little in the way of shoreside infrastructure, accommodation of commercial
fishing vessels at an expanded Port Authority facility represents an oppor-
tunity to diversify activity and expand the Port Authority's revenue base.

Interviews with Portsmouth Harbor Cruises have shown the company to be
interested in adding an additional vessel to its harbor cruise activity.
Because of land constraints at the company's current Ceres Street location,
the Port Authority facility represents a logical alternative.

While this activity could be accommodated at the existing Port Authority
facility, the prime location would be adjacent to Viking Cruises' expanded
facility, which would require installation of a float, stairway, and other
improvements. Parking to accommodate both Viking Cruises' and Portsmouth
Cruises' traffic would be a problem.

Exhibit 111-1

PORT AUTHORITY CARGO TONNAGE

FY 1978-1983

(percent)

Cargo 1978 1979 1980 1981 1982 1983 1984*

Scrap Metal 97% 89% 94% 68% 83% 7800' 96wm
Containers 0 a a 6 8 13 4
Other 3 11 6 26 9 9 N.A.
100,00, 100010,1 100% 100% 100% 1 0OW10 100%
*Preliminary data.
N.A. = not available.

Source: Port Authority and TBS.

IV. EVALUATION OF OPTIONS

A. INTRODUCTION

This chapter evaluates the recommended options for future development of
the Port of Portsmouth. Two are capital improvements to berthing areas
while the third is a management option.

e The first option develops new terminal facilities north of the existing
Port Authority terminal by filling containment areas east of Cutts Cove.
This option depends on the availability of dredge spoil from a proposed
federal main channel dredging project, and the completion of necessary
permits.

The second option extends the existing terminal wharf to the north and
provides for the accommodation of Ro/Ro vessels.

e The third or management option would develop measures to improve the per-
formance of the Port Authority or determine how the State should terminate
the existing organization.

Evaluation of options

B. POTENTIAL FOR DREDGE SPOIL AVAILABILITY

e The first option depends on Congressional approval and funding of the
Piscataqua River dredging project. Some transportation cost savings to
both the federal government and local interests could be realized if the
dredge spoil were moved a short distance to the containment areas instead
of to the proposed deep water site southeast of Massachusetts.

The outlook for Congressional approval for the project is unclear because
both the language and number of port projects included in the Senate and
House Water Resource bills differ. The House bill (H.R.6) requires local
participation of 10 percent for channels less than 20 feet, 25 percent for
those 20 to 45 feet, and 50 percent for any greater than 45 feet. Other
local costs, including those for rights of way and easements, would be
capped at 5 percent of the total cost of the project. The Senate bill
(S.1567) adds 10 percent to the local shares for each depth category to be
paid over a 30-year period.

e The bills will be negotiated in a joint conference committee and the
resultant compromise bill will be returned to both chambers for approval
before the passed bill is sent to the President. The Senate bill is
currently favored by the Administration.

In addition to the federal action, State approval of filling the contain-
ment area and other changes to the bottom lands in both Options 1 and 2
will be necessary. The permitting process encompasses the procurement of a
series of permits at the local and State level before applying to the
U.S. Army Corps of Engineers for approval.

Evaluation of options

C. CAPITAL IMPROVEMENT OPTIONS

Option 1

e option 1 involves developing two containment areas upriver from the exist-
ing Port Authority terminal. The containment sites would be created on
either side of the North Mill Pond Inlet Channel, as shown in Figure IV-1.

e The larger site (No. 1), approximately 10 acres in size, would provide a
750-foot-long berth with 35 feet of water alongside at MLW, and a 350-foot-
long berth with 25 feet alongside. The smaller site (No. 2), approximately
1.5 acres in size, would provide a 350-foot-long berth in 25 feet of water
and 200 feet of berthing space with 9 to 12 feet alongside at MLW. A
bridge over the North Mill Pond Inlet Channel would connect the two sites.

e A minimal amount of dredging would be required along the 750-foot berth to
ensure a 35-foot depth.

o The containment structure for Site No. 1 would consist of filled cells
strengthened with stone columns. Dredged material would be placed shore-
ward of the containment structure. Site No. 2 would be constructed of a
sheetpile retaining wall, or rip-rap with a timber pier above. A berm
along the railroad embankment adjacent to Site No. 1 will be necessary to
ensure containment and structural stability. Periodic adjustment of the
railroad tracks may also be necessary due to consolidation and settlement.

e Several feet of dredged port construction material will likely settle in
the near term. Portions of the site will be able to be used for storage of
dry bulk materials and containers-on-chassis if care is taken in placement
and site preparation. Cell-supported aprons will be capable of accommo-
dating vehicles and crawler cranes, although crane rails would require pile
supports. Foundation conditions should be taken into account in locating,
designing, and constructing any structures.

Evaluation of options

Option 1 (continued)
� Prior to proceeding with the dredging project, the State would need to
obtain all appropriate permits. Environmental factors to be considered
include the impact of the depositing of dredge spoil on Cutts Cove, an
environmentally sensitive area, and potential displacement of the Boston &
Maine Railroad's embankment. In addition, potential impacts of the project
on National Gypsum's property would also need to be addressed.

� The cost of construction and improvements for both containment sites in
option 1 is shown in Table IV-1. Construction cost is estimated at
$10.5 million and improvements at $4.3 million, for a total of
$14.8 million.

Table IV-1

COST OF CONSTRUCTION AND IMPROVEMENTS OF NEW TERMINAL
IN CONTAINMENT AREAS NORTH OF MAINE-NEW HAMPSHIRE INTERSTATE BRIDGE

(Option 1)

Construction Cost Site No.1 Site No. 2 Other Total

Containment Site $8,450,000 $1,650,000 $10,100,000
Bridge $400,000 400,000

Total $8,450,000 $1,650,000 $400,000 $10,500,000

Improvements Cost

Dredging $ 470,000 $ 220,000 $ 690,000
Site work (utilities,
security, surfacing,
drainage) 900,000 140,000 1,040,000
Apron, fenders, etc. 1,340,000 220,000 1,560,000
Transit shed 1,000,000 1,000,000

Total $3,710,000 $ 590,000 $ 4,300,000

Total Cost $14,800.,000

low

Evaluation of Options

Option 1 (continued)

le The dredge spoil containment area provides an ideal site for the storage
and handling of commodities with large, outside storage requirements. Its
location away from the main entrance to the facility and out of sight to
most of Portsmouth's urban and residential areas are its major attributes
as a bulk/neobulk facility.

e Given these attributes, the major uses to be considered for site No. 1 are
the storage and handling of steel scrap currently handled at the existing
Port Authority facility and other compatible bulk cargoes that could be
attracted to the facility.

Granite State M'inerals salt operation, currently located at the foot of
Ceres Street, is an ideal candidate for relocation to site No. 1. Reloca-
tion of this facility to the containment area accomplishes the following
goals:

--Removes a heavy industrial activity from close proximity to intensive
retail/tourist activities

--Alleviates noise and air pollution that occasionally emanates from
Granite State's facility

--Provides increased capacity for Granite State's current salt operation
and offers expansion opportunities

--Ensures long-term preservation of a water-dependent industrial activity
and its associated economic impacts

--Frees valuable urban waterfront property to be developed into compatible,
urban- and/or tourist-related activities resulting in additional employ-
ment, tax revenues, and attractiveness to the central business district
of Portsmouth.

0-0) am 4M am M on on so M" "Wig aM- no we on an

Evaluation of Options

option 1 (continued)

o The potential disadvantages to the relocation of Granite State's operation
are potentially higher fixed (lease payments versus existing facility
amortization/property taxes) and variable (principally stevedoring) costs
for Granite State.

0 An additional activity relates to the possible relocation of bulk cargo
activity from another port, a recent-example being the closure of
Schiavoni's scrap facility in Boston. While this opportunity is purely
speculative at this time, it should be recognized that bulk cargoes are
facing increasingly stiff competition for waterfront property in highly
developed ports such as Boston and New York. Such trends represent a very
real potential for Portsmouth to significantly increase and diversify its
cargo base.

o Due to its limited draft, site No. 2 is designed to accommodate non-cargo-
related activities. The principal use envisioned for this site is
commercial marine fishing.

Development of this site for commercial fishing is to augment, not compete
with, the existing State Pier facility. This intent is.based on expres-
sions of interest on the part of the commercial fishing community that
unfilled demand exists for commercial fishing docking facilities and the
fact that expansion of the existing State Pier is not considered feasible.

e Shoreside installations required to support commercial fishing activities
would include An ice machine, storage for bait, and a lift for landing
catches.

Evaluation of Options

option 1 (continued)
e While tour boat activities could be accommodated at site No. 2, public
access to the site would be restricted due to marine cargo operations
occurring at both the existing facility and site No. 1. The more logical
site for locating a tour boat operation would be adjacent to Viking
Cruises' facilities.

a Relocation of the steel scrap operation to containment site No. 1 frees the
existing facility to be developed as a multipurpose facility oriented
toward general cargo and industrial activities. Specifically, the existing
facility could be used to accommodate the following activities:
--Current and expanded container and general cargo operations
--A bonded warehouse operation for the New Hampshire State Liquor
Commission or other users
--other industrial activities--fish processing, for example, as envisioned
by AMTEC, Inc., a local fish wholesaler
--Accommodation of occasional visits by navy vessels, tall ships, and
coastal cruise vessels

In summary, the uses envisioned for the existing facility would be less
industry-intensive, aesthetically compatible uses.

The economic revenues generated from'the above activities is estimated to
be $498,310 per annum. Table IV-2 provides a breakdown by activity.

Evaluation of Options

Option 1 (continued)

Table IV-2

SUMMARY OF ESTIMATED DIRECT REVENUES TO PORT AUTHORITY
DREDGE SPOIL CONTAINMENT AREA AND EXISTING FACILITY

Projected Annual
Activity Revenue Basis Units/Year Revenues

b
Scrap Metal $150,000 base revenue 300,000 tons $150,000
80% of dock age/wharfage 30,720
in excess of $150,000

Containers $7/20 ft. unit 100 units 560a
$14/40 ft. unit 900 units 10,080b

Commercial fishing $650/vessel 3 vessels 1,950

Total $498,310

a8O% of dockage and wharfage fees from Yankee Clipper.
bBased on estimated annual per acre containerization cost of site No. 1.
CDockage from miscellaneous vessel calls and fees.

Source: TBS.

Evaluation of options

option 1 (continued)

Included in this total is $182,500 associ ated with the attraction of a bulk
lessee to the containment area--Granite State Minerals, for example.

e Assuming the containment area is financed by general obligation bonds for
30 years at an interest rate of 10 percent per annum, annual capital costs
associated with the containment area total $1.6 million. To this must be
added annual capital costs on the existing facility of $0.1 million or a
total of $1.7 million.

Annual revenues generated from the addition of the containment area cover
29 percent of total Port Authority debt service cost, based on the
foregoing analysis.

The revenue projections can be viewed as conservative since they assume the
Port Authority is only able to attract one-half the Liquor Commission's
annual shipments and one-quarter the potential market defined by Reebie
Associates. They also include no provision for expanded uses of the
existing facility.

OW M' so tow No "K WO MW 00 WO, MW MW OW MW M 41M

Evaluation of options

Option 1 (continued)

Revenues to the Port Authority could be significantly improved by
attracting additional tenants to the facility. Examples would include a
bonded warehouse operation and an industrial user. Each of these activi-
ties could provide for annual contributions to capital costs through
leases. Estimates for such revenue have not been made due to the lack of
sufficient data on potential users.

e The economic impact on the State from creation of the dredge spoil area and
the associated increase in activity it could generate is substantial.
Based on the 1985 economic impact study of the Port Authority'sl opera-
tions, the total economic impact both,direct and indirect is estimated to
be between $,8 and $9 million.

lThe Economic Impact of the Port of Portsmouth on the New Hampshire Economy?
M. Wolfenden, 1985.

aW go Im no, low; Wt im so Im I M ON

Evaluation of Options

ption 2

0 Option 2 would extend the existing Port Authority Terminal wharf by
700 feet, providing capability for handling side as well as bow- and stern-
loading vessels, as shown in Figure IV-2. Depth along the extension is
35 feet, MLW, while depth at the Ro/Ro berth is 25 feet, MLW. This option
creates approximately two acres of land.

& Environmental considerations would be primarily associated with the impact
on aquatic habitats of filling behind the berth.

option 2 includes a 100-foot-long extension of the existing berth and a
600-foot-long second berth, in order to provide flexibility in using both
berths. The 100-foot extension of the existing berth also shifts the
second berth toward the channel, allowing a 250-foot Ro/Ro berth to be
utilized without impinging on navigation.

0 This option represents the design recommended in the Preliminary Concepts
Phase Engineering Report prepared by CE Maguire and selected by the Port
Authority. The wharf would be a caisson-supported, reinforced concrete
structure that is 69 feet wide with a sloped, armored, embankment to retain
fill. The Ro/Ro wharf and ramp will be of similar construction, but
39 feet wide.

0 The cost of construction and improvements for Option 2 are shown in
Table IV-3. Construction cost is estimated at $9.5 million and
improvements at $1.5 million, for a total of $11.0 million.

"I' no UK M, WK so M. 1W No, on:

Evaluation of Options

2pLL,on 2 (continued)

Table IV-3

COST OF CONSTRUCTION AMD IMPROVEMENTS
OF EXISTING TERMINAL EXTENSION

(Option 2)

Construction Cost

Foundation $2,075,000
Curtain wall 2,810,000
Superstructure 3,105,000
Earthwork 1,500,000

Total $9,490,000

Improvements Cost

Dredging $ 535,000
Fender system, etc. 350,000
Utilities 250,000
Miscellaneous site work 375,00d

Total $1,510,000

Total Cost $11,000,000

The addition of the second berth and a Ro-Ro capability at the existing
facility would produce three operational/marketing benefits:
--Eliminate congestion at the existing berth

Evaluation of Options

Option 2 (continued)

--Enhance the Port Authority's marketing efforts through provision of berth
guarantees

--Handle roll-on/roll-off traffic

� Elimination of berth congestion would ensure the Yankee Clipper was not
shut out of Portsmouth due to a scrap vessel. It would not, however,
produce substantial increases in tonnage in and of itself.

� Conversely, the ability of the Port Authority to offer a gua ranteed berth
could result in a measurable increase in traffic. By guaranteeing a berth,
the risk of costly delays to the vessel owner is eliminated, thus improving
the attractiveness of the Port.

� Although the addition of a second berth enhances the attractiveness of the
Port Authority facility, it will not by itself attract additional service
to the Port. However, by ensuring the Yankee Clipper a berth every time it
does call in Portsmouth, it may be possible to entice other lines calling
at Halifax to use the Yankee Clipper and Portsmouth as a more efficient and
cost-effective gateway to northern New England markets.

� Such a marketing effort would require'a joint effort on the part of the
Port Authority and the Port of Halifax to market this concept to
Hapag-Lloyd a.n,d carriers serving Halifax.

Evaluation of Options

option 2.(continued)
Similarly, the ability to handle Ro@Ro vessels could result in an increase
in traffic by providing the specialized facilities these vessels require.
The Port Authority staff has indicated that they have consistently received
inquiries over time regarding 'Ro/Ro capabilities at the Port Authority
facility.

TBS is not aware of any coastwise Ro/Ro service (excluding ferries)
currently operating within the coastal North Atlantic range (Canada to
Norfolk). A few transatlantic line-haul operators--Atlantic Container
Lines, for example--provide Ro/Ro service primarily for the carriage of
automobiles. However, such services would be unlikely to call at
Portsmouth due to the lack of sufficient cargo base to support a call by
these large, line-haul ships and the need to limit port calls in order to
maintain service frequency.

A January 1985 study conducted by the Port of Halifax on the potential for
a Halifax-New England feeder service suggested some potential exists for a
coastal Ro/Ro service that would compete for traffic currently moving via
truck between New England markets and Eastern Canada. However, the study
did not address the subject in detail and, therefore, potential traffic
volumes were not estimated.

Without conducting a detailed market study for the potential for a New
England Ro/Ro service, it is not possible to quantify what traffic could be
attracted to the Port Authority facility with the addition of a second
berth.

Annual capital costs associated with Option 2 were estimated at $11.0 mil-
lion. Assuming this investment was financed with general. obligation bonds
for 30 years at 10 percent interest, the annual capital cost would total
$1.2 million.

Evaluation of Options

Option 2 (continued)

e Revenues generated by the Port Authority, excluding any provision for the
attraction of a second carrier or Ro/Ro service to the Port Authority, are
estimated at $0.3 million, i.e., revenues developed for Option 1 in
Table IV-2, excluding the commercial fishing and other bulk cargo
revenues.

e The estimated economic impact from this level of activity is between
$7 million and $8 million.

The $0.3 million r 'evenue number covers only 25 percent of the annual capi-
tal cost, resulting in an estimated annual shortfall of $0.9 million when
capital costs for the existing facility of $0.1 million.are included.

Option 3: Management Options

� The intent of option 3, as expressed by the Advisory Committee, was to
explore ways to improve the existing Port Authority operations and
procedures for terminating the Port Authority and its operations. Each of
these options was to be explored under the assumption that no capital
improvements were made to.the facility.

� Several important facts must be kept in mind when exploring ways to improve
the Port Authority's existing operations. These include:

--The Port Authority does not control its assets. Therefore, it is
relegated to the role of landlord and contract supervisor.

Evaluation of options

Option 3 (continued)

--It does not appear feasible to sell the existing facility at the present
time, due to the existence of the Clark and Viking leases. Consequently,
sale of the facility, without the consent of both Clark and Viking,
before,1992, is not an option.

--The Port Authority's ability to market the Port is constrained by its
inability to set prices--a function reserved for Clark under its. present
lease--and by the lack of a second berth.

--As called out in the Sunset Review Committee's report, a duplication of
responsibility for managing commercial, water-dependent activities exists
between the Port Authority and DRED.

--The Port's revenue base is largely dependent on the Clark lease and a
single commodity--scrap metal.

e The net impacts of these factors are that the Port Authority's ability to
generate revenues, fund capital improvements, and market the Port are
limited.

If the Port Authority is to improve its performance, three items are
required. These are:

--Clear direction by the State and the Port Authority Board as to what the
Port Authority's role is and what criteria are to be used in measuring
the Port Authority's performance in fulfilling its stated role. For
example, if the Port Authority's role is to generate a return to the
State, it should be so stated along with what criteria will be employed
in measuring its performance in providing that return--net revenue, cash
flow, return on investment, etc.

Evaluation of options

Option 3 (cont inued)

--Commitment of adequate resources to perform its role. Within existing
constraints, the Port Authority has two options for improving its finan-
cial performance--attract more cargoes to the facility and expand the
scope of its operations. To attract additional cargoes, the Port
Authority must develop an aggressive marketing' plan that focuses on those
opportunities for which the Port possesses competitive advantages--e.g.,
specialized service, congestion-free, competitive service to the United
Kingdom/Continent, etc. Such a plan requires the development of
marketing materials, purchase of customer/shipper information and travel.
Expansion of its scope of operations includes promotion of the foreign
trade zone or assumption of additional commercial waterfront activities.
The latter would require legislative action.-

--The Port Authority must establish closer ties to both the Portsmouth Port
Community (Clark, Portsmouth Navigation, shippers, truckers, etc.) and
State agencies that are responsible for promoting industrial development
and commerce. Specifically, the Port Authority in conjunction with other
state and port interests needs to identify and then to sell shippers
currently using other ports that the total transport package, i.e.,
costs, service, transit times, etc., are superior via Portsmouth.
Similarly, the Port Authority in conjunction with the Governor's office
and Hapag-Lloyd need to cooperate in evaluating the advantages/disadvan-
tages of shipping New Hampshire State Liquor Commission cargoes through
Portsmouth.

A second option for improving the Port Authority's performance would be to
assume the terminal operating responsibilities currently held by John T.
Clark. This option would require the acquisition of A staff member with
extensive operating experience. The advantages of assuming the operation
would be increased control of pricing and marketing and increased revenues
from terminal functions such as handling and storage.

man W@ M W, M MM MM M= M M =-Man

Evaluation of Options

option 3 (continued)

e A stevedoring firm would still be responsible for loading and unloading the
vessels. However, that firm would be appointed by the ocean carrier or his
agent.

This option could not be exercised before the termination of the Clark
lease in 1992.

The principal consideration in evaluating options for terminating the Port
Authority are (1) what role if any the State desires to maintain in
promoting port development and commerce and (2) timing considerations for
terminating the Port Authority and its operation.

e If the State wishes only to maintain a landlord or property management
function per the Sunset Committee recommendation, then the Port Authority's
responsibilities could be transferred to another agency per the Sunset
'Review and the Port Authority terminated.

Conversely, if the State desires to sell its coastal industrial holdings,
the timing of the sale becomes an issue. The State may have to wait until
after the expiration of the current leases in 1992, since it is not clear
whether sale of the property could be effected without the consent of the
lessees.

Figure IV-1
NEW CONTAINMENT AREAS (OPTION 1)

Containment Site No.
cc Po" 'Aulhority r
co

Site Cn
a:
No. 2 LU

z Cn
-0

IrA

0%
ATS COVE

oe@\\

Source: Containment Structure Project Status Report, Kimbell Chase, May 1984.

Figure IV-2
EXPANSION OF EXISTING TERMINAL (OPTION 2)
600,

...................
................. .........

........... . .............
:1.5 ID. X:D*:"@:
Pe ........ : ..... *
........... *:::::::::::: ....... .. ......
..................

...........

............
Act.4
..........

...........
........... .... .....
. . . . . . . . . . .
-4 . .. . . . . . .
. . . . . . . . . . .....
. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .-- W . . . . . . . . . . . . . . . . .
.... . . ... . . . . . . . . . . . . . . . . . 41 . . .. ...:.:.:................ . . *.,.*...*.�
. .. . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . . .
. . . . . . . . . . . .
. . . . . . . . . . . . .
. . . . . . . . . . .
TOP OF SLOPE
............
............
... .......
*\C-l BOLLARD--%'

NEW PAVED APRON

BITUMINOUS
PAVEMENT

WAREtjOUSE
..........

SCALE I
Source: Preliminary Concepts Phase Enqineering Report, C.E. Maquire, February 1984.

V. RECOMMENDATIONS

0 The Port Authority should actively pursue the creation of the dredge spoil
containment area--Option 1.

--Assuming the State were to proceed and sufficient demand did not
materialize, the maximum exposure to the State would be from 1989 to
1992, during which time it would incur two to three years of unamortized
debt or about $4.8 million. However, this amount would in all likelihood
be recaptured through the sale of all or a portion of the Port Authority
property.

--Consequently, the dredge spoil containment area provides the least
downside risk of the two capital development options.

0 Option 2: Addition of a second berth with Ro/Ro capability at the existing
pier does not represent the best use of State resources.

--option 2 provides limited diversification opportunities relative to
option 1--principally Ro/Ro which could be added in the containment
area.

Recommendations

Given the potential opportunities to expand the Port Authority's operations
and improve its performance, the Port Authority should not be terminated.
The absence of maritime expertise in other State agencies, combined with a
lack of credibility within the industry, would hinder the pursuit of the
existing opportunities.

The Port Authority should develop a detailed plan for attracting additional
cargoes to its existing facility and for marketing the dredge spoil
containment area. Key components of the plan should include:

--Maximum effort in the short-term to obtaining a major share of the New
Hampshire State Liquor Commissions' cargoes

--Identification and solicitation of bulk cargoes that could be accommo-
dated in the dredge spoil containment area--Granite State Minerals repre-
senting a priority flow

imam M 11M M M M M MM@ M M W M

Recommendations

--Pursuit of the potential opportunities identified in the Reebie market
survey with particular emphasis on export cargoes

--Increased cooperation and coordination of marketing efforts among the
Port Authority, John T. Clark, Boston Overseas, and Hapag-Lloyd

0 During the next four years, the Port Authority and its Board should begin
to explore its options as they relate to the expiration of the Clark lease.
Specifically, the Port Authority should:

--Explore modification of the lease in order to remedy existing
shortcomings as they relate to pricing and control of the premises

--Assess the managerial, technical, and financial aspects of becoming an
operating port

--Initiate preliminary discussions with a number of terminal operators
regarding leasing of the facility (post-1988)

17-D r -1 f -I F-1 L:-@j

NOAA COASTAL SERVICES CTR LIBRARY

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