public role in port development

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THE PUBLIC ROLE IN PORT DEVELOPMENT
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APR 28 1997
NATIONAL TRANSPORTATION POLlCY STUDY COMMISSION

WORKING PAPER NO. 3

AUgUSt 1979

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3(BLIOGRAPHIC DATA 1. R port No. 3. Recipient's Accession No.
3HEET NTPSC/WP-79/03
I. Titie and Subtitle 5. Report Date
The Public Role in Port Development August 1979
6.

7. Aut-or(s) 8. Performing Organization Repe.
John L. Hazard No-Working Paper No. 3
riorming Organization Name and Address 10. Proiect/Task/Work Unit No.
Pe.
qational Transportation Policy Study Commission
@000 M Street, N.W. - Suite 3000 11. Contract/Grant No.
lashington, D.C. 20036

2. Sponsoring Organization Name and Address 13. Type of Report Period
Covered

14.

15. Supplementary Notes

6. Abstracts Analyzes state participation in port development, covering both
Dast and potential trends, and draws implications for Federal port policy.
7he report features the results of a comprehensive survey of state ports
idministered by John Hazard, involving 34 states and 261 ports. The survey
Lncludes data on types of ports, state agency organization and functional
:esponsibility, public fin@nce policies, and port performance related to
'--raffic growth. Discussion of policy options draws on a second survey,
ilso administered by the author, canvassing the opinion of port industry
Drofessionals on major Federal port issues. The study advocates increased,
3ut moderate, Federal participation in port@policy, and concludes by draw-
1-ng up a model redistribution of Federal port functions.

7. Key Words and Document Analysis. 17c.. Descriptors

7b.. Identifiers/Open-Ended Terms

7c. COSATI Field 'Group

8. Availability Statement 19. Security Class (This 21. No. of Pages
kvailable to the public through NTIS Report) SSIFIED
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NTPSC Working Paper Series No. 3

Preface

The National Transportation Policy Study Commission (NTPSC)
was created by Congress under the Fedetal-Aid Highway Act of
i976, to investigate U. S. transportation needs and
institutions, and to recommend new transport policies for the
country. The NTPSC is composed of nineteen members--six
appointed from the U.S. Senate, six from the House of
Representatives, and seven appointed by the President.
Representative Bud Shuster is Chairman of the Commission and
John E. Wild is Executive Director.

As part of its research process, the staff prepared working
papers for the use of Commission members. Research for those
papers was performed under the supervision of Dr. John W.
Fuiier, Deputy Executive Director of the NTPSC. Following
publication of the NTPSC's final report, these papers will be
dis@r',ibuted as an "NTPSC Working Paper Series."

This paper, prepared for the Commission by Professor John
L. Haz'ard of Michigan State University, examines the current
and future roles of Federal and state governments in port
development. Much of the information is derived from a survey
conducted by the author. This paper was edited by John W.
Fuller with Eileen Bartscher.

The conclusion 0s are those of --the author and do not
necessarii--y reflect the views of the Commission or its
individual members.

COASTAL ZONE
INFORMATION CENTER

TABLE OF CONTENTS

Preface

.Uist of Tables v

introduction 1

The State Questions 1

State Port In.-Lormation 2

Types of Ports 2

State Agencies 2

Major Functional Responsibilities 5

individual Ports 5

State Financing 6

Level of Monetary Support 6

Sources of Fun6s 7

State Port 8

Capital Commitments By States 9

Por t Per f ormance 10

State Program Outlook 11

Alternative Federal Roles 12

Port industry Opinion on

Federal Initiatives 13

Perspective on Change 16

The Port Development Process 16

Unanswered Questions 18

Notes',and References 20

LiST OF TABLES

Tabie Page

i State Port Questionnaire Summary 3

State Participation in Por@ Development 4

3 Summary Distribution of Major Port
Functions 5

4 Average Annual Public Expenditures
for U.S. Ports 7

5 Sources of Port Capital 1975-76 7

6 Proportion of Transportation Budgets
Allocated to Marine Terminals 8

7 Selected Future State Commitments to
Port Development 9

8 Relative Growth of Port Tonnage 10

9 Redistribution of Model U.S. Port
Functions 17

LIS.T OF FIGURES

ELaure

1 Federal Port Policy Options Matrix 14

THE PUBLIC ROLE IN PORT DEVELOPMENT

Introduction

Che states pi-ay a far more crucial role in the development
ot transportation in the United States than do districts,
provinces, and comparable units of gov6r:nment in Western
Europe.!/ it is conceivable that states could assume a
dominant role in port deveiopment in the U . S., as they already
ilave in the development of highways and otiler transportation
infrastructure.i/ Because such responsibility could
substantially alter the role of Federal participation in this
area, it is important to understand the present and future
activity of states in port development before defining a
Federal program.

State Questions

Historica'Liy, the state's role in port development has
varded extensiveiy. it began in earnest when the State of New
York\,,began digging the Erie Canal in the 1820s, setting off the
race of the eastern ports to the Mid-continent. Afterwards,
state port activity had several peaks: in the midst of the
canal buliding era of 183-D to 1850; after the successful
establishment of the Port Authority of New York-New Jersey in
1921; and again after release of facilities following World War
II. Although there have been several studies of Federal port
policy, the states have been curliously neglected. Therefore, a
special survey of @states was cond,ucted2/ that posed the
foliowing questions:

(1) What are the present roles of the state in port
development?
(20 How are the roles changing and what developments can
be anticipated in the future?
(3) who is primarily responsible for each of the basic
port functions?
(4) What levels and types of public funds are available
for future port development?
(5) What are the alternative forms of state organization,
and the advantages and disadvantages of each?

State Port information

Only 38 of the 50 states have what might be regarded as
commercial or industrial ports. These are the states bordering
the Great Lakes, along the major inland waterways, on the
Atiantic, Gulf, and Pacific coasts, and the offshore states.
The remaining 12 are landlocked in the arid West and in New
England. All states have highways, airports, and (with the
excep t4 on of Hawaii) common carrier railroads,'making it less
of a problem to develop transportation constituencies and to
allocate Federal assistance. Useful information on port
involvement was received from 34 of the 38 states surveyed,
primariiy from state departments of transportation (DOTs).

Types of Ports

The 34 states responding to the questionnaire had a total
of 26i ports that could be ciassitied as commercial. Table 1
iists the number of ports in each state and the tonnage
accommodated in i975. Ports vary in number from a maximum of
26 for Michigan to a minimum of 1 each for Delaware and New
Hampshire, with an average of about 8 per state. They range
from cosmopolitan trade centers, such as New York and New
Or-Leans, to a series of barge exchange terminals scattered
Jong the Mississippi River. The total tonnage moving through
a.L
the responding states' ports totalled 1,234,938,125 short tons,
or about 78 percent of the national waterborne total. The
larger states generally have the higher port tonnages, with
Texas, New York, Illinois, California, and Michigan ranking in
that order. However, the level of tonnage has little to do
with state involvement in port functions. Texas, California,
Michigan, and Florida have little state involvement, while New
York,j New Jersey, and Maryland have full-function state port
authorities. In general, coastal states with little
state-level involvement make up for the lack by having strong
local port authorities. This is the case for Texas,
Caiifornia, Florida, and Washington. Michigan and some of the
river states are the only exceptions to this rule and have
little state or local community.involvement in port management.

State Agencies

Various state agencies are responsible for..,port liaison and
deveiopment. Twelve states have set up port authorities, and
an equal number rely on a state department of transportation
for liaison with ports. The remaining 10 states that responded
to the questionnaire have either designated other
organizations, or charge no specific agency with port
responsibilities. Selection of state port organization seems
to have more to do with geography and custom than with tonnage
or commerce. Virtually all of the East Coast states plus
Puerto Rico have autonomous state port authorities, while West
Coast states hQ-ve little in the way of state port organization,
preferring to rely on local authorities. Great Lakes and
inland waterway states either rely on state DOTs or have no
organization charged with port responsibility at the state
level. Several states have established organizational forms
that may set a new precedent. California has relinquished its
involvement in the Port of San Francisco and has turned over
its remaining port functions to a Coastal Zone Commission that
allocates all waterfront space; Washington finances port
J
development, but screens projects through iocal, regional, and
state@port associations; and Texas has established a Coastal
and Marine Council whose major coordinating services remain to
be fully determined.

TABLE 1

STATE PORT QUESTIONNAIRE SUMMARY
1975

No. of 1975
tate Comm. Ports Tonnage State Agency

labama 15 (1 ocean) 20,000,000 Ala. State Docks Dept.
laska 23 ports 15,000,000 State DOT
rkansas 1 port 3,238,000 Ark. Waterway Comm.
alifornia 12 ports 90,121,268 'None
onnecticut 7 priv., 1 state 2-0,600,000 State DOT
elaware port 1,572,857 None
-Lorida 24 ports 79,200,000-_ State DOT
eorgia 5 ports 2,900,000 Geo, port authority
awaii 8 ports 16,577,000 State DOT
llinois 13 ports n.a. State DOT
owa, 11 ports 8,800,000 State DOT
ansas 5 ports 300,00-0 None
entucky 3 ports 12,000, - 000 Ken. Port & River.Dev. Ag.
aine 2 ports 29,000,000 State DOT
aryland 2 ports 41,70:6,000 State DOT, MD port adm.
ichigan 26 ports 87,000,000 State DOT
innesota 3 river, 4 lake 47,518,000 State DQT
ississippi 8 ports 27,000,000 Miss. A & I Board
issouri 3 ports 23,500,000 None
ebraska 2 por t,s 900,000 None
ew Hampshire 1 por t 2,940,000 S.tate port authority
ew jersey 3 ports 42,400,000 Bi-state authority
ew York 5 ocean, 3 lake 217,000,000 P.A.-NY/NJ, NYS-DOT
orth Carolina 2 ports 2,800,000 State port authority
hio 8 ports n.a. None
klahoma 5 ports 900,000 State DOT
uerto Rico 3 ports .11,381,000 P.R. ports authority
.hode Island 3 ports 7,838,000 R.I.-PA., local, & priv.
outh Carolina 3 ports 3,000,000 State port authority
ennessee 4 ports/150 term 25,000,000 State DOT, Bur. Waterways
10 ports 237,000,000 Coastal & Marine Council
irginia 6 general cargo 3,052,000 VA port authority
7 bulk 51,300,000
ashington 19 ports 70,600,000 None
isconsin 14 ports 26,800,000 None

OTAL 261 ports 1,234,938,125 12 port s authorities
12 state DOTS
8 no state organizations

OURCE: 1977 State Port Questionnaire administered by John L. Hazard
responses b' 34 states).
y

Distribution of Functions

What port functions do the states perform? How do they
anticipate changing their role in the near future? Not all of
the states responded to this section of the questionnaire. The
information received, however, revealed some interesting trends
in state participation in port development, as illustrated in
Table 2.

TABLE 2

STATE PARTICIPATION IN PORT DEVELOPMENT
(No. performing each function)

Functions Present Number In Future Trends

Pianning 17 19 increasing
Disposal of dredge spoil 15 18 increasing
Promotion 15 16 slight increase
Approval of plans 10 14 major increase
Financing infrastructure 10 9 decreasing
Operating subsidies 9 11 increasing
Legal support 9 9 stable
Protecting rate structures 9 9 stable
Regulating port rates 6
4 decreasing

SOURCE: 1977 State PoFt Questionnaire administered by John L. Hazard
(responses by 34 state's)

The survey suggests that overall state participation in
ports may increase modestly. While 19 states expected the
total of their functions to stablize, 12 others anticipated
increases and only 1 (Kentucky) foresaw a decline. States
having no port functions are expected to decrease from 7 to 2.

In the distribution of port functions, states have been
most active in planning, arranging disposal of dredged
material, promotion, and financing infrastructure. However,
the distribution of state port functions is expected to change
somewhat. Planning will be emphasized in the future, and
promotion slightly increased. Financing of infrastructure
capital may decline as states shift to operating subsidies.
Legai support and intervention in rate cases to protect port
overland rate structures will remain stable, while regulation
of port rates may become a declining state function. Overall,
there is little evidence that the states will substantially
expand their port development functions..

Major Functional Responsibilities

Port development in the U. S. is inevitably a joint venture
between various levels of government and t.he private sector.
Seldom, however, have any two states or ports divided the five
major management functions (i.e., planning, financingr
promotion, operation, and control) in exactiy the same way.
The distribution of major functions between state and local
governments and private enterprise is illustrated in Table 3.
As shown below, states are most likely to be involved in port
planning or approval of plans.

TABLE 3

SUMMARY DISTRIBUTION OF MAJOR PORT FUNCTIONS

Major Functions State Local Private

Planning 25 20 3
Financing 14 20 20
Promotion 16 14
Operations 10 18 31
Controls 14 20 12

SOURCE: 1977 State Port Questionnaire administered by. John L.
Hazard (responses by 34 states)

Local government divides port financing with private
enterprise and is a-major factor in promotion and control
functions. Private enterprise is the dominant force in port
operations (cargo-handling activities) and shares financing
with local government and the states.

Functions can be broken down into sub-functions that are
performed jointly. For example, pians are initiated at the
local level and then move up to the state level for approval
and financing. Financing may involve private provision of
specialized terminals, local provision of access roads and
public terminals, and state guarantees of bonds. Likewise,
promotion may entail institutional advertising by the states,
direct promotion by local authorities, and sales solicitation
by the private lines and terminals. Control of a private
project may include support from a local public authority and
approval by a board appointed by the governor.

Individual Ports

in the same state there may be specialized private ports,
municipal ports, and state port authorities--each with a
different role in state and national commerce and a different
organization for accomplishing its functions. In tiny Rhode
Island, for example, there are three ports. One port is

private (Tiverton), one is municipal (Providence), and the
third (Quonsett) is being developed by the Rhode island Port
Authority. In the first two ports, the state merely approves
pians and assists with dredge spoil disposition; in Quonsett,
however, the state port authority will perform all functions.
It is the author's belief that each state-should -classify its
ports by some commercial criteria before determining the degree
and type of state involvement warranted.

For that matter, each port is a unique joint venture
combining various elements and functions in somewhat different
patterns. The survey data summarized in Table 3 indicate that
Coos Bay (Oregon) is predominantly a private lumber port with
much iocai support. Galveston (Texas) and Oakland (California)
are almost exclusively local municipal ports with varying
contributions from private enterprise. Baltimore (Maryland),
Charleston (South Caroiina), and the Hampton Roads (Virginia)
ports are almost exclusively state ports with modest local and
private participation.

State Financing

State and local government expend'itures for transportation
are more than double the level of Fed'E@ral'expenditures and
their share is expected to increase.i/ state-s are in a
crucial position to fund port development and to influence the
a.Llocation of Federal funds to local communities. How much can
ports rely on the states for future funding? What sources of
funds and techniques of financing will the states employ? How
successful have state financing etforts been?

Most of the 34 states responding to the questionnaire are
directly or indirectly involved in port financing. The 12
states with port authorities are involved in reinvestment of
port revenues, issuance of bonds for capital expansion, or
approval of operating subsidies. Most of the state DOTs are
providing capital support to ports and some are providing
operating subsidies. Ten states are neitlier directly, nor
indirectly, involved in port financing, but instead rely
primarily on local and,private financing of their ports.

Level of Monetary Support

The level of state financial support to port development
was del--ermined from earlier surveys,conducte6 by the Maritime
Administration and the U.S. Department of Transportation.
Whiie the findings of the surveys are not completely
homogeneous, they tend to confirm the prospect that public
.Linancial support funneling through the states will not be
adequate to future port needs. Public support to ports will
first stabiLize, then decline, if the estimates shown in
Table 4 hold:

TABLE 4

AVERAGE ANNUAL PUBLIC EXPENDITURES FOR U. S. PORTS

Period Annual Expenditures

Estimated (1972-1980) = $416 million per year
Estimated (1980-1990) = $233 million per year

SOURCE: U.S. Department of Transportation, i974 National
Transportation Report, Washington, D.C.: Government Printing
Office, 1975.

Ports comprise the only segment of transportation in which
public investment is expected to.decline. This is a
potentially serious problem, because private investment is not
expected to make up the shortage, port construction costs are
escalating, and the trade and offshore responsibilities of
ports are growing. The outlook is Lor.gravely underfinanced
ports.

Sources of Funds

Where will the funds for port devei-opment come from? Most
states indicated t@at re-invested port revenues will be the
most important source of future port capital, with general
obiigation bonds and private investment ranking second and
tiiird. Other sources of port capital are shown in Table 5.

TABLE 5

SOURCES OF PORT CAPITAL 1975-76

(No. of states ranking the sources as 1 through 7)

Source No. states Rank

Reinvested Port Revenues 13 states first
General Obligation Bonds 12 states second
Private Investment 9 states third
Other Public Sources 8 states fourth
Revenue Bond Issues 6 states fifth
Speciai Mileage Assessments 2 states sixth
General Transportation Funds 1 state seventh

SOURCE: 1977 State Port Questionnaire administered by John L.
Hazard (responses by 34 states).

Private investment, which is ranked as the third priority
source of capital by the states, was not included in the
earlier Federal surveys summarized in Table 4. Some states
have worked ports into general revenue appropriations and
general transportation funds as a regular-line item; others
have relied more on revenue bond issues and special local
miliage assessments.

State Port Allocations

Only about 2 percent of the total public transportation
funds channeled through the states in 1971 was spent for
ports. That proportion is expected to drop to 1.9 percent over
the next 8 years and to a little over 1 percent over*-the next
A years. The range between states is great. Some states
(e.g., Alabama, Delaware, Louisiana, and Washington) will put
over 8 percent of their public transportation funds into port
development, while others (e.g., Michigan, Ohio, Missouri, and
Tennessee) do not intend to invest in this area. The
diZference in state commitments apparently has little to do
with port tonnage or mode of state organization; it seems
instead to depend primarily on geography and location, as
illustrated in the following regional-lbreakdown.

TABLE 6

PROPPRT1ON OF TRANSPORTATION BUDGETS
ALLOCATED TO PORTS
(Estimated 1972 to 1978 program)

Region Percent for ports

North Atiantic states 3.8%
Pacific Coast and offshore 3.8%
South Atlantic states 3.2%
Gulf Coast states 1.3%
Great Lakes states 0.2%
Inland River states 0.1%

National average 1.9%

SOURCE: i977 State Port Questionnaire administered by John L.
Hazard (responses by 34 states).

The North Atlantic, Pacific Coast, and South Atlantic
states' allocations to ports are above the national average,
while the Great Lakes, Gulf, and Inland River states'
allocations fall below the average. A partial explanation is
that the Gulf, River, and Great Lakes ports handle a greater

proportion of specialized bulk cargoes that attract private
investment. However, this fact does not fully explain the
current differences in allocations, as it does not take into
account either the Lake ports' quest for general cargo via the
Seaway or the River ports' increasingly diversified services
via integrated bargeship operations.

Capitai Commitments by States

The 10 states with the highest future public capital
commitments for port development are listed in -fable 7, which
also includes the types of state support available and the
proportion of total public transport capital allocated to ports.

The top 8 states in prospective port capital invo.stment are
also among the top 11 in tonnage accommodated. The only
high-tonnage states missing from the list are Michigan, Ohio,
Illinois, and the Lake states that have been reluctant to
commit public funds to port development. They have been
replaced on the top-10 investor list by the South Atlantic
ports of North Carolina and South Carolina, which are 30th and
27th, respectively, on the port tonnage list.

TABLE 7

SELECTED FUTURE STATE COMMITMENTS TO PORT DEVELOPMENT
(Annual average 1972 to 1980)

Percent of
Total
Type of Marine Terminal Transp.
Ten Highest State $upportm@/ Public Capital Budget

California 0. $45,464,000 3.2%
Maryland 1 rev., 2 cap., 3 op. 39,831,000 6.4
New York 1 rev., 2 cap., 3 op. 36,488,000 2.6
Washington 2 cap. 31,945,000 7.1
New Jersey 1 rev., 2 cap., 3 op. 23,117,000 3.4
Texas 0 22,855,000 0.6
Virginia 1 rev., 2,cap., 3 op. 22,387,000 3.6
Florida 0 14,970,000 2.4
N. Carolina 1 rev., 2 cap., 3 op. 12,735,000 3.8
S. Carolina 1 rev., 2 cap. 11,400,000 7.1

SOURCE: 1977 State Port Questionnaire administered by John L.
Hazard (responses by 34 states).

i rev. = reinvested port revenues, 2 cap. public capital
investment, 3 op. operating support.

Most of the top 10 public port investments derive abundant
funds from the states through re-invested port revenues,
capital investment, and operating support. However, three
states with the most expansive coastal waterfronts, i.e.,
Caiifornia, Texas, and Florida, provide no funds for port
development either directly or indirectly;- They rely, instead,
on local communities and private industry to provide port
capital. It is noteworthy that in these 3 states ports receive
a -Lower proportion of total public transportation funds than in
the other leading 10 states. If local community support should
falter in California, Texas, and Florida, as might happen in
the wake of the property tax revolt, their ports may have to
turn to the state for financing.

Port Perrormance

How have the ports performed under different state regimes
and financial arrangements? This is difficult to 3ud Ige. Gains
in traffic and returns on investment are performance
indicators, but only the former data are available in the U. S.

Perhaps the best available way to rate the performance of
ports is by traffic growth within a competitive regional
context, although it must be recogniied that a multitude of
economic and geographic factors not controlled by ports can
affect changes in traffic. There have been major diff-erences
in the rate of tonnage growth in each coastal district, as
illustrated in Table 8. The major growth areas in the past
decade have been the South Atlantic and Gulf coasts. Tonnage
through the North Atlantic and Pacific coastalports has
increased at a slower rate, while Great Lakes port tonnage has
declined slightly-due.to the shrinkage of interlake trade.

TABLE 8

RELATIVE GROWTH OF PORT TONNAGE

(By coastal district and key states, 1965 to 75A/)
(in 1,000 of tons and percentages)

Coastal District N. Atlantic S. Atlantic Gulf Pacific Great Lakes

Tonnage 1965 420,270 123,820 356,130 169,400 374,300
Tonnage 1975 494,738 187,881 517,500 200,298 335,700
Cnange 75/65 74,468 64,061 161,400 30,858 -38,600
Percent Change 17.7% 51.7% 45.3% 18.2% -10.3%

Highest Growth N. Jersey N. Carolina Miss. Oregon Minnesota

Lowest Growth Penn. Virginia Texas Calif. Wisconsin

SOURCE: 1977 State Port Questionnaire administered by John L. Hazard
(responses by 34 states).

From the larger port states in each coastal district. Also, trend
statistics were available for most river port states.

Without reading too much into the figures, it is probably
significant that the tonnage records of ports with strong state
backing have generally been better than for others in the same
region. For example, tonnage increases through New Jersey
ports, which have the backing of the powerful Port Authority of
New York-New Jersey, were much higher than in Pennsylvania,
where local port commissions persevere.. Both North Carolina
and Virginia have state port authorities, so the fact that they
were the high and low states in the growing South Atlantic
coast is of little organizational significance. (it is
noteworthy, however, that the Virginia State Port Authority was
devoid of financial resources during this period.) Mississippi
and Louisiana, with vigorous port authorities in the Gulf,
substantially exceeded the relative growth of Texas,'-which had
halted port activity at the state level.-T-his experience was
repeated on the Pacific coast, where Oregon and Washington
tonnages advanced far more rapidly than California, which had
discontinued state port involvement and had turned the
remaining functions over to a Coastal Zone Commission. The
principle also holds in the Great Lakes region, i.e., port
traffic in Minnesota, Ohio, and Pennsylvania has held up better.
--with a modicum of state involvement@_than in Wisconsin and
Michigan, which have no state and ver" little local involvement.
y

Clearly, those states with active state port development
programs have experienced a more rapid growth of port traffic
within their regiopal context than have those states without
port responsibilities or with minimal programs.

.State Program Outlook

The states are caught in an anomalous middle position in
port development, resulting from an absence of Federal port
policy and a decline in local and private initiative at the
waterfront. Will the states fill the growing void in port
development? What is the outlook for state port development
programs? Generally, the results of the survey of state
transportation officials are not at all reassuring.

(1) States expect to increase their port-related functions
slightly, but more for planning and approval aspects
than on the promotional and financial side of port
development.
(2) Overall public expenditures for ports are expected to
decrease from.1980 to 1990, despite construction cost
inflation, increasing trade, and growing offshore
responsibilities.
(3) Only about 2 percent of the total public transporta-
tion funds channeled through the states was spent for
port terminals in 1971, and that figure is expected to
decline to 1 percent over the course of the next 18
years.

(4) States still rely primarily on conventional sources of
port financing (reinvested revenues, bonds, private
investment, and property taxes) but very few have
incorporated these sources into the mainstream of
transportation fund financing.

The survey also indicates that, in coastal regions, traffic
growth is linked to the vigor of state port development
programs. Under present circumstances, however, it does not
appear that the states are prepared to move ahead in this
area. Even if they are willing, it is doubtful that many
possess either the financial or the human resources necessary
to fill the growing need..@/

Alternative Federal Roles

How can the Federal government strengthen port development
in the United States? How can it implement its programs for
expanding trade and commerce with the least damage to the
present mainsprings of port development?

There are three basic alternatives.that the Federal
government should consider in defining'its role in port
development:

(i) Status quo--do nothing different-than at present;
(2) Moderate change--assume a limited set of functions; and
(3) Major change--assume a comprehensive set of functions.

Each of the alternatives has its own assumptions,
arguments, and internal logic. Status quo advocates maintain
that ports are already overexpanded.Y and any further Federal
participation would exacerbate the present misallocation of
resources. In their view, ports would pursue Federal dollars
in the same limitless acquisitive fashion as communities pursue
inland navigation projects. A selective approach, in their
opinion, is unconstitutional because discriminatory Federal
actions are forbidden by Section 9 of Article 1 of the
Constitution:

"No preference shall be given by any regulation of commerce
or revenue to the ports of one state over those of another;
nor shall vessels bound to, or from, one state be obliged
to enter, clear, or pay duties in another."

However, there are.powerful counter arguments to a status
quo Federal port policy. Studies by the National Academy of
Sciences' Future Port Requirements Panel have concluded that
ports have not overexpanded; in fact, some excess capacity is
believed desirable if ports are to remain competitive and
handle recurring peak-load requirements efficiently.2/ Also,
whereas this country may have too many ports, it cannot be said
that there are enough of the proper type or enough in the right

place (deepwater ports being a case in point). Nor can one
argue that the projected levels of public investments in ports
(slightly more than half the present level) will be adequate to
serve growing commerce and offshore responsibilities.
Gratuitous expenditures for port purposes are best avoided by
careful allocation formulas for Federal funds, in accordance
with comprehensive plans and investment studies at the local
level. User charges on direct beneficiaries, already under
consideration, may also be helpful.

Actually, Section 9 of Article 1 of the Constitution was
designed to assure the colonies that their major source of
revenue (customs duties), shipping, and trade;would not be
impinged upon by any arbitrary action of other states or the
Federal government. It was meant to reinforce, rath'er than
deny, the paramount powers of the Federal--g.overnment in foreign
and interstate commerce. Federal agencies have been applying a
seiective approach to port dredging and navigation aids for
years and now, because of budget ceilings, they will have to
become even more selective. The most compelling arguments
against maintaining the Federal status quo on ports are the
adverse results that the present fragmented policies have
produced, and the high probability that problems will become
more severe.

Despite the strength of the pro-Federal position, there are
few advocates of a new U.S. port policy in which the Federal
government assumes,comprehensive port development functions.
This may be becaus'e of lessons learned from the public port
policies of the Uni-ted Kingdom and Western Europe, or even
nearby Canada, which plans to embark on a comprehensive
national port program.in 1979 or 1980. An attempt by the U.S.
Army Corps of Engineers to engage in regional port planning was
soundly thwarted by the American ports in 1970. Senior port
officials viewed the planning effort as an invitation to
further Federal intervention. Later they acknowled d an
interest in Federal funds without ties or controlsT9

Clearly, moderate change appears to be the only prudent and
acceptable position for the Federal government at present. And
that position must be closely attuned to the varying opinion of
the industry on major port issues.

Port Industry Opinion on Federal Initiatives

in order to tap industry opinion on major Federal port
issues, a questionnaire was designed and administered to 75
young port professionals and about 50 transportation and
distribution personnel. The opinions of the two groups
correlated closely and are reflected in the Federal port policy
options matrix below.

FIGURE 1
FEDERAL PORT POLICY OPTIONS MATRIXa/
(Rank order of choices)

Functional Issues Status Quo Moderate Change Major Change

1. Federal planning? none 2nd bottom up lst top down 3rd

2. Federal financing? as is 2nd capital only lst cap./oper.
ass. 3rd

3. Operation of off-
shore ports? private 2nd state/local lst Federal 3rd

4.' More control? local/ regional 2nd Federal 3rd
state lst

5. Federal govt. org.? as is 2nd DOT lst
.in other dept. 3rd

6. Waterway user
charges? none 2nd fuel tax lst segment
chrg. 3rd

SOURCE: Questionnaire administered by John L. Hazard to port and
executive seminars, 1,976 to 1978.
.@V Arrows reflect the preferred option on each issue and the
others are ranked second and third.

Perhaps in contrast to former port officials, the younger
professionals who were surveyed preferred to see moderate
Federal government involvement in most of the functional areas
affecting ports. Each response on issues carried a distinct
message. Planning should be from the bottom up, i.e.,
initiated at local and state levels, rather than from the
Federal level down. Federal financing of port infrastructure
should consist of capital financing alone, without operating
assistance. Offshore ports should be operated by state and
local authorities rather than by private industry consortium,
as is now under consideration. The Federal port function should
not remain divided among the Departments of Transportation and
Commerce and the Army Corps of Engineers; rather, it should be
placed with DOT or assigned to a new super-department, such as
the once-proposed Community or Economic Development
Departments. A surprise was that young port professionals were
favorable to moderate fuel taxes, as opposed to continuing the
battle for free waterways, or the alternative of imposing
segmental charges on inland waterways.
4@. @reaio

What do the responses of those surveyed indicate as the
proper roie for the Federal government in port development?
The respondents acknowledge, first of all, the need for some
caution in altering delicate and complex -relationships
developed over the years. The Federal role would be shifted
gradually in the direction of a moderate, facilitating presence
rather than a wholesale takeover of port functions. This shift
would involve more than simply putting up the money and
stepping quietly aside. Incremental facilitating changes would
require the measures listed below.

(1) An acknowledgement in national transportation policy
guidelines that ports (and all intermodal terminals) are
important eiements in the national transportation system,
for achieving balanced intermodal transportation services,
and not simply an adjunct to the U.S. Merchant Marine (as
'implied in the Merchant Marine Act of 1920).
(2) The provision of port R & D and planning funds to states so
that port needs may be systematically incorporated into the
national transportation planning and.,-forecast process, in
much the same way as airport, highway, and transit projects.
are today. The planning should e,.volve upwards from the
local, state, and regional levela,@ rather than from the top
down.
(3) The opening of categorical Federal funds.presently spent
for channels, ships, and navigation aids (over $1.2 billion
a year) to more flexible improvements in ports as part of
the through system, e.g., moving the port out of the heart
of the city toward deepwater instead of dredging in to the
city where elaborate safety and navigation aides are needed.
(4) The assurance.that an equitable share of Federal funds is
available for port development, to be allocated on a
regional or coastal basis, and requiring matching funds by
state and local authorities in the same proportions as
other federally-aided transportation projects. Within
regions and coastal districts, funds are to be allocated by
investment and cost benefit analysis.
(5) The immediate formation of a small Port and Intermodal
Terminal Agency within DOT, followed by improved
coordination of the waterborne programs of the Maritime
Administration, Corps of Engineers, and DOT, leading to
eventual formation of a full waterborne administration in
DOT.
(6) The establishment of a competitive regulatory milieu for
ports and supporting carriers, based on costs of access and
accommodation rather than arbitrary agreements. Subsidies
should be reviewed and eventually eliminated. A uniform
and dependable system of administering regulations must be
established, with coordination between the FMC and ICC.
(7) The use of Federal pre-emption whenever local government
standards and regulations constitute an undue burden on the
nation's interstate and foreign commerce.

(8) The use of Federal anti-trust and intervention processes
whenever monopolistic restraints, arbitrary work rules, or
labor-management impasses at the waterfront unduly burden
or jeopardize the nation's interstate and foreign commerce.

Perspective on Change

These measures and policies should assist ports in
achieving their basic goals and missions. Ports, like all
modes of transportation, are means to other goals rather than
ends in themselves. Those of paramount Federal interest serve
the nation's foreign commerce. If they serve foreign commerce
well and efficiently, the cost of conducting trade will be
reduced, trade between nations will expand, and the gains from
regional specialization and trade can be distributed among
exporters, importers, and consumers at large. All nations gain
as trade expands and, theoretically, they become more
economically interdependent and less susceptible to political-
division and warfare.

Ports, however, even with Federal aid, cannot alone perform
the job of expanding trade and U.S. exports. They are an
important and often overlooked element in the United States'
total international trade and transport system. Complementary
and reinforcing changes will be required in other elements of
the international system.

The Port Development Process

How would Federal functions be assimilated.,in the present
port structure? Would the changes provide a more systematic
and assured port development process? Actualiy, there would be
few shifts in the present distribution of essential port
functions. Table 9 iliustrates some of the shifts that would
occur at a model port of primary Federal interest. (In this
respect, it is noteworthy that few major U.S. ports conform to
the model distribution of functions.)

Major changes would be in the dynamics of a systematic port
development process. Long-range planning would continue to
initiate at the local level. Port project approval would move
up from local and state levels to state and regional levels, in
most instances. The selection of major ports would still be
left primarily to the marketplace, where ports distinguish
themselves by competitive performance and pricing of services.

TABLE 9

REDISTRIBUTION OF MODEL U.S. PORT FUNCTIONS

PORT FUNCTIONS PRESENT FUTURE

Planning
Development of plans L L
Approval of projects L&S S&R
Selection of major ports O&S S&F

Financing
Channels and approaches F F
Terminals and equipment LSP FLSP
.(Absorption of losses and surpluses) L&S L&S

Operating
Traffic and navigation systems F F
Ownership of terminals and equipment L&P LSP
Operation of terminals P P

Marketin,q
Promotion and advertising L LSR
Solicitation of traffic P P
Regulatory intervention L&P LSRP

Controlling
Board appointments L&S L&S
Selection of port director., L&S L&S
Aliocation of waterfront space L&S

Key: F = Federal, S State, L Local, P = Private,
R = Regional, 0 None.

SOURCE: 1977 State Port Questionnaire administered by John L.
Hazard (responses by 34 states).

Plans would move up to the state, regional, and Federal
levels for funding purposes, much as highway, airport, and
transit projects do at present. Ports of paramount national
and international interest, with the best potentiai-to-costs
ratios would have priority for Federal funds. A modest 3 to 4
percent of Federal transportation funds would be allocated
among the states and coastal regions by formula based (in part)
on tonnage and value of commerce. State and local authorities
would put up matching funds in the same proportion (20 to 80
percent) as for other federally-financed transportation
projects, to avoid distortion of priorities. Ports would be
expected to move toward a system of user charges that would
eventually cover the full local and Federal costs. The Federal
government would continue to provide channel access (Corps of
Engineers), aids to navigation (Coast Guard), and support to

shipping (Maritime Administration), but hopefully in a flexible
and coordinated package that is more open and amenable to port
and trade development purposes. Subsidies should be clearly
identified and negotiated downward with a view toward ultimate
elimination. Economic regulations should be designed to accord
ports and supporting carriers competitive access to traffic
based on costs and performance, rather than arbitrary
agreements.

The current, fragmented administration of waterways is not
equipped to provide the R & D, planning, and technical
assistance to water ports that the Federal Aviation
Administration provides to airports. Those management services
would be performed initially by a small port or terminal
division in the Department of Transportation that might
eventually expand into a full Waterborne Administration. The
other functions of port administration would remain much as
they are today. States that have not already done so would
have to create multimodal transportation agencies, and weave
ports into their planning and funding programs. They may' also
assume more vigorous roles in port development, particularly
states along the Pacific Coast, the Great Lakes, and inland
waterways. Regional associations of ports would likely play a
larger role in screening and approval of port projects,
coastwide promotion, and intervention in regulatory proceedings
to protect regional rate structures.

Unanswered Questions

A modest but positive Federal role in port.,.:development will
not solve all port problems in the United States for all time.
New and somewhat different problems will emerge. Aside from
the difficulties of initiating a new port program in the midst
of conflicting points of view and rival agencies in Washington,
D.C., the foliowing problems will probably emerge more fully.

(1) How might the other elements in port joint ventures
need to alter or augment their functions?
(2) What should be the new roles of state governments and
multistate regions in port development in the U.S.?
(3) How can ports achieve agreement on the principle of
cost-based competitive pricing, so as to avoid
subsidies and unwarranted expansion?
(4) How can ports achieve more voice in rail and ocean
rate structures so as to preserve equitable inland
access, and avoid being used as pawns by ocean
carriers and railroads in rate and service agreements?
(5) How can the U.S. ports move toward the financial
self-sufficiency that is necessary to conduct a
vigorous entrepreneurial function?

(6) What is the optimum role for private enterprise and
labor as partners in the joint enterprise of port
development?
(7) How can ports augment urban development, facilitate
expansion of exports and world trade, and promote
international amity?

These are difficult questions that will take a good deal of
time, effort, and experience to answer. Policymakers will be
assisted in the process by drawing on the growing body of
professional knowledge available in Western Europe, the states,
and the great ports of the world.

NOTES AND REFERENCES

1 So do the provinces of 'Canada, states of Australia, and
districts in the U.S.S.R., indicating that the responsibilities
of intermediate levels of government are partly a function of
size and regional differentiation in nations.

2 State and local governments prbvide over two-thirds of
the public transportation expenditures and have an important
influence on the purposes served by Federal pass-through funds.

3 The author conducted this survey during June, July, and
August 1977. Questionnaires were mailed to officials in the 38
states with ports, and the results tabulated in September.
Later that month and in June of 1978, this unpublished report
was presented to seminars sponsored by the American Association
of Port Authorities.

4 State and local government expenditures for
transportation more than doubled between 1960 and 1970 and
moved up from 64.5 percent to 70.2 percent of national public
expenditures. See U.S. Department of Transportation, 1972
National r2ransportation Report, Washington, D.C: Government
Printing Office, 1972, p. 25.

5 Tiny Delaware is considering a $500 million bond and
Texas a $1,200 million bond forcsingle offshore ports that will
cost more than the,total nationai-public expenditures for ports
in the average year, i.e., between $146 and $371 million.
'Further, it would be dubious.national policy to let the port
policies of the coastal states determine the access of interior
states to foreign commerce. (However, the Federal Deepwater
Ports Act may already have condoned this kind of denial of
inland state access to foreign petroleum by allowing governors
of northeastern states to veto offshore ports. This forced the
offshore ports to locate in the Gulf where overland
transportation costs to the northeastern and midwestern states
consume all the potential savings of using deepwater tankers.)

6 Including Stewart Barland and Martha Oliver, Port
Expansion in the Puget Sound Region, 1970-2000, Seattle:
Division of Marine Resources, University of Washington, 1972;
Ernst Frankel, Studies on the Future of Atlantic Ports: A
Review of the Status and Analysis of Characteristics,
Cambridge: Massachusetts Institute of Technology, 1973; and
U.S. Department of Transportation, Federal Port Policy in the
United States, Report No. DOT TST-70-41, Washington, D.C:
1977. (Distributed through the National Technical Information
Service.)

7 National Academy of Sciences, National Research Council,
.Panel on Future Port Requirements, Port Development in the
United States, Washington, D.C: 1976.

8 The National Academy of Sciences' Panel on Future Port
Requirements recommended Federal grants of $200 to $250 million
a year for ports without Federai plans or controls. Ibid., Pp.
145-148.

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