/[prepared by John L. Hazard]. Hazard, John L. National Transportation Policy Study Commission. Washington, D.C.:National Transportation Policy Study Commission,1979. Harbors United States Finance. PS 300 288 13970 1B COASTAL ZONE 206.2 INFORMATION CENTER U52, THE PUBLIC ROLE IN PORT DEVELOPMENT 16717371 APR 28 1997 NATIONAL TRANSPORTATION POLlCY STUDY COMMISSION WORKING PAPER NO. 3 AUgUSt 1979 CZIC COLLECTION U S - DEPARTMENT OF COMMERCE NOAA COASTAL SERVICES CENTER 2234 SOUTH HOBSON AVENUE CHARLESTON , SC 29405-2413 HE Property of CSC Library 206.2 .U52 no.3 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 UNCT-A 2U. Security Class (This 22. Price Page UNCLASSIFIED !ORM NTIS-35 IREV. 10-73) ENDORSED BY ANSI AND UNESCO. THIS FORM MAY BE REPRODUCED uscomm iDc 0285-P7A 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 u 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 iv LiST OF TABLES Tabie Page 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 Federal Port Policy Options Matrix 14 v 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. 2 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 3 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.. 4 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 5 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: 6 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). 7 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 8 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. 9 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. 10 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 12 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. 13 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 14 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. 15 (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. 16 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 17 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? 18 (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. 19 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. 20 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. 21 .JIMIIIIIIIIIIN @ 1 3 6668 00003 0082