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Infrastructure Improvements

The Global Transportation System

America's ports work hand-in-hand with our nation's trucking companies, railroads and airports to offer the most efficient transportation system in the world. Growth in international air and ocean cargo, imports and exports will put ever increasing demands on the transportation system.

Landside Access

Efficient transportation depends on connections between the road, rail and water. In order to move waterborne cargo quickly to or from the hinterlands, trucks and railroads need to have clear access to ports. For some ports, the weakest link in their logistics chain is at their back doors, where congested roadways or inadequate rail connections to marine terminals cause delays and raise transportation costs.

With the prediction that the volume of international trade through our ports will double 2001 volumes by the year 2020 and the volume of containerized volumes might well triple within that time frame, our nation's infrastructure will be challenged to accommodate this increase in freight movement, especially given the growing congestion caused by other commercial and passenger traffic. Problems as simple as lack of left-hand traffic signals for trucks leaving marine terminals, or at-grade rail crossings on local streets, can tie up traffic and create freight transportation bottlenecks.

Waterside Access

Bottlenecks to efficient transfer of cargo also occur when navigation channels are not deep enough for ships to dock at berths. Unless ports and waterways are dredged, goods cannot move in the quickest, most cost-effective way through the intermodal transportation chain. Without unobstructed navigation channels, deep draft ships cannot travel safely into ports.

Dredging keeps ports open, safe and competitive. Most ports are not naturally deep harbors. Many are located at the mouths of rivers where upstream runoff collects soil from the land which is carried downstream and deposited on harbor bottoms. Many ports are man-made through a process of dredging and land filling.

As modern vessels for containerized, liquid and bulk cargo increase in size, the navigation channel depths must increase too. In the late 1700s, the average three-masted schooner required a draft of eight feet. By the early 1930s, the average steamship needed a 26-foot draft. Today, fully-laden container ships can require drafts of more than 45 feet, while bulk vessels may need drafts of 60 feet or more.

Most ports require removal of sediment to deepen federal access channels, provide turning basins for ships and adequate water depth along waterside facilities. To maintain navigable waterways, each year approximately 400 million cubic yards of material are dredged from harbors, enough to build a four-lane highway four feet deep between New York and Los Angeles! Ports must be dredged if the U.S. is to continue to be competitive in international trade.

Financing Improvements

In order to keep up with changing vessel sizes and trends in world trade, public ports must continually update their facilities. U.S. public ports have made sizeable advances in modernizing and expanding terminal facilities, investing well in excess of a reported $31.2 billion in infrastructure improvements between 1946 and 2006--24% of which was invested in just the past five years. These investments cover expenditures for the construction of new facilities and the modernization and rehabilitation of existing ones.

Between FY2007-2011, the 35 U.S. ports (out of 85 surveyed) that returned completed surveys reported they would invest an estimated $9.4 billion for infrastructure. Much of this investment will go into modernizing facilities for more efficient intermodal transportation, and to further enhance seaport security to guard against terrorism.

For more information, click on U.S. Public Port Development Expenditure Report FYs 2006 and 2007-2011.  

For the latest information on how U.S. public ports are financing these and other investments, click on Public Port Finance Survey for FY2006.

Public/Private Partnerships

In the past, ports traditionally funded their equipment and facility improvements primarily with existing reserves and loans. Funding for this model may include cash from operations and retained earnings, from the proceeds of bond sales and from government grants.  A modification of this traditional funding mechanism is to use a combination of port cash and cash from a port user, such as a warehouse operator that will agree to lease or buy a facility if the port builds it.

More recently, ports have begun looking at joint venture financing, in which their customers assume most of the debt of major capital expense of a project.  In the case of the Jacksonville (Florida) Port Authority's TraPac marine terminal completed at the end of 2008, the port provided the land and $20 million for initial property development, which was offset by grants, including a $5 million Florida DOT grant to help pay for roads.  The terminal operator, Mitsui OSK Lines, assumed the balance of the approximately $305 million project debt, including proceeds from bonds and a State Infrastructure Bank loan to pay for property development and cranes.

The newest type of infrastructure funding that has emerged is third-party financing, in which an entity invests large sums in project design and construction, but may not actually operate the facility.  In this financing model, the port may start by working with a financial advisor to determine if a viable entity exists to underwrite a desired project or program.  Investors in this model may run the gamut from an experienced terminal operator that would take over and invest in an existing port-owned facility, to one or more investment groups, such as the Ontario Teachers Pension Fund,  that believe there is enough potential return in a port project or facility that they are willing to invest in it, similar to investing into traded securities.

Jacksonville Port Authority's concept for a new, high-capacity intermodal container yard may be financed using this type of third-party, public-private partnership.  According to the port, this third-party financing model is likely the one that would be used because of the high cost of the project (estimated to be in the hundreds of millions of dollars); the fact that governments are cash-strapped, making it highly challenging to get sufficient grant funds; and because certain private equity groups have shown interest in investing in ports over the long term.

There are many creative ways to structure a third-party financing model, including using multiple investment partners, combined with cash, loans, grants and revenue bond sales.  In uncertain economic times, creative financing is often required just to get these kinds of large-scale projects to the drawing board, let alone off of it.