News Release
FOR RELEASE - February 6, 2007
Contact: Aaron Ellis, aellis@aapa-ports.org
703-706-4714

American Association of Port Authorities
Phone: (202) 792-4033
www.aapa-ports.org

Press Conference Remarks Responding to the Bush Administration’s Fiscal 2008 Budget Request

National Press Club, 4 p.m., February 5, 2007

PREPARED REMARKS

[Introduction by Julie Rones, AAPA’s National Press Club liaison and a member of NPC’s Newsmaker Committee]

KURT NAGLE – AAPA President/CEO

Good afternoon and thank you for joining us.

• Warren and I are here today representing 85 of the leading public port authorities in the United States, all of which are members of the American Association of Port Authorities… or “AAPA.”    Outside the U.S., our trade association also represents more than 75 member ports in Canada, the Caribbean and Latin America, for a total of more than 160 port authority members, together with more than 300 individuals, businesses and related organizations that support the port industry.
• In addition to serving as an advocate on issues related to seaport development and port operations, AAPA works to inform the public, media, and policymakers about the essential role ports play within the global transportation system. 
• Today we’re here to discuss the President’s fiscal 2008 budget request that was released today and some of the likely impacts it could have on seaports in the United States, particularly relating to seaport security and shipping channel maintenance.
• Rather than going right into an analysis of the President’s budget, we’d like to first give you a sense of what our public ports do, the challenges they face and why your readers, listeners and viewers should care.  Then, we’ll provide details of how the President’s budget request, if implemented, would impact the ability of ships to get in and out of U.S. ports, and the ability of America’s ports to further secure their facilities against terrorism.

WARREN MCCRIMMON – Toledo-Lucas County Port Authority Seaport Director

• U.S. port development and maintenance is a shared responsibility of federal, state and local governments, with extensive private sector participation.  The federal government maintains harbor access channels, while individual ports construct and maintain the landside terminal facilities, dredge their own berths, and contribute to channel improvement cost-sharing programs.
  
• Public ports also share the responsibility for the safety and security of their marine terminal facilities with the federal government.  This includes making sure that only those who have legitimate business are able to gain entrance to secure port areas.
  

KURT NAGLE

Since our nation was founded, ports have played a crucial role in America’s economic vitality and the quality of life we enjoy.  Safe, efficient and accessible seaports help American farmers and U.S. commodities compete internationally and improve our standard of living by tapping into the goods, jobs and services that global trade brings.

• Let’s face it though, most people aren’t aware of, or don’t pay much attention to, the benefits that ports bring them.  Ports just aren’t on most people’s radar.
• Compare our nation’s ports to the engines in the cars we drive everyday. They are invisible and often not well understood, but critical to our ability to drive where we want to go.  Like automobile engines, ports propel our nation’s economy through the millions of people they employ, the billions of dollars in business investments they make and encourage others to make, and by the approximately $2 trillion worth of goods that pass through them each year. 
  
• And lest we forget the importance of our commercial ports to our national defense, commercial ports now handle virtually all of the equipment and substantial amounts of needed supplies that are shipped overseas in support of our armed forces.  In short, our military depends on efficient, accessible public ports to defend this nation.
• But, when ships are delayed due to such things as a natural disaster like Hurricane Katrina, a labor disruption or navigation channel impediment, we’re suddenly reminded how important ports are to our daily lives.
• With that background, Warren and I will briefly detail some of the challenges ports face in fulfilling their public mission.  Then we’ll explain how even small changes in the Administration’s budget request could help them overcome these challenges, to everyone’s benefit.
  

WARREN MCCRIMMON

• The U.S. has always relied heavily on international trade—both imports and exports—and that continues today, with international trade accounting from more than one-fourth of our gross domestic product.
• By 2020, industry analysts predict overall cargo volumes through America’s ports will be twice as much as they were in 2000, while containerized cargo volumes will grow even faster.  (Point to chart showing Containerized Cargo Volume Growth).
• At the same time, the number of cruise ship passengers at U.S. ports, which was more than 9 million last year, will likely double to 20 million by the year 2020.
• In response, and relying in good faith on the long-standing partnership with the federal government, seaports across the country are expanding to meet the increased demand for their services, spending $2.1 billion a year in capital expenditures for infrastructure, equipment, software and dredging.
• Let me take a moment to tell you about the value that my port in Toledo, Ohio, brings to the businesses it serves:
• As the volume of goods moving through our port is growing, local employment has increased, as well as the economic benefits those jobs bring.
• To help them compete against their overseas rivals, Midwest steel manufacturers need raw materials shipped through Toledo.
• Midwest machinery manufacturers also depend on raw steel crossing Toledo’s docks.
• Local farmers depend upon our port for the fertilizers they use.
• Regional power plants use our port to receive raw materials for their scrubbing operations, which help limit air emissions.
• Major grain handlers to export their products through the port, as do Midwest coal mines.
• The auto industry depends on the many different metals that come in through Toledo in ever increasing volumes.
• The port handles petroleum products to and from the Midwest and has also been identified as a key Great Lakes port for the future handling of containers.
• So, it probably comes as no surprise that we’re constantly worried about the impacts on our local businesses if our port were closed or crippled by a big storm on Lake Erie, or a security breach, as well as the impact of natural shoaling that reduces the depth of our navigation channel and create a grounding hazard for ships.
• This year, due to insufficient federal appropriations, the U.S. Army Corps of Engineers would need to dredge about 4 million cubic yards of accumulated sediment plus 1.3 million cubic yards of annual maintenance in order for cargo ships to enter or leave our marine terminals fully loaded. In dollar terms, the Corps needs an additional $10 million draw from the Harbor Maintenance Trust Fund this year to dredge the accumulated material in our navigation channel.  That’s on top of the $6 million to take care of the annual sedimentation.  Every year the Corps doesn’t get enough federal funding to adequately dredge the federal access channel, and our port—and the hundreds of businesses that depend on it—suffer.
• It isn’t just the ports that are worried about their ability to handle trade.  The nation’s business community is also concerned.
• In his 2007 State of American Business address, U.S. Chamber of Commerce President & CEO Tom Donohue said: "America's transportation system, once the marvel of the modern world, is being stretched beyond its capacity and is falling into disrepair.  Economic growth and prosperity cannot be sustained on our existing transportation platform.”

KURT NAGLE

• If the flow of cargo into and out of U.S. ports reaches a bottleneck at critical junctures, then transportation costs go up and U.S. businesses and consumers pay the price.
• Because most U.S. ports don’t have naturally deep harbors and shipping channels, they must be regularly dredged to allow vessels to move safely in and out. The ability of waterways to support our nation’s continuing trade growth hinges on the Administration and Congress adequately funding these needs, and the lack of funding is derailing critical channel maintenance and deep-draft construction projects.
• Particularly troubling is that U.S. businesses pay a cargo tax on the goods they import and move domestically through our ports, specifically to pay for maintaining federal navigation channels. That money is put into the Harbor Maintenance Trust Fund, but millions more dollars are collected each year than are spent.
• Much of the money in this fund sits idle, with the surplus swelling annually in enormous proportions, while the nation’s waterways silt up.  Based on the fiscal 2007 budget and recent cargo volume increases, the HMTF surplus is now at least $3.5 billion, and, with interest, the surplus is expected to grow to about $7 billion by 2010 and nearly double that by 2015!  (Point to Federal Investment Lagging chart)
• The lack of sufficient funding is causing a dramatic and growing backlog of maintenance needs at our nation’s ports.  The maintenance dredging funding shortfall has been particularly hard on smaller ports handling bulk and break bulk cargoes, like grain, steel, fertilizers, petroleum and chemicals.
• The Port of Brownsville, Texas, is a good example.  The port is a major center of industrial development with more than 230 companies doing business there.  Yet, for the past 10 years, the Corps of Engineers hasn’t received the funding it needs to maintain the 17-mile long shipping channel at its authorized depth of 42 feet.  The channel is now only 34.5 feet deep in some areas, which reduces the accessibility of the whole channel to ships with drafts of 33 feet or less.
• One of the port’s customers is a large steel importer, APM.  Inadequate channel depths have caused APM to have to use more ships with lighter loads, or ship the steel into other ports, at an additional per-ship cost of $135,000.  The Port of Brownsville fears it will eventually lose this company’s business to a Mexican port, which would be a loss to the U.S. economy. 
• The Brownsville port recently commissioned a study to assess the economic cost to the users of Brownsville of not maintaining the current dimensions of the waterway.  The study found that, in total, the economic benefit of maintaining the channel at 42 feet versus 35 feet, which is about what it is now, is $19.4 million annually.
• In Georgetown, South Carolina, International Paper Company’s local mill, which has 750 employees, is only a quarter-mile from the Port of Georgetown.  The mill has product destined for the Far East region that, because of the size of the vessels loading the cargo and the reduced draft in Georgetown caused by lack of dredging, the mill is railing this tonnage to Wilmington, North Carolina, which is over 250 miles away by rail. This represents increased costs to International Paper as a result of shipping through a more distant port, rather than the one literally at its doorstep.
• Many container ports have been negatively impacted by lack of maintenance dredging as well.
• For example, the Port of Boston generates 34,000 jobs and a $2.4 billion annual economic impact. In fiscal 2006, $10 million was needed to maintain the federal channel to Boston’s harbor at its authorized depth, but only $6.6 million was provided—a 34 percent shortfall.
• Insufficient maintenance dredging in the main ship channel to the Port of Boston has allowed shoaling to degrade the channel’s depth to only 35 feet versus its authorized depth of 40 feet.  As a result, the deepest draft vessel that can be brought in without regard to tides is 33 feet.
• In 2005, there were more than 600 ship movements in Boston Harbor by vessels having drafts of 34 feet or more.  These ships couldn’t be loaded to their full capacity because of depth restrictions in the navigation channel. The result is a significant and negative economic impact to the region, and it raises equally significant operational, safety, and environmental concerns. 
• There are numerous other examples like this one that are contained in the press kits we brought with us today.
• It’s time to put the “trust” back into the Harbor Maintenance Trust Fund and utilize the fees that were paid in good faith to maintain our nation’s federal navigation channels.

WARREN MCCRIMMON

• While America’s ports must be able to accommodate today’s newer, larger ships so we can remain competitive as a trading nation, the ports must also remain safe and secure in the face of terrorist threats.
• One of the key things impacting the ability of ports to keep up with their growing trade volumes is the high cost of hardening their facilities against terrorism.  When the nation’s ports have to divert their limited resources to pay for security measures, it can impact their ability to make the necessary investments to handle the rising volume of trade.
• The federal government has implemented a number of cargo security programs, but only the Port Security Grant program, administered through the Department of Homeland Security, is focused on port facility security.
• This program was set up in 2002 to help protect marine facilities from terrorist attacks. From its inception, the Port Security Grant program has been dramatically under-funded.  (Point to Port Security Grant Funding chart)  This under-funding has left ports with the difficult choice of either delaying security improvements or paying the lopsided balance themselves, which, in some cases, requires shifting funds from other needed infrastructure improvement projects. 
• In the media packets we brought with us, you’ll find a document that includes numerous examples of U.S. ports either having to delay security projects or having to shift funds away from infrastructure improvement projects to pay for security enhancements.
• Referring to one of those examples, I’d like to call your attention again to my port in Toledo.
• In order to meet the expected requirements of the Transportation Worker Identification Credential program—known as TWIC, we plan to install TWIC card readers at all vehicle and pedestrian gates to our terminals. We estimate the cost will be $1.2 million.  We expect DHS will mandate that we install the card readers, whether or not we get federal grant money to help pay for them. 
• If our port isn’t able to get grant assistance, we’ll have to defer two important infrastructure projects.  One is a very much overdue preventative program which involves installing a mile of fendering at one of our docks, and the other is a project that gives us greater berth and upland storage capacity to meet our tenants’ urgent needs for expansion. Without grant funding, we’ll also have the spread the TWIC card reader installation itself out over a number of years.
• Another example in your media kits is the North Carolina State Ports Authority.  Leaders of the North Carolina ports told AAPA they intend to apply for federal grant help to enhance security at their two existing marine terminals in Morehead City and Wilmington, as well as to fund security measures for new port developments.  Their projects include equipment upgrades to meet the new TWIC implementation requirements; access control and surveillance enhancements; a proposed port-wide emergency notification system; and other items.
• The port authority said that if it must pay for the security projects from its own funds, it could have to delay projects ranging from major dock rehabilitation to planning, assessment and design work on new port developments to handle increasing trade volumes.
• With that, I’d now like to hand the microphone back over to Kurt Nagle so he can discuss port security and navigation channel maintenance more specifically as it relates to the President’s FY’08 budget request.
• Thank you.

KURT NAGLE

• Just hours ago, we learned what the Administration’s proposed FY’08 budget recommends doing with the two programs we have discussed – the Department of Homeland Security’s Port Security Grant program and the U.S. Army Corps of Engineers’ Civil Works program.
• Let’s first take a look at how the President's budget numbers shake out for port security.
• In this budget request, the Administration recommends that $210 million be appropriated for the Port Security Grant program.  While this is the largest amount the Administration has ever recommended as a line item for this program, it is the same amount that Congress appropriated in fiscal 2007.  At the same time the Administration is asking for an overall 8 percent increase in DHS’s fiscal 2008 budget, it is recommending that spending remain flat for port facility security.
• When the Maritime Transportation Security Act was enacted five years ago, the Coast Guard estimated that port facilities would have to spend $5.4 billion over a 10-year period to comply with the new regulations.
• In the first six rounds of the grant program, only $876 million has been made available out of the more than $4.3 billion identified as eligible port security expenses.  Compared to Round 6, Congress upped the ante 20 percent in Round 7 and appropriated $210 million for port security grants.  To date, only 20 percent of identified needs have been appropriated.
• While we are very appreciative of the President’s budget request and the incremental increases in past Port Security Grant program appropriations, we believe an even stronger federal partnership is necessary to help our public ports balance the pressure of competing priorities, such as infrastructure development, environmental initiatives, access improvements and promoting economic growth.  Both the Administration and Congress acknowledged this fact in approving the SAFE Port Act legislation, which authorizes $400 million a year for port facility grants.
• We applaud the President, the Congressional leaders who supported and enabled this bill.
• While the SAFE Port Act provides the authorizing legislation to support a $400 million appropriations level for the Port Security Grant program, that level of funding has yet to be realized. It’s now time for Port Security Grant appropriations to rise to the full authorization amount provided in the SAFE Port legislation.
• I’d like to now take a look at the impact of the Administration’s budget request on the Army Corps of Engineers’ Civil Works program.
• The Civil Works program includes water resource development activities—such as dredging construction and maintenance—for navigation, together with flood control and recreation.  The program also includes infrastructure development, environmental stewardship and emergency response.
• One of the Corps’ primary missions is to ensure that the thousands of vessels that carry people and cargo via the nation’s waterways can move safely, reliably, and efficiently and with minimal impact on the environment.
• The Corps’ primary navigation responsibilities include planning and constructing new navigation channels and locks and dams, and dredging to maintain adequate channel depths at U.S. harbors and on inland waterways.
• The Corps dredges nearly 300 million cubic yards of material each year to keep the nation's waterways navigable. Much of this dredged material is reused for environmental restoration projects including the creation of wetlands.
• For fiscal 2008, the President has requested about $4.9 billion overall for the Corps’ Civil Works program, which is $141 million more than was requested last year.  Breaking it down further:
• AAPA urges at least $1 billion in funding for federal navigation channel maintenance, while the Administration's budget calls for $735 million. 
• Due in part to AAPA's advocacy for drawing down the huge surplus in the Harbor Maintenance Trust Fund, the President's latest budget request represents an increase of $28 million over last year's request. 
• We are very encouraged by this, but it still falls short by almost a third of what is critically needed to maintain navigability in the nation's ports, harbors and shipping channels.
• As Warren and I mentioned earlier, navigation access to ports is vital, both from an economic perspective and from a safety and security standpoint.  Because the Corps’ Civil Works program budget is chronically under-funded, the Corps must perform a kind of triage on the many harbor and navigation channel projects on its list.  This means some ports have to wait indefinitely for dredging, oftentimes with devastating results.
• Again, we stress that channel maintenance is prepaid from taxes levied against imports and domestic cargoes and a huge surplus exists in the Harbor Maintenance Trust Fund.  There's no reason why navigation maintenance projects should be under-funded in the Corps' annual budget.
• Thank you.  We will now be happy to answer any questions you may have.