Press Conference Remarks Responding to the Bush Administration’s Fiscal 2008 Budget Request
National Press Club, 4 p.m., February 5, 2007
[Introduction by Julie Rones, AAPA’s National Press Club liaison and a member of
NPC’s Newsmaker Committee]
KURT NAGLE – AAPA
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.
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
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
WARREN MCCRIMMON – Toledo-LucasCountyPort 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.
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
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.
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.
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
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.
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.
me take a moment to tell you about the value that my port in Toledo, Ohio, brings to the businesses it
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
Midwest machinery manufacturers also depend on raw steel crossing
depend upon our port for the fertilizers they use.
plants use our port to receive raw materials for their scrubbing operations, which
help limit air emissions.
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
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
isn’t just the ports that are worried about their ability to handle trade. The nation’s business community is also
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.”
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
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
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
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
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
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 BostonHarbor 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
There are numerous
other examples like this one that are contained in the press kits we
brought with us today.
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
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.
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
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.
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
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 MoreheadCity 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
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.
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
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 SAFEPort Act legislation, which
authorizes $400 million a year for port facility grants.
applaud the President, the Congressional leaders who supported and enabled this
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 SAFEPort 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.
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.
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.
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
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
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.