Richert L. Self Lakes Charles Harbor & Terminal District
The Port of Long Beach: A Model for Capital Planning
Capital projects that provide an adequate return on investments are vital to a port's future. This issue becomes even more crucial considering the gap between available funding and the need for new infrastructure. A comprehensive approach to capital planning will be necessary to meet this challenge. I had the opportunity to explore the Port of Long Beach's (POLB) approach to capital planning. Based upon the POLB success, as one of the largest ports in the United State, their approach to capital planning is worthy of being modeled.
On a macro level, the POLB utilizes three interrelated components in their approach to capital planning. These include a strategic plan, a long-term forecast and a land use study. The first component, the Strategic Plan, charts the course for the future of the POLB and provides a road map for achieving their goals. The second component, the Long-term Forecast, was initiated to project the demand of the San Pedro Bay Complex, that is used to drive the POLB long-term capital planning. The third component, the Land Use Study, was commissioned to develop a comprehensive approach to evaluate land uses and establish priorities.
On a micro-level, the POLB utilizes financial metrics to measure the financial viability of capital projects. Various methods such as the Net Present Value (NPV), Profitability Index (PI), Internal Rate of Return (IRR), Modified Internal Rate of Return (MIRR) and the Payback Method (PB) are available to measure the return on investment of capital projects. Each of these methods is explored further to offer port executives some reliable tools to ensure capital projects provide and adequate return on investment.