Needed Infrastructure Spending on Ports Attracting Increased Bipartisan Attention

Summer 2013

Often overlooked in partisan fights over government spending are matters where there exists bipartisan agreement. Congress’ failure to agree on the proper size of government hampers movement on issues where most agree government plays an instrumental role. An example of this is the need for increased spending relating to infrastructure in and around our nation’s ports and inland waterways. Although given rhetorical support by both parties for years, little action has been taken to provide the funding needed to prepare America’s ports to compete more effectively in the global logistics marketplace.

This may be changing, however, driven primarily by the ongoing expansion of the Panama Canal, which will allow the use of significantly larger ships with nearly three times the capacity of older vessels. These so-called “post-Panamax” ships, when fully loaded with cargo, will require channels that are 50 to 55 feet deep. Many ports currently are not configured to handle these larger vessels. On the Atlantic coast, the U.S. now has only two 50-foot deep ports capable of receiving these ships — Norfolk and Baltimore. The U.S. Army Corps of Engineers is currently deepening the Port of New York/New Jersey, to be completed in 2015, and also is working with the Port of Miami to deepen that port. When finished in 2015, Port Miami will be the nearest American deep-water port to ships crossing through the Panama Canal.

This issue is of ultimate importance to the commercial real estate industry, particularly the industrial sector. Ports are the nation’s link to the global economy. If not improved, the import-export market on which many U.S. jobs rely suffers. Also, since the additional goods coming off post-Panamax ships will need to be distributed to America’s consumers, goods traveling to these ports will need to be stored nearby. Developers will be working to build what will become key elements of prime distribution centers for these products. Already, industrial development in New Jersey has increased in anticipation of more robust economic activity arising from the larger cargo ships using the Port of New York/New Jersey.

State elected officials of both political parties are realizing that for their ports to increase container traffic and remain competitive hubs for these bigger ships, federal investment is required to make the major improvements their facilities need. Earlier this year, South Carolina Governor Nikki Haley focused on the need to modernize U.S. ports during a meeting with President Barack Obama and other governors at the White House, where she urged the president to allocate more funding to deepen our nation’s ports. South Carolina would like to deepen the Port of Charleston to accommodate the upcoming widening of the Panama Canal. In Florida, Governor Rick Scott proposed increasing transportation spending by 11 percent, including funding to prepare several of the state’s most important ports, to handle traffic from the Panama Canal expansion. Scott’s proposed budget included $30.6 million for the Port of Miami, $26.7 million for the Port of Tampa, and $19.5 million for the Port of Manatee. These two governors, who were voted into office with strong support from so-called “tea party” voters who believe strongly in limited government and reduced government spending, show that bipartisan support for increased port investment is widespread.

This growing chorus from state officials is helping force Congress to pay attention to the issue, although federal lawmakers are still struggling with the challenge of identifying ways to pay for what they all agree is needed infrastructure development at our ports and inland waterways. In March, the Senate Committee on Environment and Public Works unanimously approved a new Water Resources Development Act (WRDA) for the first time in six years. The legislation (S. 601) authorizes federal investments in projects and frees up all revenue in the federal Harbor Maintenance Trust Fund to be spent on dredging and other improvements — such as deepening ports and improving river quality — that have been identified by the Army Corps of Engineers as beneficial in improving the U.S. system of inland waterways. 

The Harbor Maintenance Trust Fund is currently the primary source of federal investment to maintain America’s ports, financed through a fee on the value of cargo imported through coastal and Great Lakes ports. If funding is not increased and kept at current levels, the U.S. will face a shortfall by 2040 of nearly $28 billion to meet the dredging needs of the nation’s ports. Though the legislation was approved, the Senate Committee failed to provide any new means of additional revenue for these efforts. This is due in part to the notion that anything that can be characterized as a tax increase is not politically feasible in the House of Representatives, absent an agreed-upon, bipartisan plan that addresses our long-term fiscal problems.

Understandably, Senators are reluctant to cast a vote on a tax increase that has little chance of making it into final legislation, and could also be used to harm them politically. But the need for modernizing our ports has become an economic imperative across political party lines, so it is unlikely that the Senate Committee’s failure to increase fees for this purpose will be the only time the issue is raised in this session of Congress. NAIOP will continue to work with legislators to ensure they understand the importance of port modernization to the commercial real estate industry, and to look for opportunities to advance legislation that accomplishes this goal.