galveston - houston port regionalizationonlinepubs.trb.org/onlinepubs/archive/conferences/2001...the...

Port RegionalizationPort Regionalization

Galveston - HoustonGalveston - Houston


July 11, 2001July 11, 2001

Building a 21st Century PortBuilding a 21st Century Port



What Is The Port of Galveston ?What Is The Port of Galveston ?• Average $12 million per year Total Operating Income

• Average 7 to 8 million tons per year of Total Cargo

• Organized Under Chapter 54 of the TexasTransportation Code and Article XII of the Charter ofthe City of Galveston– A Utility of the City of Galveston

• 27th Largest Throughput Port in the United States

What Is The Port of HoustonWhat Is The Port of HoustonAuthority ?Authority ?

• Average $100 million per year Total Operating Income• Average 25 million tons per year of Total Cargo• Created Under Article XVI, Section 59; and Article III,

Section 52 of the Constitution of the State of Texas– a Political Subdivision of the State of Texas

• 7th Largest Throughput Port in the World

Requirements for aRequirements for a21st Century Port to Succeed21st Century Port to Succeed• Deep Water

• Landside Port Access

• Proximity to Large Consumer Base

• Adequate Funding to Support Long-Term PortCapital Development

To Succeed as aTo Succeed as a21st Century Port21st Century Port

Galveston Must Unify with a SuccessfulGeneral Cargo Partner like the

Port of Houston

Port Regionalization Is SuccessfulPort Regionalization Is Successful

Tampa Bay

Georgia Ports Authority

Port Authority of NY & NJDelaware River Authority

Virginia Port Authority

Galveston Has The Potential toGalveston Has The Potential tobe a 21st Century Port becausebe a 21st Century Port because

Galveston has:Galveston has:

• Water - 45 foot Designated Channel• Landside Access - 9.3 miles to the Sea Buoy• Water to Water Capacity• Intermodal Access Capability• Terminal Space for Expansion to Support

Diversification of Cargo Base

But Galveston Needs:But Galveston Needs:

• Funding - $75 Million in Capital Needs through2010

• Large Consumer Base - Expanded Consumer Base Beyond Local Market (Houston Mega-Center)

• Expanded Landside Access - Improved Roadand Rail Capacity

• Market Development - Core Business to Leadto Further Diversification

21st Century ‘Hub-Port’ Load Centers21st Century ‘Hub-Port’ Load Centers

Gulf of Mexico

South Atlantic

Pacific Northwest

North Atlantic

Southern California

Benefits of Port RegionalizationBenefits of Port RegionalizationFor The Port of GalvestonFor The Port of Galveston

• Global Marketing of Regionalized Port Facilities.

• International Presence as a Partner with the 7thLargest Port in the World.

• Access to Capital Dollars and Capital Markets.

• Ability to Strengthen and Further Diversify General,Breakbulk and Bulk Facilities at Galveston.


More…………

• Increase in Quality Wage Jobs in the City of Galveston.

• Improved Payment to City for General Fund Purposes.

• Development of Transshipment (Water to Water)Opportunities within the Gulf of Mexico.

• Increased Tourism Opportunities.


More…………• Reentry of the East End Container Terminal as Part of

the Strategic Business Unit to be known as ……… The Port of Galveston.

And………….• Improved ability to utilize every asset to its highest and

best use. After this, Galveston can then develop newfacilities to meet increased market demand.

Comparison of Operating ResultsComparison of Operating Results(In Millions)(In Millions)

Port of Galveston Port of Houston Authority

Operating Net Operating Net Income Income Income Income

Last 10 Years $ 9.6 $ 0.75 $ 78.5 $ 23.4(Average)

Last 5 Years $ 11.1 $ 2.3 $ 89.9 $ 31.5(Average)

This Year $12.2 $ 2.3 $ 95.9 $ 17.6(Estimated)

Source: Comprehensive Annual Financial Reports and Port of Houston Staff

Comparison of SelectedComparison of Selected Balance Sheet Measurements Balance Sheet Measurements

Port of Port of HoustonGalveston Authority

Total Assets $ 74.8 million Note $ 788.9 million

Total Liabilities $ 31.6 million Note

$ 335.2 million

Source: Comprehensive Annual Financial Reports for the Year Ended 12/31/99

Note

Net of Farmland

Capital Investment in Public Port FacilitiesCapital Investment in Public Port Facilities(in millions)(in millions)

Port of Galveston Port of Houston Authority

Last 10 Years $ 15.6 $ 195.7

Last 5 Years $ 15.4 $ 106.9

This Year $ 10.8 $ 5.0

Next Year $ 2.3 $ 199.0

Source: Comprehensive Annual Financial Reports and Port of Houston Staff

The Proposed AgreementThe Proposed Agreement to Regionalize to Regionalize

The Port of Galveston and The Port of Galveston and The Port of Houston Authority The Port of Houston Authority

The Proposed AgreementThe Proposed AgreementWhat has been resolved thus far?

• The Transaction - Regionalization of the two ports -Galveston and Houston through a unification as asingle political subdivision of the State of Texas.

• Assets - Title to all real property and personalproperty included in the transaction will betransferred to the regionalized Port of HoustonAuthority.

• Liabilities - The regionalized Port of HoustonAuthority will assume Port of Galveston liabilities.

The Proposed AgreementThe Proposed AgreementWhat has been resolved thus far?What has been resolved thus far?

• Safeguards for the City of Galveston and its citizens– The Piers 19-22 non-port area and the New Park Shipyard will

remain under City of Galveston control. This results inincreased annual revenue to the City of Galveston, estimatedto be $1.2 million annually, rather than the current fixedannual payment of $172,000.

– Payment to the City for Municipal Services and Utilities.

– Reinvestment of revenues from Galveston Port Operations( including East End Container Terminal ) into Galveston Portinfrastructure and for capital investment needs.

– Covenant for continuous use as Port facility.

The Proposed AgreementThe Proposed Agreement

More SafeguardsMore Safeguards

– Maintenance of existing level of business activity at Port.

– Employment for Port of Galveston work force.

– Assumption of employee salary, benefits and pensionobligations.

– Develop the Cruise Market in Galveston for Home-Port andDestination Cruises at The Texas Cruise Ship Terminal onGalveston Island. The Port of Houston Authority will notcompete for Galveston Cruise Business.

The Proposed AgreementThe Proposed Agreement

More SafeguardsMore Safeguards

– 50% of Port’s cash reserves established as an operatingreserve for four years.

– 50% of Port’s cash reserves established as a contingencyreserve for four years.

– Restrictions on the use of Port facilities and an obligation tocontinue the operations at the Port of Galveston.

– And, of course, Approval by the Citizens of Galvestonthrough voter referendum determined by the City Council ofthe City of Galveston.

The Proposed AgreementThe Proposed AgreementWhat has been resolved thus far?What has been resolved thus far?

• Port Governance - Galveston will get up one seat on the Portof Houston Authority Commission.

– The Port of Galveston name will continue for at least ten yearsupon completion of the process of regionalization.

– A Citizens Advisory Board of City of Galveston representativeswill be established to provide input to the Port of HoustonAuthority.

• Capital Investment - $73.5 million estimated in the next tenyears.

Port of Galveston Port of GalvestonSources and Uses of Funds forSources and Uses of Funds forCapital Development ProgramCapital Development Program

Under the ProposedUnder the ProposedRegionalization withRegionalization with

The Port of Houston Authority The Port of Houston Authority

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TOTAL

Sources of Funds (in millions)

Port of Houston Capital Infusion 0 5.0 4.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 30.0

Additional Net Income Upon Unification 0 1.5 2.0 2.0 2.0 2.0 2.5 3.5 3.5 4.5 23.5

1

Sub Total of New Sources for Capital Development Upon Unification

0 6.5 6.0 5.0 5.0 5.0 5.5 6.5 6.5 7.5 53.5

Port of Galveston Estimated Net Income from Current Operations 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 20.0

2

Total Sources of Funds from Current and Future Operations 2.0 8.5 8.0 7.0 7.0 7.0 7.5 8.5 8.5 9.5 73.5

Uses of Funds (in millions)

Port of Galveston Long-Term Capital Needs 7.8 6.6 2.8 4.8 3.8 5.2 2.8 6.1 15.4 13.6 68.9

Notes: 1. Estimated Net Income from the East End Container Terminal as a part of the Strategic Business Unit established after unification 2. Estimated Net Income from Operations at the current Port of Galveston facilities for use in Capital Projects without unification.

Port of Galveston “Going Global”Port of Galveston “Going Global”Assets as of January 1, 2000

Port of Galveston $ 74.8 million

Port of Houston Authority $788.9 million

Total Assets of Proposed $864.7 millionRegionalized Port

Proposed Mid-Term Capital $200.0 millionInvestment in Both Ports

Estimated Total Asset Value of $ 1.0 BillionRegionalized Ports in Mid-Term Future

Gulf of MexicoGulf of Mexico

Port of Galveston - “Going Global”

Our Vision For A Regional PortOur Vision For A Regional Port

• Gulf Hub Port as a Throughput Gateway forNorth American and South American Trade.• Cost Competitive.• Efficient Rail & Road Access.• Maximum Economic Benefit for the Galveston-

Houston Region.• Balanced & Environmentally Sound Operations

and Full Utilization of Harbor Resources.

Answers to Some Frequently Answers to Some FrequentlyAsked QuestionsAsked Questions

Why Regionalization?Why Regionalization?

• The Port industry is consolidating - need to strikestrategic alliances to survive.• The Port of Galveston has almost $400 million in

infrastructure needs through 2040.• The Port of Galveston needs to access capital to

fund its long-term $400 million development plan.• The Port of Galveston needs to become as

profitable as possible.• The Port of Galveston has a responsibility to

stimulate the creation of well-paying, quality wagejobs with dependable benefits for its citizens.

Why Regionalization?Why Regionalization?• The Port of Galveston needs to “Go Global.”

• Port analysts predict that five major ports willemerge in the United States as major throughputPorts in the early part of the 21st Century. Portregions are now in competition with each otherfor the designation as 21st Century Ports - 2Ports on the East Coast, 2 ports on the WestCoast, and one port in the Gulf of Mexico.

• The Ports of Galveston and Houston can combineresources and spend precious dollars moreeffectively to obtain economies of scale.

Why This Proposed Agreement?Why This Proposed Agreement?• To preserve and create well paying, quality wage jobs

with benefits on Galveston Island and for Galvestoncitizens.• To eliminate destructive competition and to reinforce

our Ports’ respective strengths.• For synergy - Houston Has Market / Galveston Has

Location - this agreement combines those resources.• To become instantaneously international.• To achieve regionalization without cost to the

Galveston taxpayer.• To insure availability of lower cost consumable

goods that flow through the two ports.

Why This Proposed Agreement?Why This Proposed Agreement?• To allow the Port of Galveston to “catch-up” almost

immediately - instead of waiting 10, 20 or more years.• To bring the East End Container Terminal back into

the Port of Galveston operation and to put Galvestonimmediately back into the container business.• To protect the current level of container business at

the East End Container Terminal and to support thecurrent level of work at that terminal.• To support the Galveston Economic Development

Partnership 2000 Study that recommends thecreation of middle income jobs - well paying workwith dependable benefits - on Galveston Island.

Why This Proposed Agreement?Why This Proposed Agreement?• To provide a steady source of capital in partnership

with a Port that has access to capital and world-widemarkets.• To continue upon the good partnership with the Port

of Houston created with the long-term lease of theEast End Container Terminal.

• To Get Galveston “Going Global”.

Why Not PrivatizeWhy Not PrivatizeThe Port of Galveston Now?The Port of Galveston Now?

• Privatization of Ports in the United States isslowly occurring in the container end of the Portbusiness. Galveston is not in the containerbusiness. Our privatization would have to comein the breakbulk and Ro/Ro business - areaswhere privatization is not occurring.

• Partnership with the Port of Houston meansdoing business with a strong and stable partner,an already established Port with internationalstature and with a strong import and exportmarket to offer future growth opportunities.

Why Not PrivatizeWhy Not PrivatizeThe Port of Galveston Now?The Port of Galveston Now?

• The public partner - Port of Houston Authority -allows Galveston to “Go Global” now. Privatizationcould take a long time and may not guaranteecontinuance of the Port as a broad-based cargofacility.

Why Are We Selling The PortWhy Are We Selling The PortSo Cheap?So Cheap?

• The Port of Houston Authority has offered to infuse$30 million of net income from Harris Countyfacilities into Port of Galveston terminals over thenext ten years.

• Another $43.5 million is estimated to flow to thePort of Galveston through the reinvestment of netoperating income over the next ten years.

• Therefore the total of estimated capital investmentor reinvestment is $73.5 million over the next tenyears.

• The current, depreciated, historical value of Port ofGalveston assets is $29.4 million.

Why Are We Selling The PortWhy Are We Selling The PortSo Cheap?So Cheap?

• Finally, nothing is being sold. The two Ports areregionalizing as a single port complex in theGalveston Bay Region. The new regional Port willhave location and market, land and internationalreputation, world-wide marketing clout and anunbeatable opportunity as the major Port complexin the Gulf of Mexico.

Why Turn Control ofWhy Turn Control ofGalveston’s Port Over to theGalveston’s Port Over to thePort of Houston Authority?Port of Houston Authority?

• Control will remain in Galveston with theestablishment of the Port of Galveston as aStrategic Business Unit including the East EndContainer Terminal.

• One member of the regional Port Board ofCommissioners will be appointed by the CityCouncil of Galveston.• The Port of Galveston will have a local Port

Director who will report to the Port Director of thePort of Houston Authority.

Why Turn Control ofWhy Turn Control ofGalveston’s Port Over to theGalveston’s Port Over to thePort of Houston Authority?Port of Houston Authority?

• Planning for Port facility improvements at thePort of Galveston will continue to be determinedby investing funds in the highest Return onInvestment projects. In this manner additional netincome will generate more and more capitalreinvestment into facilities at the Galveston portlocation.

• Galveston’s current span of control in the Portindustry is very limited. Partnership with the Portof Houston would expand our control, not limitcontrol.

Building a 21st Century PortBuilding a 21st Century Port



galveston - houston port regionalizationonlinepubs.trb.org/onlinepubs/archive/conferences/2001...the...

Documents