Most of you missed this, but Alan Levin and Senator Bob Marshall stopped by coincidentally at the same time to visit Rick Jensen of WDEL, and smooth as he was, Rick convinced both to sit down for an hour and go head to head over the topic of privatizing the Port of Wilmington….
First Alan Levin; Delaware Economic Development Office….
a. Delaware river will be dredged to 45 feet.
b. Panama canal will open to new big ships from the Pacific, which will be coming up the Delaware River.
c.. Ships if not coming here, may go to ports north to Philly, Paulsboro, Newark NJ, Norfolk.
d. If we don’t accommodate these larger ships, jobs will go elsewhere taking 3000 jobs. By 2016 we should start seeing them.
e. Was not a sweetheart deal. Competing bids were proffered. Local ILA (International Longshoreman) even asked the state to search out new private/public partnership bids back in Sept 09
f. Turns out that the Bank of Montreal was advisor for port transactions, the division was located in San Francisco. It’s job is to just finance ports. Sent out 70 inquiries 17 expressed inquiries for further information, 4 actually made bids. 2 were called non responsive. leaving 2 good. Kinder Morgan and one private equity group financed by local individuals.
g. Of the two bids received, the Kinder Morgan bid secured workforce. The other group said they would rob workforce pension and union bust to squeeze their profit out of efficiencies.
h. Kinder Morgan bid grants a three year guaranteed security, to the ILA, to the teamsters, to the businesses outside.. What other business gives you a three year guarantee?
i. Kinder Morgan would grow profits by increasing tonnage. They want to add 3 additional warehouses 200,000 square feet each, and 28 additional jobs. The other bidder, made up of local cutthroats, would cut the workforce to squeeze out its profit.
j. Kinder has the ability to bring in additional volume, to negotiate and bring other companies in. The other bid doesn’t. Improvement costs are substantial. $12 million per crane. It costs between $60-70 million to replace berth 5 and 6, just the repair of which will cost $8-10 million. We need the long term lease. Companies want return over time. they won’t do it for 5, they won’t do it for 10. That’s why it is a 50 year lease. The people of Delaware want commitment as well. They don’t want someone saying “we’re outta here” after 5 years.
k. BDO did an independent audit. As does the State Senate they also show a $ 3 million yearly loss. Reports are posted in their auditor’s office. BDO is independent and won’t jeopardize their reputation by lying about the port of Wilmington. It is bottom line business. Net profit in the end, is minus $3 million dollars. The General Assembly is putting in $10 million a year for improvements. That $10 million doesn’t get us past where we are. It doesn’t get us out to the large ships. We need to get out into the Delaware and that will cost $100’s of millions of dollars. Kinder Morgan has considered expanding the Delaware River auto berth, built 20 years ago to accommodate Volkswagon. The berth goes southward. Kinder would go northbound, and put two berths, with two cranes which will service the 3 warehouses being built.l.
l. LNG is off the table, that has been committed to in the General Assembly and will also be in the lease. Can Wilmington accommodate LNG tankers? No! The port of Wilmington is not big enough to do LNG. And two, they will not increase coal over today’s level; our same level of 100,000 tons of coal is stipulated for the next 50 years.
m. Protests against the port are having negative effect. Both Mr. Kinder and Mr. Foster came with the understanding we were the ones seeking and they were not expecting negativity. They understand the ebb and flow, but were not prepared for this huge outcry. it was us. We invited them to the party. Had they come to us as a hostle takeover, the outcry could be right and proper… So far we’ve done what we thought was right. We got to find a way to stop the annual spending of the $10 million because the $10 million won’t get us out to the river. Kinder proposed and promised and has done it elsewhere.
n. Kinder Morgan if they have a customer who needs to get to the river, they then will build to go to the river; they can make the extension at that time. But Kinder (like any successful business) does not promise or commit to anything except what it is prepared to do today.
o. If deal falters, the future of port will be tenuous. It will continue to have great management, and a great workforce, but won’t have the proper resources to go to river.
p. If deal collapses, no, the port won’t go bankrupt. but collapsing the deal is not responsible. Being responsible is doing something to stop the $10 million bleeding.
Now… state senator Bobbie Marshall…author of Senate Bill 3 signed by Jack Markell, overseeing the lease of port….
a. Big problem is… we do not have details of Kinder Morgan. No written proposal,
b.Expansion is something we all favor. but deal receded into one of ” no expansion”, but we will now have to turn over the entire port. including the 300 acres owned by Delaware citizens, managed by Diamond State Port Authority to someone we don’t know.
c. Port is actually a profit making entity if you remove the depreciation yearly. Actual operation is profitable.
d. Port could grow jobs within the interior 250 acres if port grows and expands, and with new money, more employment opportunity exists if expansion occurs…
e. Point out that Julius Cephus (ILA) has rallied people, businesses, and elected officials, and has pointed out that this may not be beneficial in long term.
f. Preliminary proposal at this time, the due diligence will be present by end of month which will allow presentation to bond bill and bond bill will hold hearings on the proposal… Senate Bill 3 requires review by bond committee.
g. Members of legislature representing the state of Delaware, passed bill in 1994 to allow Diamond State to operate the day to day operations, but never was it place in the code, to give either Diamond State or the governor sale and total control of 300 acres of port property. General Assembly and its citizens are the tenant. Diamond State Port is the renter.
h. Port of Wilmington Directors are responsible to exercise “all function” of port….including the leasing of lands to companies…. That is different from” selling” the land of the taxpayers out from under them. The state taxpayer keeps ownership but leases to Kinder Morgan.
i. All interested parties, need to read Miami Herald and how expansion of Panama Canal will affect the ports of the east coast. We need to invest the Delaware river side of the port and that is not happening with Kinder Morgan.
j. This is a lease, this is not a sale to Kinder Morgan. The Diamond State board can do leases…. Alan’s understanding is if the bond bill committee approves Kinder Morgan deal, it goes to the House and Senate for up or down vote with no debate. But Marshall say debate will be impossible to quench.
k. Any one can appear before the bond bill committee… Alan will appear. Senators can appear. Kinder Morgan will be given total control of port. Diamond State Board will still be in place, will still have oversight, but not its running on a day to day basis. They make sure agreement is in force, and if not, they will take appropriate action.
l. Worried about control People getting laid off? Kinder Morgan will automate and cut employees down to one. Low skilled people will get shut out, Has happened all over the country. Failed private ports run by Kinder Morgan, cut people. (Which ones ask Jensen.)
m. Kinder Morgan is interested in the fruit business, Kinder Morgan is paying premium for fruit; they want to build three warehouses. Already they are seeking long term contracts with Dole, Chiquita, and the Chilean Pacific Seaways in order to get their fruit. They have to have to be given the chance.
n. (Jensen) Depreciation needs to be on the form to comply with IRS. Depreciation is where the loss of the port is coming from. Without it, the port is profitable according to Marshall.
o. Kinder Morgan is a bulk and liquid bulk company. (John Vitale): Concerned this deal will cost him money; his business is on the outside of the port. Container experience is limited to one 10 acre container port in Florida. Taht is all the experience they have. Products generating most jobs in ports are containers, breakable containers as in fruit, and automobiles. Handling bulk products are the least job creators. The outside area around the port has grown because the conscious decision not to handle bulk, because they didn’t mix with fruit and automobiles… .
p. Ok, (John Vitale) With Kinder Morgan switching to bulk, we could end up out on the river, but we still would have 20 percent of today’s jobs.
q. Flat out,(John Vitale) bulk products are far more profitable and will drive out costlier containers which are labor intensive, forcing the outside businesses to go out of business. High number of jobs at the port are there because of fruit, these will be lost by not sticking to containers…. A for-profit company will not be in the best interest of the existing port.
r. Ferrous alloys, fertilizer, liquids are not competitive with the outside businesses. (Alan). We can promise this: employees will last three years, we will get an income stream to the people of Delaware, and that capital improvements will happen. Check out Vancouver where Kinder Morgan has spent in last two years, $140 million spent on improvements for cargo bulk containers, something they didn’t anticipate when they leased it two years ago. …They are willing to pay a premium for our expertise. They think fruit is good business.
s. Concern that we are putting too much faith in hope. Kinder Morgan is a Wall Street for-profit stockholder company. Delaware’s General Assembly’s support is contingent on growing business to the river. Legislators are very worried about the external businesses existing outside the port. i
t. Bonds $7 million owed to the city (Roger Roy) .. In 1994, we made two deals with Wilmington: one to pay them over time, and the other was to take over the bonds they owed, which is to pay off their bonds which they currently have. State still owes city close to$7 million..
u. (Kowalko). We will debate the bill on the floor. … Alan is saying the Bond Bill Committee will debate the pre proposal proposal… not the proposal because at this time, there is no proposal. Issue is not about Kinder. … The bond bill was to discuss t he ethics of privatization of the port, not the deal itself. Therefore when it goes on the floors, that will be the only time to debate the actual Kinder Morgan proposal.
v. (Liz Allen) Vancouver contract shows Kinder Morgan is not liable or loss for any cargo, not liable for any delay, strikes, fires explosions, or acts of god, and Kinder Morgan is indemnified from all losses…. Both (Alan and Rick) spoke up that sounded like a standard hold-harmless contract, one required for all business. So who is responsible if there is an explosion (Liz)? Responsibility goes to Kinder Morgan, they have the liability(Alan), their insurance covers that, and we are not absolving them of liability. All obligations go to the person leasing the deal, not the lessor…
w. (Rick) Emotion doesn’t make sense. Why so much negative emotion?. (Bob Marshall) Those interested and raising concerns are those who work in the port, work in businesses around the port. Kinder Morgan is a profit making company, former operator working as Enron officials, that raised a red flag. Rick asks: is everyone at Enron a criminal? No.
x. (Alan) Trepidation is about change to what we know. We have tried to mitigate that concern on everyones issue. Bottom line is people of Delaware can no longer afford putting $10 million a year to upgrade the port.
y. (Alan)we take money away from everyone else in the state to bolster the port. We have an obligation to the port of Wilmington, but we can’t take anything away from Seaford, and Laural, and education and public safety….