Baltimore may lose hundreds of jobs, tens of millions of dollars in economic activity and half of the port's containerized cargo following the state's decision not to build a new rail cargo transfer facility in Morrell Park.
State and port officials scrambled Friday to outline alternatives to shoring up Baltimore's place in the international shipping industry ahead of the widening of the Panama Canal and the anticipated growth in Asian container traffic on the East Coast.
The rail facility was meant to bring Baltimore's limited freight capacity up to par with other East Coast ports by allowing CSX Transportation to stack truck-sized shipping containers two high on trains for more efficient transportation inland. Such double-stacked trains can't head directly out of the port's Seagirt Marine Terminal because they can't clear the Howard Street Tunnel.
Faced with significant community opposition, the state decided to withdraw more than $30 million in funding for the $90 million rail project.
Economists and other port observers believe the port faces significant losses without the rail facility.
"It leaves the state and the port in a suboptimal position," said Anirban Basu, a Baltimore economist who runs the consulting firm Sage Policy Group. "It means that the state and the port will not be positioned to take complete advantage of the economics being released with the widening of the Panama Canal. And that's not simply important for the port or those involved in distribution, that's relevant to any stakeholder in Maryland's economy."
Daraius Irani, director of the Regional Economics Studies Institute at Towson University and lead author of a 2012 study on the likely impact of the rail facility, said losing it puts Baltimore much further behind than it should be in its preparations for growth in the container market.
"The sense of urgency is now much more accelerated," he said.
Despite having 50-foot channel depths and towering new cranes designed to handle the massive container ships set to move through the widened canal, Irani said, the port of Baltimore desperately needed the rail facility to reduce the cost of transporting cargo containers from the port into market.
"The question becomes, 'Why should we go to Baltimore when we can go to Norfolk?'" said Irani, noting the Virginia port has a 50-foot channel and efficient cranes, but also a rail network far superior to Baltimore's.
Double-stack trains can be assembled on both of the Virginia port's big container terminals.
Without the new facility, Irani's study found, Maryland stands to lose nearly 750 jobs, about $111.5 million in state gross domestic product and $38.8 million in wages annually, and about $5.8 million in annual state and local tax revenues.
Norfolk also could lure away half of the port's current and future containerized cargo, according to the study.
Not building the facility will also increase pollution and contribute to wear and tear and congestion on the state's highways as trucks continue to move cargo that could be transported more safely and efficiently by rail, according to a previous state assessment of the benefits of building the facility.
The state estimated the value of those lost benefits at $250 million.
James T. Smith, the state's transportation secretary, called dropping the plans for the facility in Baltimore's Morrell Park neighborhood "very disappointing for all concerned" in a statement Thursday, but said the state remained "deeply committed to working with all stakeholders to develop a long-term solution."
Rob Doolittle, a CSX spokesman, said Friday that the railroad is committed to "developing alternative solutions to meet future needs" for cargo transport in Baltimore, but that it was "premature to discuss any specifics of what those potential solutions might look like."
James J. White, executive director of the Maryland Port Administration, said Friday that multiple options exist, including using port profits — which otherwise go to the state's Transportation Trust Fund — to subsidize transport costs for shippers at the port, mirroring the benefit of the proposed CSX facility.
"We're probably the only port on the entire East Coast that doesn't have some kind of incentive program," he said. "Virginia has had a rail incentive program for decades."
Currently, shippers pay freight rates to CSX, but also face port fees for loading CSX trains at Seagirt.
In the past year, CSX began offering shippers a "double stack rate" out of Baltimore under a program that holds rates flat across several ports, giving shippers the choice of where to call. That levels the playing field for the port when it comes to inland shipping costs, but Baltimore's dockside costs remain high, White said.
However, under an "incentive" program like those offered at other ports, the state could cover a portion of the shippers' loading costs, making Baltimore more competitive.
White said he is discussing whether to use the port's annual profits, which currently go back to the state's Transportation Trust Fund, to subsidize such a program. In fiscal 2013, those profits were about $12 million, he said. Fiscal 2014 totals are not in yet, he said, but he believes they will be around $6 million.
"I really don't like paying money back into the Transportation Trust Fund. I'd rather use it to buy new equipment for ourselves, but that's the way it's set up," White said. "Maybe we take those funds and create this incentive program."
The port isn't supposed to be in the business of making profits for the state, he said, but of being a job creator and driver of the economy, which benefits the state in the long run.
White doesn't agree with the Towson study and said Seagirt has the capacity for growth for years to come. Still, a so-called rail intermodal facility will be crucial down the road, he said.
Another place where the port could gain the capacity to double-stack cargo shipments is in the tentative plans to replace the Baltimore & Potomac Tunnel, a project being studied by the federal and state government.
Both CSX and its regional competitor Norfolk Southern have urged state and federal officials to consider making the B&P replacement tunnel high enough to allow the passage of double-stacked freight cars. The state "concurs" with the railroads, Smith said.
Some called the state's renewed search for freight capacity solutions after years of seeking a site for the rail facility a sign of failure.
Helen Delich Bentley, a former Maryland congresswoman and adviser to the port, which is named for her, said residents' concerns about the facility coming to Morrell Park could have been addressed by the railroad and the state, but that CSX didn't make the effort.
"I will lay all of the blame on CSX, because [from] all the reports I had from the meetings that the residents had with the city officials and CSX, the CSX people there were not responsive to the citizens, and that was wrong," Bentley said. "When you stick your nose up in the air and treat them not very nicely, it ain't going to work out."
Basu agreed, saying the dropping of the project showed officials' "utter lack of leadership."
"One wonders if the proposed location could have proven workable had there been more creative effort to communicate with the community and offer counterbalance benefits," he said. "It represents a significant lack of leadership and a lack of political courage to do what this region needs to do, which is be competitive."