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A super port is worth cost in Md.'s view; State seems ready to pay or do anything to win ship complex; Negotiations are secret; Maersk and Sea-Land could make port 2nd to N.Y. on East Coast; Shipping

THE BALTIMORE SUN

As Maryland officials await word on a deal that could transform Baltimore into the second-largest container port on the East Coast, all of them agree: The payoff in jobs and economic stimulation is worth the price.

And yet only a handful of them know what that price is likely to be, and they won't discuss it.

"Hundreds of millions of dollars" is the closest anyone has come to estimating Maryland's price tag if it lures Maersk Inc. and Sea-Land Service Inc. to a hub terminal for container cargo in Baltimore. And that came from a source close to the negotiations who would not allow his name to be used.

Former U.S. Rep. Helen Delitch Bentley, now a consultant to the port, once described the price tag as "big bucks," and compared it to the cost of building a football stadium. The Ravens stadium cost about $280 million.

State officials who know how much Maryland is offering in taxpayer's money to build a mega port won't reveal the cost because negotiations with the two companies are continuing.

The secrecy is not only common, it is protected by law. Such negotiations are specifically exempt from the state's public disclosure statute.

But the result is that one of the state's largest economic development projects in history is being negotiated behind closed doors, and one of the largest spending commitments in years could be arranged without public knowledge.

The General Assembly would likely have to approve financing for the deal -- but not until the companies and the Maryland Port Administration have worked out the details.

"We're in a very strong competition right now, and we can't be negotiating this deal through the media," said state Transportation Secretary John D. Porcari. "This is the biggest opportunity of a generation for the port of Baltimore, and we're going after it very aggressively."

The economic benefits of the Maersk/Sea-Land deal could be significant: 2,000 direct jobs, by some estimates, not counting jobs associated with construction. The state's negotiators won't discuss those figures, either.

But government and port leaders say the deal, which could triple Baltimore's container cargo business, is one that is worth the investment -- even before the costs and benefits are publicly known.

"This is a major economic entity that would be a real feather in the state's cap, and I think the legislature would be willing to provide for it," said Del. Howard P. Rawlings, the Baltimore Democrat who chairs the House Appropriations Committee.

"I think when the information is very clear about the job creation possibilities and the economic development opportunity, people will see the benefit."

Even Rawlings said last week that he did not know how much the deal would cost.

"Of course, it has to meet the test of being reasonable," he said.

Maersk and Sea-Land are expected to announce within the next few weeks which port will be its East Coast base of operations. Signs suggest Baltimore's chance of prevailing has improved.

The companies narrowed their search to three cities in December, but a Sea-Land official says one of the finalists -- Halifax, Nova Scotia -- is no longer a candidate for all the business.

And Baltimore's other competitor, the port of New York and New Jersey, is reportedly sticking to its demand for lease payments that Maersk and Sea-Land have said are too high.

The Longshoremen's unions in New York and New Jersey also have not offered favorable work rules that would reduce the companies' costs.

In Baltimore, meanwhile, labor has agreed to eliminate extra pay for working in the rain and to work later hours that could make a terminal here more efficient. And the amount of money the state is willing to spend, coupled with the comparatively low payment it is asking in return, have made Baltimore a viable option.

"The numbers work in Baltimore," said James Devine, Sea-Land's general manager of northeast operations. "We're not looking there because we like crabs; we want to be profitable. And besides, it's nice to be wanted."

Competing cities have not discussed their potential costs either, but most have offered more hints than Baltimore.

In Quonset Point, R.I., a rejected bidder, officials had proposed building Maersk and Sea-Land a terminal from scratch. Developers estimated the cost at $600 million to $800 million.

The port of New York and New Jersey released a study last week calling for $1.7 billion over the next 10 years to improve its shipping terminals, and as much as $7 billion over the next 40 years. Renovations to the New Jersey piers, where Maersk and Sea-Land operate now, are estimated at $1.5 billion over 10 years, though the companies could be moved to another port authority terminal.

In Halifax, officials say that two years of construction would cost about $431 million Canadian, or roughly $283 million. They would not reveal the project's overall cost.

The Maryland Port Administration is offering to build Maersk Inc. and Sea-Land Service Inc. a new marine terminal that would be one of the largest on the East Coast. It would require modern cranes, new 50-foot-deep bulkheads and possibly a railroad bridge across Colgate Creek.

Most industry analysts say Baltimore's construction costs could be lower than its competitors', because the Baltimore deal includes renovating existing facilities at the Dundalk Marine Terminal.

But the details may change as the deal is negotiated, and state officials won't discuss what the renovations might be. So cost estimates are difficult to make.

The companies have asked for as many as 16 modern cranes, and port officials have suggested building huge next-generation models that can reach across a ship 23 container boxes wide. Such cranes are virtually unheard of in the business, and could cost $4 million apiece or more.

The port would have to deepen its docking space and replace or shore up steel bulkheads on the piers to give Maersk and Sea-Land slightly more than a mile of birthing space. Even comparatively minor dredging projects cost several million dollars, and the Dundalk renovations would not be considered minor. Port officials estimate that the project would take 18 months.

Company and port negotiators have been considering ways to give both of the port's railroads -- CSX Corp. and Norfolk Southern Corp. -- on-dock access at the proposed terminal.

CSX operates a large loading operation next to the adjacent Seagirt Marine Terminal, but is separated from Dundalk by Colgate Creek. One proposal calls for building a trestle bridge linking the two.

Maersk and Sea-Land also want warehouse space, administrative offices for their 300 employees, a maintenance shed for fixing container boxes and other improvements. They need as many as 330 acres for an operation that could handle as many as 750,000 cargo containers a year -- putting the port of Baltimore over the million mark, and possibly surpassing Charleston, S.C., as the second-largest East Coast container port behind New York.

Not only are the estimated costs for such improvements unavailable, it is unclear who would pay for them. For instance, some cities courting Maersk and Sea-Land submitted proposals that called for the companies to buy their own cranes. Maryland officials won't say what they are offering.

The state of Maryland certainly has financed large capital projects before -- the Orioles and Ravens stadiums cost a combined $502 million.

Not all succeed

But not all projects have lived up to their economic predictions. The Seagirt Marine Terminal, constructed in the 1980s for $220 million, is significantly underutilized. The new international terminal at Baltimore-Washington International Airport has not lived up to its $140 million cost, though it is only a year old.

Those projects were approved by the General Assembly, and at least portions of the port deal would require the legislature's approval as well.

Industry analysts say the competing ports are being cautious about publicity because the stakes involved are so high.

"Baltimore has been on a 14-year downward spiral, and the paranoia they must feel is a heavy weight," said Leo Donovan, a maritime consultant with Booz, Allen & Hamilton in McLean, Va. "If they were to get that account, though, it changes everything."

As the shipping industry evolves and ocean carriers consolidate their cargo on fewer ships and in fewer ports, second-tier cities like Baltimore have become increasingly desperate for contracts with major shipping lines, Donovan said.

Some ports have begun to offer deals that approach the point where taxpayer money is propping up a market that wouldn't otherwise be economically viable.

Advantages are real

Baltimore may not have reached that point yet, he said, because it offers carriers highway and railroad access superior to its competitors. And its geographic albatross -- 10 hours away from the open ocean -- could be partially offset if the cargo volume is large enough.

But even if Maryland's offer proves so high that it cancels the economic benefits of bringing Maersk and Sea-Land to Baltimore, those economic benefits should not be dismissed, he said.

"If you're in a seaport city, and you're in the business of owning and operating a port, of course you're going to say that its economic benefits are widespread," said Donovan.

"They tend to overestimate those benefits, but my view is that their talk of significant economic impact is probably correct. It depends on the degree of subsidy, it depends on what price they're paying to get it, but either way it's an incredible coup."

Pub Date: 1/24/99

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