As work on the Panama Canal expansion project continues—and gets closer to being finished next year—authorities for some U.S. states working to deepen seaports are picking up the tab themselves, rather than wait for federal funds. These port authorities worry that if they don’t act quickly, their ports may lose competitive advantage. At the same time, they also worry about how much federal funding they may receive, along with whether they will actually receive those funds.
The issue is that the new so-called post-Panamax class of ships carries loads twice the size of current ships, and requires ports at least 43 feet deep. New generations of ships are even larger, and require harbor depths of 50 feet or more. Without expansion, many U.S. seaports cannot accommodate these larger ships.
Authorities at many ports are scrambling to catch up. Who will actually end up footing the bill though, remains to be seen. The U.S. government has historically been responsible for maintaining navigable waterways, with Congress authorizing projects overseen by the Army Corps of Engineers and appropriating funds. In recent years, federal lawmakers have been slow to approve port work and even slower to appropriate money. President Barack Obama’s fiscal 2016 budget request for the Army Corps’ coastal navigation-channel construction program was $81 million, the least in over a decade, says Jim Walker, director of navigation policy and legislation at the Virginia-based American Association of Port Authorities, in a recent Bloomberg Businessweek article.
“The federal government is just funding constrained,” Walker says. “They’re very focused on the deficit and trying to reduce federal spending. The states just see the need to get these investments completed.”
Consequently, at least four ports in Florida, Georgia and Texas have decided to foot the bill to deepen federal waterways themselves, a total of almost half a billion dollars, rather than wait years for funds, Businessweek reports.
For example, earlier this fall, Florida’s Port Miami finished dredging its waters to 52 feet, making it the deepest port south of Virginia and positioning it as one of the first calls for post-Panamax ships. The $220 million project was funded by state and local dollars after delays in Congress led Governor Rick Scott to say Florida would foot the federal government’s $77 million share and seek reimbursement later, Businessweek reports.
Then there’s the Georgia Ports Authority, which has been working for more than a decade on a $700 million harbor deepening along the Savannah River. The state advanced its entire $266 million share, a cost that normally would have been distributed over several years if federal dollars had been at hand, Businessweek reports.
The flip side of the coin is that not all ports are ready to pay for construction hoping reimbursement eventually shows up. The Port of Corpus Christi in Texas has gotten approval from Congress to deepen its port to 52 feet. The appropriations from Congress have yet to materialize, and Businessweek reports that the port’s executive director says he has no other choice but to wait for federal money on a project that will cost more than $300 million.
Given the potential economic impact, it’s easy to see why port authorities feel compelled to undertake dredging and expansion projects immediately. Not only do they compete with other U.S. ports for shipping business, but Cuba has undertaken a significant construction project to turn the port of Mariel into a regional trading hub. As Port Miami director Kurlya, said in a Miami Herald article, “The bigger the ships, the more cargo, the more jobs.”
What impact will some U.S. ports deepening, or not deepening, their harbors have on your company’s supply chain?