In 2007, Martin Associates estimated that U.S. deepwater ports supported more than 13 million jobs throughout the United States and contributed about $3.2 trillion to the national economy. The economic value of this cargo activity represents about 25 percent of the U.S. gross domestic product.
The deepwater ports system is vital to the movement of foreign trade, and the components of the coastal ports system are essential to the operation of the entire logistics system used by the nation's exporters and importers. The coastal ports system is the only economically feasible method for handling the export of raw materials, grains, most manufactured products and perishable cargos.
If the deepwater component of the logistics system fails, not only are port industry jobs lost, but also the entire export-related economic sector suffers. Similarly, the coastal ports system, with its connections to the highway and rail systems, is vital to importers, including importers of retail consumer goods as well as importers of raw materials and manufactured products.
Without the efficient port system and accompanying inland delivery system, imported consumer goods such as clothing, electronic goods and seasonal fruit would not reach store shelves. With respect to manufacturing activities, the growing reliance on "just-in-time" inventory underscores the need for an efficient port system to receive and to distribute imported manufacturing components.
In addition, the inland waterway system is critical to the nation's economic vitality. Based on U.S. Army Corps of Engineers data, about 630 million tons of cargo are transported on the U.S. inland waterway system. While no formal economic impact study has been conducted for the importance of the inland waterway system, using job estimates from Martin Associates' 2003 Port of Pittsburgh economic impact study, these 630 million tons of cargo are estimated to generate about 2.5 million jobs nationwide.
The deepwater and inland port industries are facing critical infrastructure issues that have been exacerbated by the most recent economic conditions. The deepwater ports are in need of dredging funds, capital improvement dollars and terminal infrastructure investment to increase terminal densification and prepare for the next-generation container vessels that will transit the expanded Panama Canal after 2014.
Between 2007 and 2008, international containerized cargo volume at U.S. ports fell by 5 percent, while noncontainerized cargo volume fell by 10 percent. In terms of 20-foot-equivalent container units, the largest reduction in total TEU moves was recorded in the San Pedro Bay ports (Los Angeles and Long Beach), where TEU throughput fell by 10 percent between 2007 and 2008, followed by the Pacific Northwest ports, which reported a 4 percent decline in total TEUs.
With the 5 percent decline in containerized tonnage at U.S. ports, revenue received by the ports was similarly impacted, even for those ports where minimum annual guarantees were in place, as these minimums in many cases were relaxed. Similarly, with a 10 percent decline in breakbulk and bulk tonnage, wharfage revenue received by the U.S. ports will also be down.
With the loss in revenue streams and the continued loss in throughput projected through 2009 at minimum, the ports will face increasing budgetary restrictions, impacting not only capacity enhancement investments but system preservation investments as well. The loss in international cargo traffic also impacts the rail and trucking industries serving the ports, further impacting much-needed rail investments to maintain, as well as enhance, rail system velocity.
For ports more dependent on intermodal cargo, the impact of curtailed rail investments will be particularly hard-felt, as the curtailment of investments will further exacerbate the declining market share of ports in the Pacific Northwest as well as in the San Pedro Bay area.
Further impacting funding availability for the U.S. port system, the financial crisis has lead to curtailment, to some extent, of private-sector funds available for port infrastructure. While this market for capital has not completely evaporated, as exemplified by the recent offer by CenterPoint Properties for Virginia Port Authority marine facilities and the Ports America concession at Oakland, the multiples on earnings before interest, taxes, depreciation and amortization, commonly known as EBITDA, have fallen from a high of 30-plus for the Maher Terminal acquisitions in March 2007, to about an 8 multiple in current times.
With respect to the inland waterways, Martin Associates reported that, in 2000, the majority of the locks and lock chambers in place on U.S. inland waterways are fewer than 1,000 feet in length. In this same report, the U.S. Army Corps of Engineers reported that 15 percent of the locks are 1,000 to 1,200 feet long, 60 percent are between 600 and 900 feet long, and 25 percent are fewer than 600 feet long. More importantly, about 50 percent of the locks and dams are now approaching 60 years of age and reaching the end of their economic life.
Not only is age and the need to replace these aging locks and dams a constraint on the ability of the inland waterways to handle cargo in the future, but the potential failure of one or more of the lock systems would be catastrophic in terms of loss of life as well as economic impact. The inefficiency of the older lock and dam system results in direct costs to barge operators as well as other users of the inland waterways system in terms of time delays and lost export opportunities of the nation's agricultural sector, according to a December 2000 white paper sponsored by the Marine Transportation System National Advisory Council.
With the need to stimulate the faltering economy, the marine transportation system offers an attractive and productive segment to which funds should be directed. It would be difficult to identify a single transportation sector that supports nearly 16 million high-paying jobs, as well as a sector that is vital to enhancing the competitive position of U.S. manufacturing and agricultural sectors in the global economy, and where investments in infrastructure, such as the locks and dams on the inland waterway system, will not only improve the competitive economic environment of the nation, but, more importantly, potentially avert a major life-threatening catastrophe.
