Turning on the Funding Tap

Turning on the Funding Tap

By Lori Musser

The need has been established for a new port facility. The site is available, architectural and engineering plans are in the works, permitting and regulations are being addressed. And a dearth of dollars might squash the entire project before a shovel hits the ground.

Or, a thoughtfully assembled package of public and/or private financing might answer strategic needs, provide room for growth, balance risk and return, and enhance a port’s long-term financial position and bond ratings.

And there’s the rub. Many ports have lean finance, grant and planning departments. Few have sufficient bench strength to carefully write – and then administer – complex grant applications, or to go out to global markets to recruit private investors, or to work with appropriate agencies to float or even piggyback on new bonds.

By recognizing their own deficiencies and planning around those deficiencies, ports are one step closer to securing funding that ensures ongoing freight and passenger mobility through their gateways.


Funding Needs

In the United States, where seaports carry out more than $10 billion in capital projects each year, numerous industry reports, including AAPA’s The 2015 State of Freight and the American Society of Civil Engineers’ still-timely 2013 Failure to Act, cite a growing gap between available funding and needs.

Waterways must be dredged so that freight (and passengers) can move safely and efficiently to destination. As modern cargo vessels increase in size, the navigation channel depths must increase accordingly.

Port assets, including equipment and facilities, must be built, maintained, expanded, upgraded or removed. Edward Anthes-Washburn, executive director of the Port of New Bedford, summed up the situation: “The Port of New Bedford, like many ports in the U.S., needs significant funding to maintain the piers and wharves we have, as well as perform maintenance dredging. Many of the facilities in the port were constructed in the 1960s or earlier, so they are past their design life.”

He said that some of New Bedford’s port and channel projects have been sidelined due to lack of funding. “The federal navigational dredging job is currently in design because they do not have a location to place contaminated sediments … Other infrastructure projects have been included in bond bills, but funding was never authorized.”

Port of Hueneme CEO Kristin Decas said, “California has very rigorous environmental regulations. They come with heavy-lift requirements.” Hueneme is faced with many of the same regulations – and expenses – as the very large ports, like Los Angeles and Long Beach. Hueneme’s shore-power project, for example, with a capital price tag on a par with the port’s annual operating budget, presented a major funding challenge.

Decas said, “Smaller and medium-sized ports are faced with different cash flows than bigger ports.” But they can rise to the challenge. “I’ll bark up any tree. I won’t overlook any resources.”

On the land side, trucks and railroads need to have clear access to ports. There is a need for significant and timely investment in inland connectivity. Without it, the nation’s economy will suffer and jobs will be lost. AAPA President and CEO Kurt Nagle said, The fact is that while over a quarter of the U.S. economy is accounted for by port cargo activity, freight connections to our ports are crumbling, putting our economy at risk and reducing America’s competitiveness in global markets.”

Decas, while also acknowledging the importance of projects outside the port gate – the last-mile of connectivity – cautioned that there are still plenty of unfunded on-port projects, especially for smaller and mid-sized ports: “We have had to park a lot of projects. We have deferred maintenance. Docks are also crumbling, roofs on buildings, storm water systems, general wear and tear – and sometimes, just finding the match money can be difficult.”


A Fair Share

Because freight mobility needs vary from place to place, there is no one-size-fits-all solution to seaport project funding.

In New Bedford, Anthes-Washburn said, “Nearly all of our infrastructure funding comes from the Commonwealth of Massachusetts. While certain agencies have been critical to funding infrastructure improvements, changes to those agencies under a new administration have shifted priorities.” And created challenges.

Steven Ribuffo, director of the Port of Anchorage, said, “Since Alaska’s muscle in Congress fell to zero, we have come to rely more on the state.” But oil and gas prices have devastated the state capital budget.

As a municipal port, Anchorage is pegging its hopes on a pending legislative request for a general obligation bond package that voters would agree to fund. He said, “Our expenses, outside of patrol and administration, come from port revenues. Tax dollars don’t come down to the port, and we have tied up all our bonding capacity. We will take our modernization effort as far as we can, but we need a great deal of money and there is no business case for expansion. We continue because we are one big earthquake away from being in the water.”


A Medley of Mechanisms

In general, port development benefits most from a broad selection of funding mechanisms, from all levels of government. Unfortunately, the more mechanisms available, the harder it may be for ports to find the money.

Matching a project with a funding source, including potential private-sector partners, and steering the project through regulatory, permitting, impact and credit processes is cumbersome. In response, the U.S. government’s Maritime Administration created the Build America Transportation and Investment Center (BATIC).

Build America

BATIC serves as an advisor for ports and other transportation entities. It recognizes the procedural, permitting and financial quagmire associated with infrastructure and aims to be a single point of contact to guide project sponsors.

Roger Bohnert, deputy executive director for BATIC, said, “If you are looking to finance transportation infrastructure, we can help you find the right answer.”

As vessels upsize to offer economies of scale to the supply chain, ports need to “meet the geometry of the new ships,” according to Bohnert, who has seen port and inland connectivity infrastructure needs soar in recent years. The public dialogue has hit Washington, D.C., and ports have become more visible. “With these larger ships, aging ports and population growth, changes in infrastructure are coming incredibly fast.”

While Transportation Investment Generating Economic Recovery (TIGER) grants may be one of the best funding options available to ports today, Bohnert acknowledged that $500 million or so split among modes makes only a small dent in port funding needs. He recommends nurturing relationships with the Army Corps of Engineers, states, local governments, MPOs and related organizations – bodies outside of the realm of USDOT – to expand options.

Bohnert also said focusing on the market-driven basis for each project helps open up access to federal transportation credit programs such as Transportation Infrastructure Finance and Innovation Act (TIFIA) and Railroad Rehabilitation & Improvement Financing (RRIF).

“What we are learning,” Bohnert said, “is if ports can access low interest financing, such as a TIFIA loan at about three percent, for a portion of a project, their overall costs are lowered so they might be able to engage a private partner – who will need a 10 percent return or more – for the remainder.” He added, “You used to look for a project and somebody wrote a check. That is not how it works anymore. Projects now have a pie chart of solutions, and finance is becoming a more complex aspect.”


The FAST Track

On behalf of its U.S. members, AAPA advocates for a plethora of funding mechanisms.

In the United States, ports have fought long and hard for all of the money collected under the Harbor Maintenance Tax program to go back into harbor maintenance. AAPA’s Hit the HMT Target! campaign urges Congress to meet dredging funding commitments made in the 2014 Water Resources Reform & Development Act. WRDA established increasing targets over a 10-year period with full use of HMT revenues beginning in 2025.

Late last year, President Obama signed a five-year, $305-billion transportation reauthorization bill with $11 billion in new freight funding grants and programs available to U.S. seaports. The Fixing America’s Surface Transportation (FAST) Act was the first ever to make freight a priority.

The approved bill provides $6.3 billion for the new National Highway Freight Program, which pioneers dedicated formula funding to states for freight projects such as port-inland connectivity. It funds $4.5 billion for the Nationally and Significant Freight and Highway Projects program, which includes $500 million for multi-modal freight projects and a $450-million ‘carve-out’ for projects ranging from $5 million to $100 million.

Also of benefit to seaports will be the Congestion Mitigation and Air Quality Improvement Program (funding for certain port-related equipment and vehicles), the reauthorization of the Export-Import Bank, and the authorization of more than $1.4 billion for TIFIA.


Turning on the Funding Tap

Port finance and infrastructure development divisions are guided by departmental plans, and longer term strategic and master plans, which typically include project budgets and preliminary guidance for sourcing funds.

The Port of Hueneme is supplementing its long-term plans with a more comprehensive Plan of Finance; this is a first for the port and is somewhat novel in the industry.

CEO Kristin Decas said that, with a staff numbering less than 30, simply writing a TIGER grant or researching private financing sources is taxing; the development of a thorough plan will provide the guidance necessary to navigate the maze of infrastructure funding opportunities going forward.

Innovative planning may be increasingly important in the future.

“There are creative solutions out there. Foreign investment – that is an interesting alternative. I have met with investors from China, but they wanted to inherit the infrastructure over time,” according to Decas. That was a deal breaker.

Hueneme has also investigated other innovative tools, such as the IRS New Market Tax Credits, which give private investors the public relations benefit of a green project, along with a modest tax credit.

Enhanced public education and outreach, which illustrates the economic impact of port infrastructure projects, may also prove to be an important tool to help turn on the funding tap.


Producing Results

America’s seaport infrastructure is paid for by a range of funding and financing solutions. From public taxes to facility bonds to government grants, every new project must access a unique combination of mechanisms to improve freight and passenger mobility and help seaports remain competitive.

Funding that brings an accelerated modernization of ports and supply chains will start to produce results – namely, lower shipping costs, expanded markets for goods overseas, and less expensive international products for buyers at home. That can’t come fast enough.



In the last funding cycle, U.S. ports were awarded $44.3 million in TIGER grants from the U.S. Department of Transportation. While 50 of the more than 600 applications came from ports, five were awarded funding.

Hueneme was one of the success stories. When asked the secret to her success, port CEO Kristin Decas said, “I’ve been planning for TIGER grants since their inception. Each year we submit, go through a debriefing, learn more and resubmit the next year.” This time, Decas said, “We really got a lot of support – about 32 letters. We had the project programmed through the MPO, Ventura County Transportation, Caltrans. We got a little outside help because we needed an air-quality analysis,” but, she noted, fancier isn’t better. USDOT is simply looking for key criteria.

Decas said that it is unfortunate that ports were only awarded a handful of TIGER grants, and don’t receive anything approaching a fair modal share of federal grant funds. “We might not be boxing at our weight, but I think we are getting better.”

When asked about the ports’ lack of success in accessing the TIGER kitty, BATIC’s Bohnert said, in an important way, ports have been disadvantaged by not having to follow the rigorous, prescribed planning and engagement processes that have been required of highway projects for decades. BATIC aims to level that field.