AAPA Seaports
Ports seek diverse financing opportunities while employing technology for efficiency and transparency.
*By Tom Gresham*
In the past decade, the port industry has experienced a shift that has had a major impact on many ports’ financing responsibilities. Previously, ocean carriers paid for many terminal infrastructure and port infrastructure projects, said John F. Reinhart, CEO and executive director of the The Port of Virginia. However, as the ships began to grow larger and more expensive and as carriers formed new alliances with each other, the carriers “just couldn’t afford the cost of infrastructure on their capital plans,” he said. “So now a lot of that responsibility has fallen on the state ports authority or the terminal operators in the United States to come up with their own funding plans.”
The result? Ports have become increasingly creative and sophisticated in their approach to financing their operations and capital improvements, said Reinhart. At the Port of Virginia, for instance, he said his organization pursues a mix of public and private funding support, ranging from grants and bonds to joint ventures with private developers and master equipment leasing.
“It all starts with a good master plan,” Reinhart said. “And then you’ve got to look around and say, ‘OK, what are all of our opportunities out there to make this happen?’”
Bonds and Private Investment
Cynthia Weed, a partner with the K&L Gates law firm, said changes in federal tax law lowering the value of tax exemption to banks has resulted in higher interest rates on bank loans and prompted some bond issuers to public bond offerings of either variable rate debt backed by letters of credit or fixed rate long-term debt as interest rates for investors other than banks remain low.
“I believe that more and more larger ports will be establishing short-term borrowing programs and utilize commercial paper formats for variable rate exposure and utilize long-term debt to take out (refinance) commercial paper,” Weed said.
