Weekly Column: Should Virginia Put Its Port on the Auction Block?

The following is my column that will appear in the Mt. Vernon Gazette, the Mt. Vernon Voice and Patch in the week of October 1, 2012. 

Should Virginia Put Its Port on the Auction Block? 

Largely out of sight in the Northern Virginia media, there has been a controversy raging in the Hampton Roads area about the privitization of Virginia's Port.

Governor McDonnell is very passionate about privatizing government functions. Everyone is familiar with his effort to privatize the state liquor stores. He has also announced multiple efforts to privatize Virginia's roads by selling tolling rights to foreign investors for I-95, US 460 and a new tunnel between Portsmouth and Norfolk.

In May, APM terminals offered Virginia $540 million to run the Virginia Port for 48-years. Governor McDonnell is now soliciting proposals from other private entities. After a flood of criticism about the timing of the proposal, the lack of information provided to elected officials, and the short timeframe for accepting proposals, the Governor slowed the process down a bit.
Virginia's Port Authority was created by the state in 1981 after numerous studies suggested the state consolidate its operations in Norfolk, Portsmouth, and Newport News.  More recently, they also added a facility called the Virginia Inland Port in Front Royal you might have noticed while driving down I-66. 

Virginia's Port is under competitive pressure.  Virginia has the deepest water port on the East Coast.  However, Charleston, South Carolina is deepening its port so it came compete with Hampton Roads for newer larger container ships.  Also, in 2014, the deepening of the Panama Canal will be complete and larger boats will have a more direct route to Virginia.  More business is coming. 

So why should Northern Virginia care?  First, we are all obviously in this state together and matters that affect the economy in one of part of the state affect all of us sooner or later whether it involves tax collections or government programs, and responsibilities that we are all on the hook for as Virginia taxpayers.

However, there are even more direct reasons.  A large percentage of the goods you buy here in Northern Virginia come through the Virginia Port.  Much of the furniture sold in Northern Virginia comes from Asia and goes through the port.  If you bought a chair at Office Depot or a bookcase at Walmart, chances are it came through the Port.  If you purchase a foreign car - there's a good chance it came through Hampton Roads.  If you shop at Costco, Target or Walmart (or pretty much shop period), this issue matters to you. 

Virginia's exports also go through the Port.  Lumber, coal, and microchips.  In 2007, microchips passed coal and tobacco as Virginia's #1 export.  In 2007, the value of exported microchips was double coal and triple the value of cigarettes.  A huge portion of them are made at Micron's facility in the City of Manassas. 

Aside from whether the state should privatize this operation, the secondary question is who should get the contract.  The majority of the bidders are foreign shipping conglomerates.  Some people view it as unseemly that we would give such an important contract to a foreign company and not a domestic company that could do some good here in Virginia.

Second, many of the bidders are shippers themselves.  Other shippers have expressed concern about their Port being operated by a competitor. This could reduce commerce at the Port which would lead to higher prices.

The Governor has announced that he will evaluate all proposals and ink a contract before the General Assembly returns in January.  He is basically deciding this in nine months.  This would be the largest public-private partnership negotiated in the history of the Commonwealth.  The largest deal previously negotiated took three years. 

Last July, the Virginia Port Authority had its best month ever.  Many of us in the legislature are not clear what problem we are trying to address here or what the big rush is.   

The Port of Virginia is an important piece of our state that has a large impact on jobs, the price of goods, and the economy across our entire state.  The Governor should venture into this very carefully. 

I am generally leery of selling government assets to foreign investors, but I am still considering this proposal.  If you have any feedback, I'd love to hear it.