Port Financial Management Challenges Financing Freight Transportation Improvements

Port Financial Management Challenges Financing Freight Transportation Improvements St. Louis, Missouri April 29 to May 2, 2001

Port Financial Management Challenges Perceived Public Benefits Declining • High Tech Terminals + Seamless Intermodal Transfer = No Local Jobs, No Taxes • More Cargo = More Trucks = Pollution, Noise, Congestion • Ugly Piles of Empties • Warehouse/Distribution Jobs Adding Value Far From Waterfront • Waterfront Land Demand High By Other Uses: Offices, Theme Parks • Host Communities See Port As Part Of Past, Not Future

Port Financial Management Challenges Growth and Development Forecasted Growth of Container Traffic with 50 ft Channel Deepening 16 14. 4 MM 14 TEUs in Millions 12 R 10 % 4. 2 G CA 8 Terminal Land Expansion Needs in 2040 6 Channel Depth Terminal Productivity Total Land Required New Land Required Reclaimed Land Required 4 2 50 feet 3, 500 lifts/acre 1 2, 400 acres 1, 120 acres 600 acres 0 1995 2000 2010 Note: 1) Increased from current 1, 500 Lifts per Acre 2020 2030 2040

Port Financial Management Challenges Growth Issues Land Creation Modal Split Rail 13. 9% Truck 86. 1% Environmental Impacts Return on Investment Regional Market Share MILLIONS OF TEUs ROI 2000 2010 2020 2030 2040 Other North Atlantic Ports PONYNJ Canada West Coast Ports

Port Financial Management Challenges Port Development Costs Going Up. . . • • • Dredging / Disposal Landside Access Terminal Equipment Land Creation (Fill) Mitigation / Restoration Public Access Container Terminal Construction Costs: 1990 2000 Terminal Facilities 31% 20% Berth Construction 28% 18% Railroad and Road Access 8% 7% Channel Deepening (Local Share) 5% 15% Land Procurement & Reclamation 20% 27% Environmental Mitigation 8% 13% Average Cost/Acre ($ Millions) 3. 4 4. 0 . . . Prices Received For Services Going Down

Port Financial Management Challenges Return on Investment Going Down Inter-Port Competition is High Lease Rates Are Flat State Funding is Drying Up Competition For Federal Funding ROI Millions of TEUs • • 2000 2010 2020 2030 2040

Port Financial Management Challenges Ports Change Business Model • Maintain Market Share (Earn Market Share, Don’t Buy It) • Strategic Plan To Meet ROI Objectives • Competitive Bidding To Maximize Lease price • Stress Capacity Expansion By Productivity FINANCIAL STRATEGY 2000 2010 2020 2030 2040

Port Financial Management Challenges Mindset Change From Landlord to Logistics Provider • Challenge Jurisdictions • Entrepreneurial Risk Taking • Regional Logistics Service Management Port Landlord

Port Financial Management Challenges Demand Management Strategic Mandate: Maximize Real Economic Impact of Demand Stream On Region • Advance Competitive Advantage • Decentralize Investment and Services • Add Value By Integrating Cargo Handling With Distribution • Build Leverage to Improve Pricing

Port Financial Management Challenges Proposal to Improve Financial Performance Container Facilities Charge • NAFTA-Wide • Collected By Local Port Authority • To Be Invested in Facilities By Collecting Authority (Not on Maintenance Dredging) • Initiate Research to Determine Feasibility CFC