Jonathan Daniels has checked off a few tasks on his to-do list since taking over as head of the Mississippi State Ports Authority in 2012:
» Put money in the bank;
» Establish a nearly $4 million operating budget surplus;
» Expand the Port of Gulfport by 84 acres;
» Complete channel maintenance dredging, including 100 feet out from the docks;
» Double the speed of Kansas City Southern rail cars from the port to Hattiesburg;
» Make progress in diversifying the port’s tenant roster.
The tricky part has been getting the to-do-list done while shifting tenants around to accommodate approximately $600 million in rebuilding of the port Katrina destroyed in late August 2005.
But Daniels does not have to venture far to encounter critics. They question why so few vessels call on the port, why Daniels and other state officials chased fool’s gold in trying to get the port’s 20-mile channel deepened to handle the mega-freighters that would traverse an expanded Panama Canal, why they let port mainstay Chiquita slip away to New Orleans.
The port’s rebuilding is central to the criticism, especially the community ill-will created by the wheeling-and-dealing of former Gov. Haley Barbour in persuading the U.S. Department of Housing and Urban Development to divert hundreds of millions of dollars in post-Katrina housing money to the port’s restoration.
“The $600 million for the Port of Gulfport is more money than the port has generated in income since its existence,” said one critic of rebuilding the 50-year-old port.
Critics also charge the port is losing millions of dollars annually – a claim supported in the port’s audits from 2012 to 2014.
That charge, Daniels said, is rooted in an accounting practice that marks millions of dollars in grant money from HUD as an operating expense. “We have to show it as an expense associated with design work or port- related projects,” he said. “It shows up as an operating expense, but ends up being washed out when we look at transfers-in from other agencies.”
In the 2014 audit, Gulfport CPA firm Alexander, Van Loon, Sloan Levens Favre explained it this way:
“As of June 30, 2013, the Authority’ operating expenses totaled $25 million, resulting in a net operating loss of $10.3 million. This compares to a fiscal year 2013 net operating loss of $13.6 million and $36.1 million for fiscal year 2012.”
The key is in the sentence that follows: “Fiscal year 2014 included $10 million of CDBG (Community Development Block Grant) grant reimbursable expenses,” the audit says, and accounts for the previous two years of operating losses in the same way.
The audit for the period up to June 30 of this year is expected to show a similar reimbursable loss.
In adopting its fiscal 2014-2015 budget, the Ports Authority deducted those reimbursable expenses, thus giving itself an operating surplus of $3,878,386, instead of a $10 million loss.
“The operating budget shows what we calculate as a true cash position,” Daniels said.
Meanwhile, Daniels said after 2017’s port restoration completion, federal grant money will no longer appear on the port’s expense ledger. “I’m looking forward to day that goes down to zero,” he said.
The audit for fiscal 2015, he said, will show the Authority has about $80 million in the bank and bond debt of around $15 million.
A big part of the port’s fiscal health is tied to the hospitality sector, specifically the newly opened Island View Casino Resort and the $58 million oceanfront Island View Tower hotel across U.S. 90. Of last year’s $12.6 million budget, Island View leases accounted for nearly $7 million.
Those leases give the Ports Authority 5 percent of the resort’s revenues above $25 million annually. The current lease is for 10 years and has a series of renewal options that take the lease to 50 years, according to Daniels.
The port chief said he is working to whittle down the percentage of revenue the Authority gains from the gaming and hospitality sector. “It used to be 55 percent of revenue coming from gaming. Now it is well less than 50 percent with the remaining being made up by the maritime portion,” said Daniels, who previously headed the Port of Greater Baton Rouge and a port operation on Lake Ontario, as well as a public economic development agency in Maine.
On the maritime side, Daniels is expecting the port to gain cargo vessel visits with completion of the Panama Canal expansion in the middle of 2016. While the port can’t handle the drafts of the new generation of mega-freighters that will come through the enlarged canal, the vessels their cargo will be off-loaded onto at trans-shipment points in Jamaica can, Daniels said.
“We’re looking at being able to handle the 5,000 TEUs,” he said, referring to freighters carrying 5,000 Twenty-Foot-Equivalent Units, or containers about half the size of those typically hauled by tractor trailers.
Daniels and the Port Authority’s board have been criticized for spending millions of dollars on large gantry cranes designed to take cargo from vessels far larger than those that now call on the port. The idea behind the big ticket purchases, Daniels said, was that “if you buy a bit larger now we have a chance to get into the system” of stepped-up vessel traffic caused by the canal expansion.
Further, he said, the cranes can be altered to handle break-bulk (non-containerized) cargo and project cargo such as the small military vessels Ingalls makes and ships abroad.
Daniels said oil-and-gas industry equipment maker McDermott’s arrival and decision to manufacture and ship its elongated piping from the port marks an early success in his effort to diversify the port’s maritime tenant mix. “This is different from anything the port has done before,” he said.
“We’ll continue to push for international cargo, but at the same time our ability to grow is based on a very diverse business portfolio,” Daniels said.
He attributed the limited growth among current tenants to constant relocating of tenant space to accommodate the port rebuilding. “It is very difficult for them to grow under their exiting footprint. They are being shifted around on a daily basis.”
Another new tenant, Chermours (formerly DuPont), is building an $80 million break-bulk facility scheduled to be completed by the end of the third quarter of 2016, according to Daniels, emphasizing this is “purely private investment.”
Also ahead for the port is a request for proposals for a third-party rail-dock switching company, Daniels added. This will give the port ability to manage its rail operations on site and would be a progression of a rail upgrade project that Daniels said enabled double-stacked Kansas City Southern trains to reach speeds of 40 mph en route to Hattiesburg.
When the post-Katrina restoration is completed in the next couple years, the port will cover around 300 acres. Daniels said the follow-up plan is an additional dredge-and-fill operation to add 150 acres to the port’s west terminal.
He said he expects the Army Corps of Engineers to soon complete a final environmental impact assessment.
The expansion will loosen up a “very tight footprint” at the port, even with the additional 84 dredge-and-fill acres, Daniels said.
“’We have letters of intent and memorandums of understanding with other shippers that could allow is to sellout all of our available land.”
He conceded, however, he “has no idea” how the authority would pay for the west terminal expansion.
But, Daniels said, that shouldn’t keep the port from “looking at the next generation of development today.”