PennDOT's scheme will eliminate jobs at Port of Philadelphia

In contrast, the diversion of through-bound heavy trucks from Route 41 to the Turnpike would protect the Port of Philadelphia/Camden against the unfair advantage that will be enjoyed by the Port of Wilmington and the Norfolk Southern Railroad, principal beneficiaries of the new four-lane highway.

Notwithstanding the possible impacts of the Route 41 project on the Port of Philadelphia, both PennDOT and the DVRPC have proceeded with the project without consultation with anyone from the Port or any other Philadelphia organization, unilaterally deciding to risk the export of Pennsylvania jobs to neighboring states.

Given the trend toward larger ships and fewer regional load centers, any project that tends to favor the Port of Wilmington over the Port of Philadelphia should be closely scrutinized. PennDOT's proposal to build a free, four-lane highway will reduce the Port of Wilmington's costs of freight and risks tipping the market balance in favor of Wilmington as the preferred port of call on the Delaware River.

Today, there are few who would question that U.S. seaports are increasingly competitive due in part to market forces that have caused the decline of several once proud and historically significant ports:

Among ports, the competition has continued in recent decades as the shift to containerization and other factors have led to demise of many once-significant ports, such as Boston and San Francisco. However, it appears that this competition is growing in intensity as shipping companies and the shipping alliances continue their shift towards using larger ships that call at fewer and fewer regional load centers. Click here to see David Luberoff and Jay Walder, U.S. Ports and the Funding of Intermodal Facilities: An Overview of Key Issues, Kennedy School of Government, Harvard University (March 28, 2000).

Container ships are getting bigger, shipping companies are merging or forming alliances, and they are demanding the consolidation of port facilities into super-hubs. These new organizations increasingly have the market power to dictate the terms of engagement with individually operated state and local port authorities. . . These trends in the maritime industry could have major impacts on the Corridor. Some ports could become super-hubs and their volumes would grow exponentially. Other ports may see reductions in the number of large "mother" ships making direct oceangoing calls, resulting in a greater volume of products being delivered via the "backdoor" by truck or rail . . .

There is also little question that the construction of a four-lane limited access highway will decrease substantially the costs to ship bananas and other commodities from Wilmington to Harrisburg and points West, thereby favoring Wilmington over Philadelphia/Camden as the preferred port of call on the Delaware River.

The Route 41 expansion to Harrisburg and points West will expand highway capacity for intermodal trucking that is not subject to any tolls, unlike many of the trucks carrying freight to and from the Port of Philadelphia. Accordingly, the marginal cost to ship from Wilmington to Harrisburg and points West will be substantially lower than from Philadelphia. The role of freight costs in intermodal choice is well understood:

All forms of user fees and taxes affect the total freight transportation cost, resulting in higher rates and prices for carriers, shippers and receivers of products. These fees and taxes can be imposed based upon the value, weight, volume or dimension of commodities, shipments and vehicles, thus affecting these characteristics of freight in the traffic stream.

The potential impact on the Port of Philadelphia of a reduction in the costs to ship freight to and from the Port of Wilmington should not be underestimated. Numerous studies show that the cost of freight, including shipping time and tolls, is a significant factor in the choice of intermodal facilities. This is especially true for the Port of Philadelphia/Camden, which is already at a geographic disadvantage due to its location some twenty miles upstream from the Port of Wilmington.

In fact, the Port of Wilmington's own studies suggest that the competitive balance between it and the Port of Philadelphia is a delicate one because of the geographic proximity of the Ports and the flexibility that shippers have to choose between the ports:

Related impacts measure the jobs with shippers and consignees moving cargo through the Port's marine terminals and private terminals. These jobs are classified as related jobs, since the firms using the marine terminals for the movement of cargo can and do use other seaports and marine terminals. For example, firms importing breakbulk fruit can and do use the Port of Philadelphia or other private terminals along the Delaware River, such as Gloucester City. Similarly, importers of steel often use freight forwarders, who in turn choose the port of import based on market locations. Because of the proximity of other ports such as Philadelphia, Camden, Chester, Gloucester City, and Baltimore to the Port of Wilmington's marine terminals, importers as well as exporters of breakbulk cargo have some flexibility in port choice, and jobs with these exporters and importers cannot be counted as dependent upon the marine terminals owned and operated by the Diamond State Port Corporation.

Moreover, the consequences of higher freight costs on the Port of Philadelphia's competitiveness was identified as a serious concern all the way back in 1989 at the time of the formation of the Philadelphia Regional Port Authority and still holds true today:

The Philadelphia Port Corporation Strategic Business Plan, prepared by Booz-Allen & Hamilton, looks at future market opportunities for the two types of general cargo — containers and specialized cargo — and outlines a business strategy for revitalizing the Port. The study recommends that the Port target paper, fruit and regional container businesses for growth. The regional container market represents a particularly significant growth opportunity as the Port is well positioned to transport an increasing share of goods in the tri-state area. The study also recommends action to defend the existing market shares in the relatively more mature cocoa bean, iron and steel markets, but places only limited emphasis on long distance container markets, lumber and motor vehicle sectors.

The ability of the Port to compete in the targeted markets depends on several key capital investments in Port infrastructure. Without these investments, the Port will continue to lose market share to other Delaware River and North Atlantic ports. Recommended capital expenditures include new warehouses for paper and fruit and an Intermodal Container Transfer Facility at the Greenwich Yard, south of the Packer Avenue Terminal. The Intermodal Container Transfer Facility would provide an important link between the region's water, rail and highway systems and represents an investment in the future competitiveness of the region.

The economic benefits accruing from investment in the Port of Philadelphia are difficult to measure. Jobs and taxes are two commonly used benchmarks. The Port is responsible for an estimated 3,500 jobs for skilled and unskilled persons directly involved in its day-to-day operations. An additional 10,000 jobs in service, retail, and financial sectors are indirectly supported by the Port. In terms of taxes, business activity at the Port generates substantial direct and indirect benefits to the City and the State, including $16 million in the form of wage, sales and income taxes.

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Highway tolls that penalize east-west traffic place the Port at a disadvantage. Trucks traveling from the Port of Philadelphia to Pittsburgh pay about $100 in tolls on the Pennsylvania Turnpike for a one-way trip. In contrast, north-south traffic from Baltimore to New Stanton incurs no tolls. This toll structure encourages shippers to plan north-south routes and places the Port of Philadelphia at a competitive disadvantage.

Concern over the impact of Turnpike tolls on the competitiveness of the Port of Philadelphia was so great, in fact, that Philadelphia Senator Vincent Fumo and others proposed legislation in 1990 and 1991 to eliminate such tolls for cargo destined to the Port of Philadelphia and Camden, thereby, increasing usage of Port facilities. This legislation, the Philadelphia Regional Port Authority Usage Incentive Program Act, would have created a voucher program, whereby shipments destined for export through the Port would have paid no tolls, but instead would have been given vouchers to be drawn from the General Fund. This voucher program would have compensated the Pennsylvania Turnpike Commission for the loss of toll revenue. Unfortunately, after passing the House, the bill was tabled in the Senate Appropriations Committee and was never passed.

Accordingly, unlike the Port of Wilmington, shipments to and from the Port of Philadelphia are still burdened by higher shipping costs associated with Turnpike tolls.

Imagine what will happen if PennDOT is allowed to implement its grand scheme to build a new, 200-mile, 4-lane highway. The Port of Philadelphia not only will continue to suffer the burden of higher freight costs, it will now suffer the burden of greater competition from the Port of Wilmington, as travel times and associated shipping costs from Wilmington to Central Pennsylvania and points West will be even lower.

PennDOT readily admits that construction of the planned four-lane highway will result in a highway with 60% excess capacity, thereby providing for the unimpeded flow of large tractor trailer trucks across Chester County. See http://www.pa41.com/RealityChecks.htm.

Finally, with its recent cold storage expansion, it appears that the Port of Wilmington has already gained a competitive advantage over Philadelphia:

The cold storage business is heating up at the Port of Wilmington. In mid-April, the port unmasked its second warehouse in less than a year for the storage of chilled fruit. It's a state-of-the-art temperature controlled facility that stalls the ripening process of fruits and vegetables, thus allowing the perishables to come to market at an optimal time and attractive selling price. The technology advances give it a competitive edge over Philadelphia, the largest port of entry for Chilean fruit... Currently, Wilmington boasts 700,000 square feet of cold storage and is now recognized as one of the world's largest dockside cold-storage terminals. The $17 million cold store is expected to house 14 million boxes of southern hemisphere fruit imports this year. The recent port expansion will further bolster its role as a major refrigeration and food distribution center. Last year Dole and Chiquita expanded their services to Wilmington, hiking the number of imported tropical fruit and bananas from Central America to a record 1.36 million tons.

Moreover, DelDOT is investing $50 million over the next five years to enhance the competiveness of the Port of Wilmington in the growing automobile import business: Construction of an auto berth 875 feet in length and 155 feet in width located approximately 800 feet offshore in the Delaware River. The project will also include a new, dedicated access roadway connecting the trestle with the Port and existing auto processing facilities located both on and off port. Functionally, the new dock will be designed to provide berthing, mooring, loading, and unloading facilities for Roll On/Roll Off and Car/High-Heavy vehicle carriers with sufficient operational flexibility to accommodate a variety of vessel types. In addition to the above proposed improvements, the FY 2002 Bond Bill authorized the following:

• $15 million to complete the State's obligation to the auto berth facility.

• $2 million to complete improvements for the rail system which supports the container cranes at the Port.

• $5 million to enhance the future economic development of the Port.

• $27.5 million loan to undertake a program of re-financing a portion of the debt obligations of the Diamond State Port Corporation.

Argentina has made great strides in improving Puerto Nuevo, its efficiency and customer service. It now handles nearly half of all foreign trade for Argentina — including winter citrus fruit headed to the Port of Philadelphia. We want to take part in your success! That's why I announced $1.5 million in new Pennsylvania state funds to improve the Port of Philadelphia. It will enable us to build a refrigeration unit, enhancing our status as one of the great importers of fruit and produce for North America. Our $5 million investment two years ago in refrigeration for the Tioga Marine Terminal has already led to a dramatic expansion in produce trade. We've also invested $70 million to strengthen the Port's infrastructure and cargo-handling facilities. All in all, if you forgive the pun, you might say we're seeing the fruits of our labors!

PennDOT's construction of "The Port of Wilmington Memorial Highway," linking the Port of Wilmington to Norfolk Southern Railroad's Rutherford intermodal facility, will also jeopardize significant public and private investments in the Port of Philadelphia made over the past decade to increase rail accessibility and the ability of the Port to compete effectively.

Four years after the 1989 Southeastern Pennsylvania State Legislator's Conference, the Commonwealth of Pennsylvania spent millions of dollars to improve rail access to the Port of Philadelphia by removing vertical clearance obstructions on rail lines into the Greenwich Yard. See Act 188, Pennsylvania Chapter Laws of 1992. The Conference had identified the need for a new "Intermodal Container Transfer Facility at the Greenwich Yard . . . [to] provide an important link between the region's water, rail and highway systems and represents an investment in the future competitiveness of the region." Then, nearly a decade later, the vision was finally realized when CSXT invested $15 million of its own money into the Greenwich Yard. CSXT's investment created a state-of-the-art intermodal facility at the Port of Philadelphia.

The new facility was intended "to extend the benefits of a larger network to a larger customer base . . [and] to improve freight transportation in the eastern United States where, freight traffic is heavy, highways are congested and the need for more competitive freight rail is obvious." See CSX Press Release, June 23, 1997. According to CSX's CEO at the time, the investment "signals a new era of competition not just in freight rail, but in the entire transportation sector. . .".

Construction of the "Port of Wilmington Memorial Highway" will have the opposite effect, creating a new competitive advantage for the Port of Wilmington funded by Pennsylvania's taxpayers.

News Articles about the Port issue

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• Top Stories Focus on port activities helps state be competitive and improves local traffic
• Will Highway Hurt Port?