Speech by Julie Nelson, Deputy Maritime Administrator

New York Maritime Matters

Port Infrastructure Forum

Thursday, September 20, 2007

The Marine Transportation System is a critical component in our nation’s economic health and national defense.

Our nation’s ports deliver over $2 trillion dollars in international trade value and over $18 billion in industry fees and taxes each year. Trade in this country depends on an efficient U.S. port system.

But goods movement in the U.S. is not an easy task. Our ports and waterways handle more than 2.5 billion Tons of trade annually and that volume is projected to double infrastructure in the next decade.

When you couple that increase in trade with ageing infrastructure, the future doesn’t look so rosy. Our intermodal freight systems across this country are nearing capacity yet AMERICA’S appetite for more goods isn’t slowing down. Our ports and terminals must look to greater efficiencies and technology in order to accommodate this trade growth.

One of the handouts for this event is a Report on U.S. Public Port Development/Capital Expenditures. While only about 38% of the nation’s ports contributed to this report, the numbers exceeded the $1 billion dollar mark for the 10^th year in a row with 2005 expenditures exceeding $2 billion.

Extrapolating that data to all of the national ports seems to indicate that capital expenditures across the nation likely exceed $5 billion dollars and it’s still climbing.

But this money is still not enough. Money is needed for “off-port” connections to the ports, as well as “on-port” technology improvements and better cargo handling capabilities. U.S. citizens are calling for environmental enhancements which will cost terminals, ship-owners and ports more billions in the future.

While this all sounds so tragic and doomsday-like, the immense potential for very good returns on these investments is extremely positive.

These 3 facts are true:

(1.) Trade growth is inevitable.

(2.) This trade will keep moving through our ports and

(3.) Goods movement is a good investment.

While Rick Larrabee and Brian Moon will talk more specifically about recent port investments by the private sector and the interests of private equity into transportation infrastructure, I would like to briefly discuss what the federal role is in this market.

We, at the federal level, need to establish policies that promote increased investment by the private sector in our transportation infrastructure. There is not and will likely never be enough money in the government coffers at the federal, state or local level to accommodate the expected trade growth.

The federal government needs to encourage investment in this sector by helping to maximize the limited funds that are available. Current programs include the use of:

(a) State Infrastructure Banks to complement traditional federal aid programs, through loans, credit enhancements, guarantees or initial funds that will later provide direct revenue streams.

(b) Federal credit programs can leverage federal funds by attracting substantial private

and other non-federal co-investment.

(c) Private Activity Bonds – The bonds can now support “freight transfer facilities” in

addition to more normal transportation projects.

Qualified Highway or Surface Freight Transportation facilities include: Facilities for the transfer of freight from truck to rail, or rail to truck including cranes, loading docks and computer controlled equipment integral to such freight transfers.

These private activity Bonds can leverage private investment by providing private developers and operators access to tax exempt interest rates thereby lowering the cost of capital.

Most importantly, though creative public private partnerships will produce the greatest return for investment in the marine transportation system, mixed funds for various types of investment in our ports and terminals can make a difference in the future growth of the marine transportation system. The most important federal role is not to stand in the way of economic success.