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[IMGCAP(1)]NEWARK-Cargo volume at the Port of New York and New Jersey reported flat growth in container activity in 2008, for the first time in 15 years. During 2008, total container traffic in the port was 5.27 million loaded and empty TEUs–20-foot equivalent units–compared to 5.30 million in 2007. The Authority says it expects this decreased activity to continue throughout 2009 as the full effect of the economic downturn is realized.

Over the long term, however, the Authority is projecting cargo growth at the port, and is making investments in express rail and other infrastructure to support this growth. “Despite the challenging economic environment, the Port Authority’s port facilities continue to outperform other major ports in North America, with container volume at the top 10 ports in North America declining by an average of 5% in 2008,” says Scott K. Perkins, managing director of corporate services at NAI Hanson. In addition, the Port Authority reports that its $246-million investment this year is helping to support more than 230,000 jobs.

One of the biggest challenges the port faces in the coming years is its inability to accommodate larger container ships, particularly those that will enter through the Panama Canal in 2014 when its expansion is complete. The Bayonne Bridge, which stands 151 feet over the Kill Van Kull tidal straight at its highest point, is too low to accommodate these ships. “In addition to dredging the waters to a 50-foot depth, the Port of New York and New Jersey announced last year that the raising or replacing of the Bayonne Bridge could be upwards of $2 billion,” Perkins tells GlobeSt.com. “The bridge is the largest obstacle facing growth in the port,” says Richard Larrabee, the Port Authority’s port commerce director. The Authority expects to complete a study by next summer on how to deal with the issue. Perkins tells GlobeSt.com that some of the preliminary discussions have involved replacing the bridge with a tunnel under the Kill Van Kull.

The ports here have also taken a hit from auto industry turmoil. According to Kenneth D. Lundberg, senior vice president, NAI Hanson, the downturn in the economy has slowed the import of foreign cars through the port. “In addition to affecting the ports directly, it has impacted some of the specialists who import and prep cars for third parties,” he tells GlobeSt.com “These third party groups are some of the largest lessors of ground space from the Port Authority, and due to the downturn their needs for land have decreased.” The end result is a decrease in revenues for the Port Authority.

On a more positive note, Lundberg predicts that the ports will see an increase in both imports and exports in the long term. “While the current recession has caused a decline in activity, the population will continue to grow, consumer demand will rebound and overseas manufacturing will increase,” he says. “As the largest consumer market in the world, we can expect product to continue to flow to the US. On the export side, the economies of many developing countries are maturing, thus creating demand for US-based products, which will flow outbound through the ports.”

But just how equipped are we to handle this increased capacity? According to the Urban Land Institute’s 2009 Infrastructure Report, done in conjunction with Ernst & Young, and authored by Jonathan Miller, partner and co-owner of Miller Ryan LLC in New York City, the country’s major ports and international airports need upgrading to meet standards set by facilities in other world markets. In short, he adds, “the nation must refashion its freight networks serving ports and airports and finally enter the age of high-speed rail, which could help reduce road and airport congestion.”

[IMGCAP(2)]But creating wider freight corridors through ports in urban centers could take decades without convincing leadership and adequate compensation for property owners. “Incentives will be necessary to forge regional and local consensus for where to locate mass transit lines and stations,” Miller tells GlobeSt.com.

However, there will likely be pushback from residents affected by infrastructure improvements. A case in point, the British government recently approved a multi-billion dollar proposal to build a third runway at Heathrow, which would allow 125,000 more flights to take off and land each year. “Heathrow, one of the world’s busiest airports, approaches 100% capacity,” Miller says, “and small delays can disrupt airport schedules throughout the day and back up flights at other airports.” But the Heathrow project points to problems with expanding key airports, freight corridors, and port facilities in major metropolitan areas. “An entire village, including 700 homes, will be razed in constructing the new runway and area residents are determined to fight the project,” Miller relates.

Dissension aside, decongesting America’s gateway ports and airport hubs could create opportunities for new inland distribution centers. “Through railroad and truck corridors, imported goods could be transported from the primary east and west coast ports to major transfer points in less densely populated areas at key interstate and railroad crossings,” Miller says. “These strategies could reduce the need for expansive industrial space in crowded residential metro areas that surround key ports and create new jobs and industry for strategically located interior cities, which may have lagging prospects because of declines in manufacturing or agribusiness employment.” Centrally situated cities–like Harrisburg, PA; Columbus, OH; St. Louis, MO; Chicago; Kansas City, MO, and Salt Lake City–may be well-positioned to fill the need for facilitating increasingly complex cross-country shipping logistics.

Not coincidentally, Miller says, federal spending on infrastructure has been reduced over the past three decades against a backdrop of rhetoric to shrink government and reduce taxes so that individuals have more to spend for themselves. “Investment success, meanwhile, has been predicated on short-term profit–trading and flipping assets–rather than on long-term gains from patient outlays.” He adds that when the economy eventually recovers and the government is left with yawning deficits, officials must stand firm and avoid back-burning infrastructure spending.

Like the US, Canada has lagged in infrastructure investment since a 1950s/’60s spending surge. “But while the US has dithered, Canadians have come to recognize liabilities to continued under-funding and in recent years have jump-started national initiatives to revamp road, transit and water systems, working in concert with provincial and municipal governments and the private sector,” Miller explains. Not only do substantial federal government gas taxes–just under 40 cents per gallon–support the Building Canada Plan enacted in 2007, but Ottawa has also embraced initiatives to transform the country into a leader for public/ private partnerships.

Fortifying about $26.5 billion in direct federal funding initiatives for infrastructure, Canada looks to jump-start public/private financing ventures, including establishing a public/private partnership fund and a federal office, PPP Canada Inc., to help local governments engage private partners. According to Miller, the Canadian approach offers guidance for marshalling federal programs to work with state and local governments in a more unified effort to tackle infrastructure planning and funding on a national basis.

No doubt, appropriately structured public/private partnerships can provide significant funding and management expertise for governments grappling with maintaining deteriorating infrastructure systems and desperately needing sources of capital.But fund managers readily agree that “we are not the panacea” and realize government needs to supply overall direction for infrastructure policy, planning, and strategy. In reality, Miller says, “they can only be positioned to operate parts of overall systems. Even in the UK, where PPPs were initiated more than 20 years ago, only about 15% of public infrastructure is privately managed.”

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