Energy & Environment

Pier Pressure

Ports are struggling to balance the need to expand with the public's newfound interest in urban waterfronts.
by | October 2004

For most people, Charleston conjures up images of grand, antebellum mansions looking out over the Battery toward Fort Sumter and the Atlantic Ocean. Or perhaps "Rainbow Row"--the bright-hued townhouses that line East Bay Street near the old warehouse district. But this handsome city of 100,000 residents is also the home of the sixth- busiest container port in the United States. Therein lies a challenge.

American ports are experiencing an unprecedented shipping boom. Most of the growth has come in the form of enormous cargo containers carrying electronics and consumer products from Asia. In the past decade, container traffic has climbed from 20.5 million to 30.4 million TEUs (twenty-foot-equivalents, the standard measurement for a container unit), and economists expect that number to double by 2020. While West Coast ports have experienced the highest growth rates, East Coast ports such as Charleston, Savannah, Norfolk and New York/New Jersey have also seen their container businesses grow rapidly. As cargo levels have increased, container ships have gotten bigger. Today's behemoths stretch to more than 1,000 feet long and can carry more than 8,000 TEUs. They also require bigger cranes, deeper channels, longer docks, better road and rail connections, and ultimately more land.

Charleston seemed to have the perfect place to expand: sparsely populated Daniel Island, about five miles upriver from downtown. But in 1999, when the South Carolina State Port Authority released the environmental impact report for a 12-berth, 1,300-acre container terminal on the island, it ignited a firestorm of opposition. Environmentalists and neighborhood groups protested the scale of the proposed project, warned of traffic congestion and criticized the logic of the site. To the surprise and dismay of the SCSPA, opponents persuaded the state legislature to prohibit a new terminal facility on Daniel Island.

The South Carolina State Port Authority's bruising battle over Daniel Island reflects a new reality for many port authorities. Agencies that are accustomed to ruling over their waterfront domains with minimal outside interference are now contending with another trend--cities' return to the waterfront. From Boston to Houston to Seattle, local and state officials are struggling to balance ports' traditional activities and need to expand with the desire of residents and developers to use urban waterfronts in other ways.

Even Los Angeles and Long Beach, the nation's two largest port operations, are facing space constraints and new demands to reduce their environmental impact. In the process, officials are grappling with tough questions. What are the advantages of a big container port? When do luxury condominiums make more sense than, say, an intermodal water-to-rail transfer facility? And as residents question the traffic congestion and air pollution that come with working ports, are there ways cities can capture the benefits of ports while minimizing costs?

GROWING PAINS

Charleston's entire history is rooted in its role as a port city. When the first European settlers landed on the Charleston peninsula in 1670 and established their settlement upriver along the banks of the Ashley River, they were rebuked by investors in London for building too far inland. Duly chastened, they uprooted their small settlement and moved down to the tip of the peninsula. There they established a port that soon made Charleston one of the richest cities in the New World. They also left an architectural legacy that continues to define the city to this day today. Last year, 4.6 million tourists visited the city, generating an estimated $5 billion for the region. To Charleston Mayor Joseph Riley, who has governed the city for 29 years, historical preservation and outstanding design are not just about charm, they're the key to the city's economic vitality.

A short stroll down Queen Street illustrates Riley's point--and highlights the challenges that arise when a water-oriented city meets a working seaport. To the right, a construction crane hovers above the newest low-rise luxury condominium complex. To the left is the headquarters of the South Carolina State Port Authority and behind that, occupying some of the most valuable land in the city, is Union Pier--a parking lot for the BMWs manufactured upstate in Spartanburg. A little further north is the oldest of Charleston's three container- shipping terminals. In 1966, when the Columbus Street terminal began to handle containers, it occupied 11 acres, a tract of land one local paper described as "massive." Today, the terminal covers 78 acres and processes roughly 250,000 TEUs a year, and it's the smallest of Charleston's three terminals.

Because of local opposition, the port of Charleston hasn't been able to build new shipping berths since the mid-1990s, when it inaugurated the 300-acre Wando Welch terminal. Instead, it's had to improve the efficiency of its operations. Although the SCSPA and other ports have managed to boost productivity in recent years, officials insist that only expansion will allow ports to meet the future needs of U.S. exporters and consumers. "The long-term solution is not going to be met by increases in efficiency and streamlined labor costs," says Gerald Ricchio, executive director of the port authority in Bridgeport, Connecticut, and head of the Association of American Port Authorities' economic development subcommittee. "It's going to have to be met through increased capacity of other properties and through the acquisition of land."

The need to expand port operations has put cities, states and port authorities in something of a quandary. On the one hand, waterfront areas are increasingly seen as desirable development locations and port authorities are taking on the role of real estate developers. Along the South Boston waterfront, for example, the Massachusetts Port Authority is redeveloping hundreds of acres of parking lots and lightly used industrial land into luxury hotels and office towers. Others have embarked on even more exotic ventures. Fans of the Cleveland Browns football team park in a garage owned and built by the port of Cleveland. The port of Corpus Christi is constructing a minor league baseball stadium.

On the other hand, a thriving port also generates large numbers of well-paying, blue-collar jobs at a time when such jobs are hard to come by. In 2003, the average wage for fully registered longshoremen was $89,000. In L.A., when the International Longshore and Warehouse Union and the Pacific Maritime Association announced plans to sign 3,000 new longshoremen earlier this year, more than 400,000 applicants responded. Indeed, the port of Los Angeles alone helps sustain more than 260,000 jobs in Southern California--one out of every 24 jobs in the region.

Nowhere has the question of how the port should use its urban waterfront properties been more hotly debated than in Seattle. While most port authorities are independent agencies whose members are appointed by mayors (on the West Coast), counties (in Florida) or governors (further up the East Coast), the Seattle Port Authority's commissioners are directly elected by King County voters. Last fall, Alec Fisken ran against one of the incumbent commissioners on a platform that called for better management and a rededication to traditional maritime uses. One of Fisken's first acts was to lead the charge against a proposal to redevelop one of the city's four major container terminals, Terminal 46, into an 88-acre mixed-use neighborhood with apartments, office buildings, parks, a marina, a cruise ship terminal and perhaps a basketball stadium as well.

While Fisken calls it "a great plan," he also considers the port a kind of insurance policy for the region. "It's important to have those diverse kinds of jobs that pay well and don't require a doctorate in anything," says Fisken. "It's good to keep that mix." In early August, the Seattle Port Commission voted against the redevelopment proposal.

UNAPPRECIATED RESOURCE?

That ports are an important source of jobs is not in doubt. A 2002 economic impact study found that the SCSPA's port activities supported 280,000 jobs in South Carolina alone. Yet despite these benefits, few communities that surround ports seem to have much enthusiasm for the economic powerhouses docked next door. When the SCSPA proposed to build a new container terminal in the old Navy Yard in the blue-collar city of North Charleston in the mid-1990s, Mayor Keith Summey expressed his opposition by commandeering an armored personnel carrier and declaring "war" on the port.

"The big issue was the effect on the surrounding neighborhoods," Summey says. And while he acknowledged that the project would create some decent-paying jobs for the community, he worried that most of the jobs would go to businesses in other parts of the state, leaving North Charleston with traffic congestion and vast parking lots containing nothing but stacked empty containers. Ultimately, the North Charleston city council passed a resolution barring the construction of a new container port in the city. That's when the SCSPA shifted its attention to Daniel Island.

The back-to-back defeats of both port expansion proposals caught the SCSPA and Charleston's business community off guard. "I think it's fair to say that the port found itself faced with a climate that had changed in ways that were a bit unexpected," says Wilbur Johnson, president of the Charleston Metro Chamber of Commerce.

The SCSPA's insistence on building a massive new terminal "showed a stunning lack of insight and comprehension," says Dana Beach, executive director of the Charleston-based Coastal Conservation League, an environmental group that helped organize the opposition to the Daniel Island project. "Part of it is the culture of the SCSPA," she says. "They have been able to get over the years whatever they wanted. In the 1970s, they fought a big battle over the Wando [Welch] terminal and were able to overcome local opposition. They didn't realize that 25 years had made a huge difference in public attitudes."

SCSPA executive director Bernard Groseclose acknowledges that the residents' demands on the port can be frustrating. "Look around the perimeter of the Wando Welch terminal," he says. "All the land adjoining it was industrial up until the last 10 or 12 years or so. It was gradually rezoned residential, and people started building up to the [port] property line. Then they started complaining, 'Well, gee, could you have a quiet day on Sunday?'"

In 2002, however, the SCSPA finally secured a victory. The state legislature (with an assist from the federal government) made North Charleston an offer it couldn't refuse: In exchange for negotiating an agreement with the SCSPA, the city could have the northern half of the Navy Yard. The parties negotiated an agreement that gave the SPSCA the go-ahead to start work on a new, three-berth container terminal at the south end. Port officials say the new terminal will increase the port's capacity by 20 percent and ultimately generate thousands of new jobs. Mayor Summey is a lot more enthusiastic about a new mixed-use development planned for the old base. "While we didn't want the port, the port was sort of mandated to us," he says. "My job was to get as much for the city as I could from the mandate."

REGIONAL VS. LOCAL BENEFITS

Charleston isn't alone in having a history of conflict between neighborhoods and ports. In Los Angeles, the San Pedro neighborhood has long contended with heavy traffic congestion and air quality levels that are not merely bad but possibly deadly. The combined ports of Los Angeles/Long Beach emit more pollution than Southern California's top 300 emitting plants and refineries. A 1999 study by the South Coast Air Quality Management District found that residents of the LA port area have a significantly higher risk of cancer than other residents of the region. Many other major ports, including New York, Oakland and Houston, also violate federal air-safety standards. They may be great for the region, but many residents worry that they are sacrificing their health for another area's wealth.

Increasingly, port authorities are acknowledging these concerns. Jerry Bridges, executive director of the Port of Oakland, says ports not only need to deal with environmental problems, they also need to do more to ensure that the residents of areas around ports receive the benefits that flow from them. "When we look at where ports are situated and how communities are impacted, some of the biggest pockets of unemployment are just outside of the gates of our terminals," says Bridges. "We need to look at ways to bring those unemployed individuals into the industry."

One way to do that is through apprenticeship programs with local labor unions and industry. Another approach that is attracting attention in maritime circles is a strategy pioneered by Charleston's most serious competitor, the Port of Savannah.

A NEW FOCUS

Seventy miles south of Charleston lies the Port of Savannah, the country's eighth-largest container port. Like Charleston, Savannah is an historic port city. Unlike Charleston, however, Savannah is not blessed with a natural port. Container ships departing from Charleston's most modern terminal reach the ocean in 90 minutes. In contrast, it takes container vessels roughly three hours to travel 24 miles up the sinuous Savannah River to the Georgia Port Authority's Garden City terminal.

Yet despite this apparent disadvantage, the port of Savannah has experienced explosive growth in its container business over the past five years. Five years ago, Savannah handled 730,00 TEUs. By last year, that number had increased to 1.5 million, a figure that has brought its container business to within a few thousand containers of the port of Charleston. Moreover, while most of Charleston's trade continues to come from Europe, Savannah has tapped into trade with Asia, which bodes well for future growth.

Some of the GPA's success can be attributed to its location. Unlike the port of Charleston, the Garden City terminal does not compete for space on the urban waterfront. It's located a few miles upriver from downtown Savannah. As a result, it's been able to expand more easily and to build new facilities, notably an intermodal rail-transfer facility where containers can be loaded directly onto trains. However, space to expand accounts for only a part of the GPA's success. More important has been the GPA's economic development strategy.

Of the 360-odd ports in the United States, less than 24 have the capacity to handle significant numbers of shipping containers. Because containers transport valuable cargo and typically require careful and frequent handling, they create the most jobs and spur the most economic activity. As a result, ports compete fiercely for business from the 10 shipping lines that control most of the world's container business. In the past, proximity to major markets, on-dock facilities and prices have determined who fared best in this competition. But beginning in the mid-1990s, Savannah added another variable to the mix--the customer.

The key to Savannah's recent successes is found not along its 7,600- foot dock (soon to be 9,800 feet) but four miles down the road at a windowless, 1.4 million square foot warehouse--the distribution center for Home Depot. In the early '90s, Savannah had struggled with a problem. Because it had comparatively few imports, Georgia exporters couldn't get enough containers to serve their needs. So the port, together with state and county development agencies, set out to attract big customers to the area. Its first major catch was Georgia- based Home Depot. Today, the area around Savannah is home to a dozen major distribution centers, including Pier 1, Target, Best Buy, Kmart, Lowe's, and the mother of all importers, Wal-Mart.

Targeting customers has given the GPA unusual leverage over the major shipping lines. "The ocean carriers are not picking the port to the extent they used to pick the ports they served," says Doug Marchand, executive director of the GPA. "It's being driven by the big shippers saying, 'If you want my business, you'd better be in Savannah.'" According to GPA officials, the state's focus on end-use customers has generated approximately 20,000 distribution jobs for Savannah area residents. The port's approach means that jobs, not just traffic, are now concentrated in the area.

AN UNCERTAIN FUTURE

Savannah's success in attracting customers and then using them to lure Asian cargo and negotiate good deals with the shipping lines is being watched closely by other ports. However, not everyone believes that this approach should be applied to more urban, industrial ports such as Charleston.

"There is an issue of scale here," says the Coastal Conservation League's Dana Beach. "The cost of these new berths is going to approach three quarters of a billion dollars and that does not include infrastructure improvements. The question remains: Is this an investment that is wise for the state to make or are there alternatives, either in Charleston or elsewhere? What are the opportunity costs versus other types of economic development in the region? I think that if we were to look very dispassionately and analytically, we would realize that our port is perfectly adequate as it is and that we'd don't need massive expansion."

SCSPA executive director Bernard Groseclose and other port officials don't share that view. "Clearly, there are communities that are balking at port expansion," says Bridgeport's Ricchio. "Some communities are saying, 'You're so big already, what's the point? Let the cargo be diverted to another port.' That's easy to say if you're a citizen in the area, but if you're running a port and don't want to see your competitive advantage undermined, you're going to be as aggressive as possible in getting and developing that land. To many of us, a water view is not a water use. A residential condominium project with a restaurant on the water is not really the best use of a port property."

For now, the contentious debate has receded to the background in Charleston. The SCSPA's current focus is on the new three-berth container terminal at the Navy Yard. However, Groseclose refuses to rule out the possibility of more berths in the future--an idea that environmentalists and community groups seem certain to resist. Despite calls for ports to rethink their operations, a sea change doesn't seem likely.

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