Jaxport’s strategy for deepening and growth.

dredging2The past five years have been busy ones for the Jacksonville Port Authority, seeing it install larger cranes, improve navigability at Mile Point and build an Intermodal Container Transfer Facility, among other developments.

Now, as the authority begins work on its next five-year strategic plan, it could be embarking on a transformational course for the port, emphasizing a different mix of customers and changing where tenants operate.

“We have choices because we are in a great place in the port industry,” said Jaxport CEO Eric Green.

The changes would see Jaxport rely more heavily on its Blount Island terminal, diversify its markets and attempt to become the first port of call for larger vessels. The port authority is exploring ways to fund the $435 million left to pay on its harbor deepening project, is drawing up plans for a container “super terminal” and is working to become less dependent on trade with Puerto Rico.

Funding the dredge

The top priority for the port remains funding its project to deepen 11 miles of the St. Johns River to 47 feet.

In a five-hour board workshop in May, Green called it “the prize,” while Susie Wiles, principal at Right Coast Strategies and manager at Ballard Partners, said she was “intensely focused” on lobbying for dredging funds. John Martin, an economist and president of Martin Associates, said simply, “You got to get the deepening done.”

Jaxport is counting on deeper water to attract larger ships. Vessels are already getting larger, as the average ship that called on Jaxport last year carried 1,500 more containers than in 2012.

More than $435 million remain to be paid on the deepening project, assuming it stops at 11 miles instead of completing a 13-mile plan. Interim CFO Beth McCague laid out the following plan to fund the project if no federal funds are available: $211 million from state agencies, $150.7 million from the City, $39 million from tenants and $35 million from Jaxport

The U.S. Army Corps of Engineers Work Plan allocated more than $32 million for the deepening project this year. The project received $21.5 million in federal funding last year.

Green noted that the more than $150 million contribution from the city is a maximum, and that Jaxport may ask for as little as $47 million. Jaxport has not yet asked City Council to approve any funding.

“At the right time and the appropriate time, we will make that ask,” said Green.

Any amount unpaid by the federal government is divided 50/50 between state and local funds. Jaxport tenants are asked to pay almost $40 million for the dredge, which McCague said was a customary request for a landlord port.

Not all tenants will contribute an acknowledgement of the fact that some tenants, like auto importers and U.S.-Puerto Rico barge service, do not need deeper water. The amount tenants will contribute is subject to direct negotiations.

Federal funding remains a focus for Rep. John Rutherford, who sits on the House Appropriations Committee, and Sen. Marco Rubio, who sits on the Senate Appropriations Committee.

“Senator Rubio is strongly supportive of Jaxport’s Harbor Deepening project and continues to urge the Corps to further support the state and local investments already being made,” Rubio’s office wrote in a statement to the Business Journal. “These Work Plan decisions are made one year at a time, but the senator’s role on the Appropriations Committee allows him to help ensure that there is ample funding available for this essential project in Jacksonville and other similar projects across Florida.”

Diversifying

The Port of Jacksonville has long been the leading port for trade with Puerto Rico. It was responsible for about 88 percent of the market last year.

But Jaxport has been strategically moving away from this segment for years. Trade with Puerto Rico is still the majority of Jaxport’s container business, but its share has dropped 24 percent points in the last decade. Trade with China and Southeast Asia, by contrast, has risen 37 percent points as a share of Jaxport business over the same period.

Jaxport has turned to Asian markets to diversify, but it is looking to increase trade with Europe, the Middle East and South America in coming years. The organization also hopes to win Florida-bound cargo away from out-of-state ports, especially the Port of Savannah.

One emerging opportunity to win such cargo is a new federal mandate that restricts the hours trucks can drive in a day by requiring electronic logging devices. This development makes it harder for trucks to travel from Savannah to Orlando and back in a single day, giving Jacksonville a competitive advantage, according to Martin.

The port authority is also attempting to copy a strategy used in Savannah: luring distribution centers. Deciding on a port of call is a complicated decision for shippers. It is dependent on port prices and equipment, rail access, warehouse space and many more factors, but shippers will always travel to their customers’ distribution centers.

Jaxport is therefore focusing on attracting more importers, third-party logistics providers and manufacturers, like Canadian furniture brand Article, which opened a 319,000-square-ft. distribution center in Jacksonville earlier this year. Staff did not offer many details on this approach during the board workshop, but rather articulated the vision behind such a strategy.

The port authority is also planning $270 million of capital projects unrelated to dredging, including berth rehabilitations, relocating cruise parking and other projects.

The board did not vote on any items during its May workshop, and its June board meeting focused on other items, including a potential bond offering of up to $85 million to help fund the port authority’s capital projects. However, the plans articulated during the workshop will trickle into future board meetings as TraPac-SSA negotiations progress, deepening contract bids come in, tenants start to move and the like.

“I’ve never been more excited about what’s going on at the port,” said Green, a 13-year Jaxport employee.

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