Posted: March 1, 2013

By Bill Cresenzo

bill.cresenzo@insidebiz.com

After almost a year of debate that included a loud chorus of opposition from stakeholders, the Virginia Port Authority's board of commissioners is slated to take a historic vote this month: whether to place control of the Port of Virginia - what many call the commonwealth's "greatest asset" - into the hands of a private company.

Whatever the outcome on March 26, the board faces its most significant vote yet, one that will have implications that would change the very nature of how the port operates.

Throughout its history, the port has been a "Port of the People," and opponents of privatization are afraid that handing control of its terminals from Virginia International Terminals over to APM Terminals or JPMorgan Chase could be a mistake.

Yet Secretary of Transportation Sean Connaughton says that "the status quo is unacceptable."

"The choices before us are between restructuring VPA/VIT or going with a true private operator," Connaughton said. "Neither the governor or I have ever said that we favor privatization over restructuring; each path has its pros and cons."

The 12 members of the port authority board have been silent about which way they are leaning. They have not discussed, as a board, the issue in public, and they have declined to answer specific questions regarding their thoughts on port privatization.

"We take this responsibility very seriously," said Jeffrey Wassmer, the vice chairman of the Virginia Port Authority Board of Commissioners. "We appreciate the energy, comments and input from the community. It has been very helpful, and we wouldencourage the input to continue. It would be premature to answer any specifics as we continue tocomplete our due diligence."

William Fralin, chairman of theboard, said board members can speak only in general terms about possible privatization.

"We can't negotiate a deal in the newspaper," he said. "And there are confidentiality agreements. There is very little in terms of factual detail I can tell you about the decision, material details I'm not at liberty to discuss. These are proposals that the board has the fiduciary responsibility to look at and evaluate. We intend to do that in a very thoughtful manner."

It's not clear how much public discussion board members will have before the open session vote on March 26 during their 11 a.m. meeting at the World Trade Center in downtown Norfolk.

"The agenda is currently being developed," Wassmer said. "We have had two public comment sessions. I am sure the [Office of Transportation Public-Private Partnerships, which is steering the process] will present some of the more detailed analysis they've completed. I suspect that will be a closed session."

"Any individual board member is free to make whatever comment they want to make," Fralin said. "Then we will open it up for motions and we'll have a discussion and then we will vote."

During a public hearing in February, held the same day the board met in closed session with reps from VIT, APM and JPMorgan Chase, no one but the reps of APM and JPMorgan spoke in favor of privatizing the port.

Attempts to privatize the port were rebuffed in 2010, but things have changed drastically since then.

In particular, McDonnell replaced all but one member of the port authority board.

"He was looking for persons in industry and with experience in managing major operations like the port," said Jeff Caldwell, a McDonnell spokesman.

"The former board he replaced were political appointments, and some of them had absolutely no business experience or experience of any kind managing a major corporation like the port. He felt the need to professionalize the board and put in individuals who could lead the port through the difficult economy and with the major expansions and with the difficult business decisions facing the port."

Then, last May, Connaughton's office announced that APM submitted an unsolicited proposal to run the port, putting its worth at almost $4 billion. That was followed by a proposal from The Carlyle Group, which later removed itself from the running, and another one by RREEF, which also withdrew itself.

In December, it was announced that JPMorgan Chase and Maher Terminals had submitted their own single proposal that would compete with APM's and VIT's. That deal has an estimated worth of $3.1 billion.

The Virginia Maritime Association opposes privatization, saying it would hurt competition among shipping companies, given that APM is owned by Maersk, a Danish company that owns shipping lines worldwide.

Members of the General Assembly made some attempts to halt the process, but nothing came of the efforts. Last month, Del. Chris Jones, a Suffolk Republican, withdrew a point of legislation that would have required a one-year study before privatization could occur.

So, barring any last-minute developments, the vote will go forward. Then, McDonnell would decide the next step.

Caldwell said the governor thinks the board should "have the ability to work through the Public-Private Transportation Act process."

"We await the conclusion of that process," he said.

Harris said the VPA has received 12 to 15 letters commenting on privatization.

"Most of the true public comments - John Q. Taxpayer, if you will - were made at the public hearings," he said.