Commentary: La. port development scheme doesn’t add up
Build it and they will come is not a viable strategy for container terminals in the international maritime sector. Ocean terminals are hugely expensive. Banks and investors are unlikely to make loans or deploy capital on the speculative assumption that a good idea for a cargo hub will attract enough business to provide an adequate return on investment. When it comes to greenfield facilities, it’s necessary these days to have agreements in hand from ocean carriers firmly committing themselves to route a significant amount of vessels and cargo through a new terminal so there is a projected revenue stream for repaying investors and making some profit.
But that is not the approach taken by a group of developers seeking to build a deep-water transshipment terminal in Louisiana at the edge of the Mississippi River, with lukewarm support from the state. American Shipper’s February cover story (“Is LIGTT legit?,” pages 46-56) is a fairly exhaustive examination of LIGTT Development Partners (LIGTT stands for Louisiana International Gulf Transfer Terminal) and recent steps to build a $1.3 billion facility on what is essentially low-lying marshes and submerged land.
On its surface, the project gives the impression of being credible based on analysis conducted for LIGTT by port development expert John Vickerman. But serious questions remain about whether the economic study is granular enough to support its conclusions.
The group has enlisted the global project firm Bechtel and is beginning pre-construction engineering work to identify the optimal location for the site within its target zone.
Louisiana has created a port authority to oversee the development and eventually take ownership of the completed facility through a still-to-be-determined financial arrangement. It’s worthwhile to note, however, that the state is not spending one dime on LIGTT. Rather officials seem to be taking a hands-off approach that gives private investors leeway to proceed and would only involve the state if they can produce a successful terminal.
LIGTT is not being designed with any road or rail access. It is purely envisioned as a station for making transfers between oceangoing vessels and barges or special-purpose vessels that can feed ports along the Mississippi River and the inland waterway system in the Gulf.
The Port of the Americas in Ponce, Puerto Rico, underscores the fact that a transshipment hub in the United States has never panned out for economic and regulatory reasons. So far, Puerto Rican officials have not been able to divert any traffic from hubs in Panama; Kingston, Jamaica; or Freeport, Bahamas.
Aside from the strategic uncertainty, the most questionable aspect of the project is how it will be financed. One of the principle parties in LIGTT Development Partners is a New York-based real estate, venture capital and investment services firm named ABK Venture Group that essentially structures deals for clients.
ABK also serves as a middleman for rich foreign investors who want to gain a “green card” to live in the United States. A U.S. Department of Homeland Security program grants foreigners residency if they invest $500,000 to $1 million in companies or projects that create — or maintain — 10 jobs. ABK brokers the transactions on behalf of companies seeking financing and the foreign investors.
ABK plans to string together thousands of $500,000 investments to pay for LIGTT. The plan calls for the terminal to be transferred to the state of Louisiana when it is built and has passed operational trials, with the port authority issuing bonds or using some other mechanism to pay off the investors. From the state’s perspective, all the construction risk is on the private sector developer.
LIGTT Development Partners recently announced it had received DHS approval to move ahead with the project — making it sound as if construction is just around the corner. In reality, the approval from U.S. Citizenship and Immigration Services was simply for LIGTT to set up a regional center to accept capital from foreigners because it passed the agency’s weak economic requirements.
Predictably, some industry publications simply published the press release and an accompanying YouTube video brochure of the approval without doing any reporting to see if the claims were plausible.
The reality is that LIGTT has little chance of being built. I could be wrong — no one probably anticipated there would be double-stack container trains or LNG-powered vessels either.
But consider that most reputable port economists and consultants approached about getting involved with the project fled in the other direction.
LIGTT’s backers are touting the benefits of economic development in a depressed part of Louisiana and the need for more port capacity. They’ve got a famous engineering firm doing some preliminary construction work, so they must be serious. They’ve got high-profile people associated with the project and analysis from a well-known port analyst showing how a transshipment hub would be great for attracting the next-generation of supersize vessels arriving at U.S. shores after the Panama Canal expansion is completed in a couple years.
It all sounds plausible.
And that’s all the developers need to advance their scheme. It’s doubtful there is any plan to actually proceed to construction.
So how does this play out? The pre-construction work, consulting studies, and preparation of permit applications will create dozens of jobs in the short-term, which meets the government’s requirements for job creation under its special visa program. That’s far short of the tens of thousands of direct and indirect jobs LIGTT is supposed to claim, but it complies with the law.
Investors will be solicited over several years.
Eventually, all this activity will quietly peter out. ABK and LIGTT Development Partners will say that despite their efforts they could not close the deal because fundraising, carrier commitments or environmental approvals — or all of the above — did not come through.
Meanwhile, the developers will have profited. It’s likely they won’t have spent all the investor money on preliminary planning and site preparation. ABK is also charging $60,000 to process each investment. There is no U.S. requirement that the investments made through the visa program prove successful and create the promised number of jobs for investors to receive residency status.
As David North, an expert at the Center for Immigration Studies, told me, ensuring that the investments go for sound projects isn’t a priority for USCIS.
“You have an agency that’s not particularly good at international finance. We’re asking DHS to do something that’s totally outside its bailiwick. If you want to find out what the climatic conditions are at the North Pole you don’t call up the National Foundation for the Humanities, and DHS doesn’t really do business development,” he said.
My sense is that the investors won’t come knocking on ABK’s door seeking repayment or a return on their investment. You see, their ROI is getting the “green card” and setting themselves on the path to citizenship.
So, the LIGTT developers and consultants make a handsome profit, the foreign investors gain U.S. residency and the project eventually fades away.