Gov. Wolf pledges $300 million to revitalize the Philadelphia port, add cranes and warehouses for cargoes and autos

Gov. Wolf announced Tuesday a $300 million capital investment to existing terminals and operations at the Philadelphia port aimed at doubling container cargo capacity and creating about 2,000 more direct port jobs.

The Philadelphia Regional Port Authority, a state agency, approved the plan to add $200 million in improvements at Packer Avenue Marine Terminal in South Philadelphia, including four new electric "post-Panamax" container cranes. Another $12 million will be invested at Tioga Marine Terminal in Port Richmond, and $90 million to expand automobile processing currently at Oregon Avenue and Columbus Boulevard. About 150,000 new Hyundai and Kia autos arrive annually at Packer Avenue, headed for dealer showrooms.

The port authority suspended the bid process for the 195 vacant acres on the Delaware River, known as Southport.

Five of the six original groups "short listed" in January to present financial and development plans have dropped out.

The state decided instead to improve and modernize existing port operations. Both Packer Avenue and Tioga terminals were built in the late 1960s.  Acreage at Southport will be used for automobile processing and to handle additional cargo containers at the port. Autos will continue to arrive on ships at Packer terminal and a new location, Pier 122, on the Delaware River.

"The objective of the Southport development was to grow jobs, grow capacity, grow state and city revenues," said Gerard "Jerry" Sweeney, chairman of PRPA board. "Going through the Southport process, we spent time with the existing tenant base, taking a look at the different pieces of business they had and how constrained they were with outdated infrastructure, versus bringing in someone new."

"From our perspective, this program actually is a better result than Southport by far," Sweeney said. "It immediately creates a catalyst to reinvigorate our existing facilities, more than double container capacity, preserve an intermediate term solution for the automotive business - preserving all those jobs at a very good rate of return for the port and expands our 'break bulk' terminal in Tioga."

The $300 million will grow container cargo capacity 86 percent, cargoes known as "break bulk" such as wood pulp and steel by 21 percent, and capacity to handle automobiles 166 percent.

The original deadline for proposals to develop Southport was Sept. 1, but most of the groups were  no longer interested.  Philadelphia Energy Solutions, which runs the former Sunoco refinery, dropped out, as had a real estate firm funded by the California Public Employees' Retirement System (CalPERS). Another group known as Southport Development Partners that included local terminal operator John Brown and OHL, a Spanish infrastructure fund, also had backed out.

The sole remaining interested bidder for Southport was a consortium that included Liberty Energy Trust, the unsuccessful bidder for Philadelphia Gas Works.

In April, the PRPA added a requirement that the developer of the 119 waterfront acres at Southport had to build a wharf and two ship berths, making the project more expensive -- about $500  million.

"We develop large scale real estate port-related," said Robert Harbour of CenterPoint Properties, an industrial real estate and transportation infrastructure firm. CenterPoint stockholders include CalPERS. "The project entailed building a wharf. That's just not what we do. We sent a letter to the port several months ago."

The challenge for any new developer of Southport was to make a $500 million investment pay off when directly to the north was Packer terminal, built in 1968 when the traditional model for constructing ports was by state-controlled port authorities that issued bonds, and found an operator to pay off the state's investment in rent.  With Southport, the state was looking for predominantly private money to construct a wharf and ship berths from scratch.

This was the third attempt to develop Southport: 119 empty waterfront acres, 75 acres around an old seaplane hangar in the Navy Yard, and the north berth of Pier 124.

In 2009, the project did not get off the ground because of the recession and a global slump in shipping. In 2010, Delaware River Stevedores and its parent companies Ports America and SSA Marine, global marine terminal operators, won the bid, along with the shipping line, Hyundai Merchant Marine Co. Hyundai later pulled out and the bidders failed to secure another shipping line.

Looking back, Delaware River Stevedores pulled out of Southport because "the initial cost estimates of doing the terminal were hundreds of millions of dollars," said DRS president Robert Palaima, the operator of Tioga terminal. "It's a great location, but a site that required a lot of fill. Economically, it was hard to put more than two berths there just because of the geology. You'd need pretty good throughput to spend upwards of $300 million. For private money, you had to be dead certain you had strong commitments from customers to do that," Palaima said.

"The market had skepticism on whether Philadelphia could grow its container business to the rate that we thought it could," Sweeney said. "The reality is that as we started to think about re-sequencing the existing facility at Packer, and being able to build upon the existing book of business there, the governor really saw a great opportunity to immediately double capacity through a fairly tight construction timeline to modernize Packer Avenue. As we were evaluating Southport, and looking at a long-term investment strategy to create container capacity, we have that within our existing footprint today."