Private company's port bid should inspire skepticism

If someone asked to borrow your most valuable possession - your house or your car - for 60 years, you'd walk away unless there was an eye-popping offer on the table. Virginia faces a similar dilemma with a proposal by a Chicago-area developer to privatize operation of the state's cargo terminals in Norfolk, Portsmouth and Newport News.

CenterPoint Properties Trust threw around some impressive numbers when it first announced its bid three weeks ago. Company officials calculated the present value of the proposal at $3.5 billion, which translates into $8.9 billion when inflation is factored in over the 60-year term.

Some of the details were released late last week, and enthusiasm is already starting to wane. It should. The proposal includes an upfront payment to the state of just $500 million and, more importantly, no guarantees that CenterPoint will invest in a planned expansion of the port at Craney Island.

The port is arguably Virginia's most important economic asset. There is wisdom in assertions that the state should never relinquish control. It may have to in order to generate cash, but state officials must ensure that any deal includes sufficient short-term funding for road and port improvements as well as long-term commitments to improve and preserve Virginia's competitive edge.

The Craney Island project is critical to those goals. Virginia possesses the only port on the East Coast deep enough to handle "mega container ships," which will have a direct route between Asia and the Atlantic once improvements are completed to the Panama Canal in 2015. Increased cargo traffic would generate new jobs and commercial growth in Hampton Roads and across the state.

CenterPoint initially touted its proposal as a way for the state to develop Craney Island. However, the company's plan requires state and federal officials to first spend $900 million for environmental work, dike construction and road and rail access. Even then, CenterPoint could decline to move forward with its $1.3 billion share for wharves, piers and cranes if the company decides that market conditions aren't favorable.

Nevertheless, the company includes the $1.3 billion in its total value for the project. Also calculated into the $8.9 billion figure are state transportation taxes that would no longer be funneled into the port. While it is true those dollars would be freed up for other projects, it is also important to recognize that nearly half of CenterPoint's proposal is money that already belongs to the state.

The proposal comes down to this: $500 million upfront, guaranteed capital improvements with a present value of $344 million, as little as $7 million a year in new cash for the state, and $5 million annually for cities that host the port. Possible extras include $1.3 billion for Craney Island and a profit-sharing deal with a present value starting at $60 million.

State officials can try to negotiate a better deal with CenterPoint, but they may also get a better offer. Over the next 120 days, bids are expected from other firms, including companies with experience in deep-water ports, which CenterPoint lacks.

Unfortunately, CenterPoint's proposal arrived before a state study of the port, headed by Del. Harry R. "Bob" Purkey of Virginia Beach, could complete its work. That increases the obligation on Gov. Tim Kaine and his staff to make sure they aren't simply reacting to individual proposals without considering the larger issues at stake.

A separate review may be needed to focus on broader questions. How can Virginia make sure the port delivers on its potential? How pressing is the timetable for starting development of Craney Island? How many trucks can existing roads, bridges and tunnels in Hampton Roads handle, How much can rail improvements relieve pressure on roads? What other community effects need to be considered? Where will the state get the capital for road and port improvements if it doesn't seek a partner?

No private proposal will be a perfect solution to Virginia's problems. State leaders have refused to commit resources to critical infrastructure needs, and there is no charity waiting to help them out of their predicament.

Even Virginia's most precious assets won't be immune from haggling until the state is willing to invest in its own destiny.