The Virginia Port Authority's governing board is set to announce this month whether to restructure its arrangement with Virginia International Terminals Inc., the port's private, nonprofit operator, or pursue a new relationship with a for-profit company.
Board members already should have concluded that the better option is to retain VIT. The company was formed about 30 years ago to take control of Virginia's fledgling port and promote economic development, and by nearly every measure it has been successful.
VIT has built the port into the third busiest on the East Coast, upgraded its facilities and prepared it to handle the next generation of massive ships expected to pass through the widened Panama Canal in 2015. And it supports close to 340,000 jobs while posting an annual economic impact of about $41 billion.
Equally important to the board's decision, however, is the process that has led to this point. That process was so flawed, and led to so much turmoil around a critical economic engine, that lawmakers recently took steps to ensure it never happens again.
The Public-Private Transportation Act of 1995, the law that allows the governor's administration to bypass the legislature on major transportation-related deals, underwent several changes in the past legislative session, including approval of a measure prohibiting any future unsolicited bids for the port. The Joint Legislative Audit and Review Commission also has been directed to conduct an extensive study of port operations.
One reason the bid-evaluation process has been so flawed is that Gov. Bob McDonnell's administration has struggled to commit to a clear strategic vision for the Port of Virginia.
In 2010, state officials signed a lease that let VIT operate APM's state-of-the-art terminal in Portsmouth for 20 years. A year later, McDonnell overhauled the port authority's board by replacing 10 of 11 members. He and Secretary of Transportation Sean Connaughton prepared to strengthen the state's commitment to VIT in late 2011 when they tried to negotiate the outright-purchase of APM's terminal in Portsmouth.
APM declined the offer and, a few months later, came back with its own proposal: up to $3.9 billion to the state in exchange for rights to replace VIT as the operator at the publicly owned terminals in Norfolk, Newport News and Portsmouth, and at APM's own terminal in Portsmouth, for 48 years.
The offer caught state officials flat-footed. They established an unnecessarily short period - less than 60 days - to solicit bids to compete with the most lucrative unsolicited proposal for a public asset. The move suggested the governor's administration had already decided to favor APM's bid and wouldn't give the scrutiny necessary to ensure a good deal. Worse, state officials never established the value of the asset for which they were thinking about giving up control.
Public outcry, including from shipping lines, persuaded state officials to revise the timeline. An analysis of the deal by Old Dominion University economist James Koch suggested the APM offer undervalued the port. An opinion from Attorney General Ken Cuccinelli, who said the fate of operations at the port should be determined by the port authority's board, rather than Connaughton, led to further delays.
In the meantime, a recent preliminary report on the port's operations concluded that claims of VIT having an unsustainable business model were overstated. The report highlighted areas where VIT could be more efficient, and the company is undertaking efforts to reorganize.
Port authority board members would do well to support that effort, and to finally provide the stability the port has been missing for too long.