Factoring a real value of cargo in port investment and funding decisions

Abstract

Ports are marine gateways to economic activities. Ports’ ability to perform services depends on their facilities, harbor conditions, and other factors. Generally, ports have control over their facilities but must compete for funding to improve them. As for waterways, in the U.S., a Harbor Maintenance Trust Fund was established to fund dredging, which levies a 0.125% cargo value tax on most shippers using U.S. coastal and Great Lakes harbors. Yet, commonly, a gross tonnage metric is used to allocate the fund’s resources, resulting in under-maintenance of some harbors. This, reportedly, deters additional port funding and hinders valuable commerce. Supplemental economic metrics, such as value of commerce or cargo, can improve port financing decisions, but such data is not readily available. Container ports collect cargo value data in nominal terms, but bulk ports do not. When making economic decisions, however, real values must be used. Further, when allocating resources, decision-makers must be able to assess ports over time and relative to each other. Conforming to these criteria, this paper develops three port financing indicators based on a real value of cargo and illustrates their calculations using the U.S. Port of Duluth-Superior as a case study.