The Port of GalvestonCase Study #2Public-Private EnterprisePresented by: Julie RadaPUB 650PR – SummerJuly 19, 2010        ...
The Port of GalvestonHistory• 1825 – designated as provisional port and  customs entry point by the Congress of Mexico• 18...
The Port of GalvestonHistory (continued)• 1860 – 1900  ▫ Railroad access to the island  ▫ Cotton exchange organized  ▫ Est...
The Port of GalvestonHistory (continued)• 1900’s  ▫ Leading U.S. port for cotton export  ▫ Third most important in wheat e...
The Port of GalvestonHistory (continued)• 1950 – 2000  ▫ Completion of rail and vehicular causeway    connecting Galveston...
The Port of GalvestonHistory (continued)• 1950 – 2000 (continued)  ▫ Secured replacement tenants, or assumed    operation ...
The Port of GalvestonHistory (continued)• 1950 – 2000 (continued)  ▫ Established a committee to promote and create    busi...
The Port of GalvestonHistory (continued)• 2001 – Citizens of Galveston defeated an  election to merge the Port of Galvesto...
The Port of GalvestonStructure• Operates as an enterprise utility• Financially independent from the city• Board of Trustee...
The Port of GalvestonFinancial Considerations• Limited ability to issue new debt to support  project development• Existing...
The Port of GalvestonThe Challenge• Meet growing demand of cruise ship capacity• Rapidly capitalize on the financial benef...
The Port of GalvestonThe Solution• Formation of a public-private partnership  ▫   Port of Galveston  ▫   Royal Caribbean C...
The Port of GalvestonThe Solution (continued)• Negotiated bridge loans from Royal Caribbean  and Carnival (short term fina...
The Port of GalvestonThe Project• Phase 1 – Terminal 2  ▫ Upgrade dilapidated warehouse into passenger    terminal (added ...
The Port of GalvestonThe Project (continued)• Phase 1 – Terminal 2 (continued)  ▫ Delivered within schedule and budget wit...
The Port of GalvestonThe Project (continued)• Phase 2  ▫ Implosion of 236-foot-high headhouse  ▫ Demolition of numerous re...
The Port of GalvestonEconomics• Private Sector  • In exchange for commercial terms re: return on    investment, provided u...
The Port of GalvestonSummation• The public-private partnership arrangement  produced appreciable cost savings by:  ▫ Provi...
The Port of GalvestonEnd Note• In 2003  ▫ Cruise lines, their passengers and crews spent    nearly $631 million on direct ...
The Port of GalvestonReferencesCernak, S. (2007, Jan. 11). Traditional and alternative financing of cruise terminals. Retr...
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Galveston

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  • Statehood 1845
  • privatized
  • Public-public partnership
  • Sandy SpringsPublic/Private Partnerships for Local Governments; Porter
  • 20” rain over 16 day period7 week period
  • Galveston

    1. 1. The Port of GalvestonCase Study #2Public-Private EnterprisePresented by: Julie RadaPUB 650PR – SummerJuly 19, 2010 http://www.capmetro.org/images/train_port.jpg
    2. 2. The Port of GalvestonHistory• 1825 – designated as provisional port and customs entry point by the Congress of Mexico• 1837 – declared a port of entry by Congress• 1854 – Galveston Wharf and Cotton Press Company ▫ Chartered by State of Texas ▫ Coalition formed by various local dock and warehousing interests
    3. 3. The Port of GalvestonHistory (continued)• 1860 – 1900 ▫ Railroad access to the island ▫ Cotton exchange organized ▫ Establishment of Galveston District Corps of Engineers ▫ U.S. Congress – deepen the natural channel and build protective jetty system ▫ Built first grain elevator ▫ Completed wagon bridge between island and mainland
    4. 4. The Port of GalvestonHistory (continued)• 1900’s ▫ Leading U.S. port for cotton export ▫ Third most important in wheat export ▫ Import of sugar from Cuba• 1940 – City of Galveston voted to acquire the holdings of the Galveston Wharf Company, known thereafter as Galveston Wharves
    5. 5. The Port of GalvestonHistory (continued)• 1950 – 2000 ▫ Completion of rail and vehicular causeway connecting Galveston Island to Pelican Island ▫ Continuous commercial growth  Container operations  Cruise industry  Mixed-use cargo facilities ▫ Sold railroad equipment and leased tracks to Galveston Railway, Inc.
    6. 6. The Port of GalvestonHistory (continued)• 1950 – 2000 (continued) ▫ Secured replacement tenants, or assumed operation of defunct enterprises ▫ Expanded real property holdings (850 acres) ▫ Completed improvements and rehabilitation projects  General obligation bonds  Tax Reinvestment Zone Bonds  Loans  Surplus revenues
    7. 7. The Port of GalvestonHistory (continued)• 1950 – 2000 (continued) ▫ Established a committee to promote and create business opportunities ▫ Entered into a lease agreement with Port of Houston Authority for the operation of Galveston’s container terminal ▫ One-half cent tax effort failed
    8. 8. The Port of GalvestonHistory (continued)• 2001 – Citizens of Galveston defeated an election to merge the Port of Galveston and the Port of Houston• 2002 – Design Build Agreement entered into with CH2M Hill ▫ Cruise Terminal #2 at Pier 27
    9. 9. The Port of GalvestonStructure• Operates as an enterprise utility• Financially independent from the city• Board of Trustees of the Galveston Wharves ▫ Complete management and control of the port, including income and revenues generated ▫ Power to contract for all essential purposes  Galveston City Charter  Chapter 54 of the Texas Transportation Codehttp://www.dredgingtoday.com/wp-content/uploads/2010/04/galveston-port.jpg
    10. 10. The Port of GalvestonFinancial Considerations• Limited ability to issue new debt to support project development• Existing bonds - restrictive covenants pledging all future earnings toward debt repayment• Debt service coverage mandated at 150%
    11. 11. The Port of GalvestonThe Challenge• Meet growing demand of cruise ship capacity• Rapidly capitalize on the financial benefits to local and state economy and tax base ▫ $10 million direct impact on the Galveston community ▫ $15 million indirect impact per year round operation of one cruise ship• Complete phase 1 within 7 weeks of contract execution with CH2M Hill
    12. 12. The Port of GalvestonThe Solution• Formation of a public-private partnership ▫ Port of Galveston ▫ Royal Caribbean Cruise Lines ▫ Carnival Cruise Lines ▫ CH2M HILL• Creation of “third party” legal entity – Galveston Port Facilities Corporation ▫ Hold the cruise line contracts and lease with the port  Allowed for retention of operating profits for future investment in other infrastructure expansion
    13. 13. The Port of GalvestonThe Solution (continued)• Negotiated bridge loans from Royal Caribbean and Carnival (short term financing) ▫ Bond guarantee language facilitated replacement of bridge loans with construction loans• Bond issuance by Galveston Port Facilities Corp. (long term financing) ▫ Tax exempt interest
    14. 14. The Port of GalvestonThe Project• Phase 1 – Terminal 2 ▫ Upgrade dilapidated warehouse into passenger terminal (added 80,000 sq. ft. to cruise complex) ▫ Extend wharf facilities - 2,000 ft. long berth ▫ Roadway improvements to accommodate increased number of passengers ▫ $3 million negotiated budget
    15. 15. The Port of GalvestonThe Project (continued)• Phase 1 – Terminal 2 (continued) ▫ Delivered within schedule and budget with $100,000 shared cost savings  Expanded dock  Upgraded interior to double amount of usable space new main waiting area, VIP check in/waiting area, ticket counters, three-level raised corridor to new passenger loading bridge, fire exit stairways, sprinkler and alarm systems, security facilities, and a rolling bridge
    16. 16. The Port of GalvestonThe Project (continued)• Phase 2 ▫ Implosion of 236-foot-high headhouse ▫ Demolition of numerous reinforced concrete silos, railcar unloading facilities and offices ▫ Asbestos abatement - ±500 windows ▫ Three month schedule ▫ Completed within schedule, with nearly 100% of debris re-used or recycled, for $1 million less than the next lowest bid
    17. 17. The Port of GalvestonEconomics• Private Sector • In exchange for commercial terms re: return on investment, provided up-front capital• Public Sector ▫ Conserved its capital funds ▫ Continued to receive increased revenues from growth in related employment and commercial revenues ▫ Strengthened ties with the business community
    18. 18. The Port of GalvestonSummation• The public-private partnership arrangement produced appreciable cost savings by: ▫ Providing the facility on time to start cruise and parking revenues flowing ▫ Saving time and money by renovating and reusing an existing building and wharf infrastructure, generating revenues much sooner than would occur in design and construction of a new facility
    19. 19. The Port of GalvestonEnd Note• In 2003 ▫ Cruise lines, their passengers and crews spent nearly $631 million on direct purchases in Texas ▫ Cruise industry activity generated 9,767 local jobs paying $425 million in income ▫ 96% of Texas cruise activity is attributed to Galveston
    20. 20. The Port of GalvestonReferencesCernak, S. (2007, Jan. 11). Traditional and alternative financing of cruise terminals. Retrieved Jul. 14, 2010, from www.aapa.com: http://aapa.files.cms-plus.com/SeminarPresentations/Cernak.Steve.pdfNational Council for Public-Private Partnerships. (n.d.). Port of Galveston cruise terminal development. Retrieved Jul. 14, 2010, from ncppp.org: http://ncppp.org:80/cases/galveston.shtmlPort of Galveston. (n.d.). History of the port. Retrieved Jul 14, 2010, from port of galveston: http://www.portofgalveston.com/about/history.shtm

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