THE MAGAZINE

Port Financing Shows Potential

By Joseph Straw

The port of Houston, Texas, which is the nation’s busiest in terms of foreign tonnage received each year, has a long history as an innovator. At its inception nearly a century ago, the port was the first in the country to be financed using a combination of federal funding and local matching funds. It was also the first U.S. port to receive a container shipment by sea in 1956. It is continuing in that tradition today as it seeks innovative ways to fund security solutions.

The port is unique in its configuration as well. While many of the nation’s major seaports lie in harbors immediately adjacent to the open ocean, ships arriving and departing the Houston port must traverse roughly 30 miles across Galveston Bay between the facility, Galveston Inlet, and the Gulf of Mexico.

The port’s facilities are owned and operated by the port authority and more than 150 private companies. The port complex encompasses 25 miles of shoreline along the Houston Ship Channel, which begins on the city’s central waterway, Buffalo Bayou, just a few miles east of downtown, and continues east out to San Jacinto Bay and south, through Galveston Bay to the Gulf. In its entirety, the ship channel itself runs 52 miles and crosses myriad local, city, county, state, federal, and quasi-public jurisdictions.

This combination of public and private stakeholders demanded a broad-based, regional approach to port security after 9-11. To achieve that objective, leading stakeholders formed the Port Strategic Security Committee, which has since evolved into the Houston Ship Channel Steering Committee (HSC-SC). It includes representatives of the Port of Houston Authority (PHA), private operators (such as terminals and freight forwarders), and dozens of government and sworn public-safety officials. All of them come together through the committee to share information, needs, and plans for the future.

HSC-SC’s central function is to apply for federal Port Security Grant Program (PSGP) funding from the U.S. Department of Homeland Security (DHS). From the program’s establishment through 2007, the port secured $38.6 million in PSGP funding toward projects, including one to establish interoperable communications throughout the port region.

Despite the region’s foresight and collaboration, Houston encountered a problem familiar to other beneficiaries of PSGP funding: how to produce DHS ’s 25 percent matching requirement. Typical DHS grants to states are matched just like federal highway funding—from state treasuries. Different PSGP recipients, usually port authorities, have satisfied the program’s matching requirements using various public revenue sources at the city, county, and state level, officials say. But there is not enough public money to meet the needs for matching funds in every case.

To date, PSGP matching requirements for the Houston port have been satisfied through the Harris County Public Infrastructure Department. But the county has limited funds and wanted another option. One option was tapping beneficiaries to pay a sort of user fee for security improvements. The primary beneficiaries of port grant funds are made up of private operators, such as terminals and freight forwarders.

With that option in mind, Harris County Commissioner Sylvia R. Garcia, whose precinct includes the Port of Houston, worked with PHA Chairman James T. Edmonds to win support for an innovative approach: a state law that would allow them to establish a management district to collect the matching funds for the port grant from private businesses using the facilities. If established, this district for financing port security would be the first of its kind in the nation.

A management district consists of a group of businesses that have statutory authority to levy supplemental taxes on themselves and spend the revenues within guidelines set by the authorizing legislation. These legal entities proliferate in the Houston area—there are at least 20—and they have been used in other large metropolitan areas as well, but they are usually set up to fund small projects like street-side improvements and beautification. The district Garcia and Edmonds envisioned would have a larger goal.

While many of the physical security efforts at ports since 9-11 have focused on the protection of port-facility land perimeters and the credentialing of authorized port workers, the management district plan focuses on the water side of the operation, hence its planned name: the Houston Ship Channel Security District.

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