Chugging Along

Local businesses and organizations weigh in on the Port of New Orleans' newest acquisition, the New Orleans Public Belt Railroad.

In September the City of New Orleans gave the New Orleans Public Belt Railroad to the Port of New Orleans in exchange for the Gov. Nicholls and Esplanade Avenue wharves. The wharves — prime waterfront real estate just downriver from the French Quarter — are scheduled to be converted into part of Crescent Park, which will stretch from roughly Iberville Street in the French Quarter to Alvar Street in the Bywater.

The deal came nearly a year and a half after Mayor Mitch Landrieu floated the possibility of selling or leasing the railroad to a private entity.

Without knowing if the railroad’s pricing structure and scheduling could remain cost competitive, economic activity at the port and railroad was hampered. With the acquisition of the railroad, however, it’s expected that the port will gain a greater competitive advantage in international trade, many of its 22 tenants will invest and grow their operations, and real estate on the Industrial Canal will see redevelopment.

“With the NOPB and Port NOLA alignment, the port controls a larger portion of the supply chain and can plan future investments and operations synergistically and strategically,” said Port of New Orleans president and CEO, Brandy D. Christian. “This increases our logistical competitive advantage globally.”

The Port & The NOPB – By the Numbers

The Port of New Orleans is a self-sustaining state-owned body which receives no local or state funding for administration or operations. According to the New Orleans Board of Trade, the port accounts for 160,500 jobs in Louisiana, is responsible for $8 billion in earnings and contributes more than $800 million in state and local taxes annually. On a national level, it’s estimated that 380,000 jobs are dependent on the cargo that is handled by the Port of New Orleans, with an economic impact to the national economy of $37 billion.

The New Orleans Public Belt Railroad (NOPB) began running in 1908. It effectively put all the tracks feeding the city’s portage under a single, public entity in order to prevent a price-gouging monopoly from forming. Today, the NOPB runs along the New Orleans riverfront and inner harbor at the Industrial Canal, moving rubber, plywood, steel, metals, ores and minerals, sand, paper, lumber, resins, grain, animal feeds, cement, wallboard, canned goods, latex, asphalt and chemicals.

New Orleans is unique in that it’s the only city in the United States with a deep-water port and a north-south and east-west railroad gateway served by all six Class 1 railroads — CSX Transportation, Norfolk Southern Railway, BNSF Railway, Union Pacific Railroad, Canadian National Railway, and Kansas City Southern Railway. The NOPB connects the city to a combined network of more than 132,000 miles of tracks that reach every major market in North America.

These efficiencies provide port tenants with lower shipping rates and faster shipping times due to the fact they can take advantage of direct delivery on one railroad line instead of using multiple carriers. In addition, companies can ship goods directly to multiple markets from the Big Easy, lowering costs by preventing shipping, warehousing and distributing from multiple locations across the country.

The NOPB also has some of the fastest delivery schedules available — shipping goods from dockside in New Orleans to Chicago in 48 hours.

“Cargo through the Port of New Orleans goes in or out on the railway,” said Christian Jensen, president of the Jensen Companies, the holding company for businesses including Transportation Consultants, Inc. (TCI), TCI Packaging, Import Systems International, Triton Stone Group, and TCI Tank Logistics. “We’re intrinsically tied.”

Real Estate & Railroads

In exchange for giving the New Orleans Public Belt Railroad to the Port of New Orleans, the city received the Gov. Nicholls and Esplanade Avenue wharves —prime waterfront real estate just downriver from the French Quarter which will be converted into part of Crescent Park.

Why Change?

The mayor’s office considered selling or leasing the NOPB as a way to bring a much-needed influx of cash to city coffers. The city hired Dallas-based consulting firm KPMG Corporate Finance to organize information, collect feedback and study potential options for the NOPB. It estimated the railroad’s value between $61 million and $196 million.

Proponents of the sale and leases option noted that, in addition to the initial cash injection, possible ongoing taxable income and private capital for tech improvements might be available.

In the lease, the city was looking for a 40-year, $60 million agreement that demanded $20 million at the signing and $1 million annually. Five companies offered bids to lease the railroad with total lease payments ranging from $113 million to $69 million.

Opponents, including the port and the New Orleans Board of Trade, balked at the idea, saying any changes in operations could negatively impact New Orleans’ ability to compete with rival ports, as costs would increase, getting goods to their destinations could be more difficult, and, ultimately, business and jobs would move out of the city.

A year ago, then-NOPB general manager, Jeff Davis, admitted, “The uncertainty that has surrounded the railroad over the last year has created difficulty for us in attracting new business. It’s been difficult to expand with our Class 1 partners. Nobody wants to enter a deal just to have management change a few months later.”

Christian said the port and the city were able to meet with an attitude of collaboration and cooperation to discuss individual and mutual goals.

“This involved recognizing the economic benefits of transferring ownership of the railroad to the port as well as the quality of life impact that nearly three miles of contiguous open space would mean to the city, residents, and visitors,” she said.

Capitalizing On Synergies

Landrieu called the transfer a “win-win-win.” for the city, railroad, and the port, and said the move would allow for greater opportunity to facilitate commerce and economic development.

For the past two years, many port tenants held off on multi-million-dollar capital improvements in New Orleans until the railroad’s future was settled.

“With the resolution of the railroad’s ownership, port tenants who rely on the NOPB’s service can invest in New Orleans with confidence,” Christian said. “The NOPB will continue its service to the port, its tenants, and as a switching railroad for the six Class 1 railroads, as it has since its inception.”

The port is currently in the process of developing a master plan which includes strategic efforts of growing port operations while effectively incorporating the railroad into its mission. At this time, both are working together to identify and plan business development opportunities.

David W. Kearney, president of The Kearney Companies, Inc., said his businesses have been involved in the logistics industry at the Port of New Orleans for more than four generations, primarily converting railcar shipments to and from ocean containers for export and import markets around the world.

“This is the best possible outcome,” Kearney said. “The NOPB is a finite resource. If it had sold to a private operator, the new owner may have had different interests than the port and the city. Now it will be better aligned with the port and its tenants going forward. It means we can invest in facilities and look long-term. It assures we’re able to grow, expand to take on more, and that will lead to jobs.”

Jensen said his companies “wouldn’t continue to invest if there was a private operator.”

“The risk was a private operator could monopolize rates,” he said.

With the alignment of missions, he believes the port can unleash value that was previously untapped.

“I believe this is the greatest move for the city and the public good. We’ll continue to invest as the port reaches maturation.”

Money Matters

For Lease

Five companies offered bids to lease the New Orleans Public Belt, with an upfront payment ranging from $20 million to $55 million and total lease payments from $113 million to $69 million. Initially, the city was looking for a 40-year, $60 million agreement that called for $20 million at the signing and $1 million annually.

 

Areas for Growth

Maximizing the port’s assets, including the $25 million Mississippi River Intermodal Rail Terminal — which opened in March 2016 — the port’s on-dock intermodal rail terminal at the Napoleon Avenue Container Terminal, and expanding rail has been a major component in the port’s growth strategy.

In anticipation of the railroad for real estate transfer, the port purchased a shipyard on the Industrial Canal for $10.5 million from Harvey Gulf International Marine and agreed to make $4.5 million in capital improvements to the France Road site, which formerly housed Trinity Yachts and Higgins Industries. TCI relocated there from their site at the French Quarter wharves, and has agreed to a 20-year lease of the land, worth $727,679 annually, through mid-2039.

The area around the Industrial Canal is seen as prime for redevelopment.

“The port has a lot of land on the Industrial Canal,” Jensen said. “I see development of storage for containers and rail cars, especially for petrochemicals, which are made just up river,” adding that storage fees on the rail cars could be a new revenue driver for the port.

"With the NOPB and Port NOLA alignment, the port controls a larger portion of the supply chain and can plan future investments and operations synergistically and strategically."

Brandy D. Christian, Port of New Orleans president and CEO