Determined to end a three-year string of deficits by the Maryland Port Administration, state Transportation Secretary O. James Lighthizer declared yesterday that the port will no longer agree to leases that effectively subsidize the operations of the port's customers.
"We are officially out of the business of bidding against ourselves," Mr. Lighthizer said. "There may be some proposed deals we walk away from because the taxpayers can't afford it anymore."
In order to return the port agency to a sound fiscal footing, the state will take a much more hard-headed approach in negotiations with the steamship lines, stevedoring companies and other companies that sign leases for the use of the state's docks, cranes and other port facilities, according to Mr. Lighthizer. "There's a limit to any subsidies," he said. "There's a bottom line below which we will not go."
The port of Baltimore has been locked in a fierce competition with the Virginia ports of Hampton Roads over steamship lines and the cargo they carry. It's a competition the port of Baltimore has been losing.
The lost business, combined with pressure to keep rates low to avoid losing even more, has produced substantial deficits in each of the last three years. For the fiscal year just ended, the port agency estimates the deficit at $3.3 million, more than double the $1.4 million registered the year before.
Mr. Lighthizer said that he has instructed Adrian Teel, the port agency's new executive director, to make elimination of the deficit one of his top priorities.
"It's not important; it's essential. The legislature has given a clear mandate that this agency had better get its act together in respect to deficits," Mr. Lighthizer said.
The MPA has to reach the break-even point in a reasonable period of time, he said. While it may not be possible for the MPA to get back into the black by next year, "It ain't gonna be four years," Mr. Lighthizer declared.
One of the basic problems, he said, is that the port has never had clear guidelines for what it could offer in lease negotiations. Mr. Teel has been told to develop "some principles to guide the port in regard to customers and tenants," Mr. Lighthizer said.
Mr. Teel said that in the future the port would agree only to deals that are "operationally self-supporting."
The most important negotiation currently under way is with Maersk Line, which is by far the most important steamship line in the port.
The port agency has been trying to keep Maersk in Baltimore by offering a long-term lease under which the state would develop a terminal for the use of Maersk and its stevedoring company.
Mr. Lighthizer said he did not think his tougher policy on lease negotiations would hamper those discussions. Maersk officials understand, he said, that there are "limits beyond which we can't go."
Mr. Teel described the discussions with Maersk as "very active." He expressed hope an agreement could be reached within the next two months.
Although the fiscal year ended June 30, the final figures for this year's deficit will not be available for another two months, said Gregory Russell, the MPA's director of finance. In a report to the legislature in February, the MPA projected a deficit of $3.3 million.
Mr. Teel said the $3.3 million figure was still the official estimate.