Tuesday morning could bring a different sort of "March Madness" to Hampton Roads.
The hottest seat in town, at least in maritime circles, will be the boardroom of the Virginia Port Authority at the World Trade Center in Norfolk.
The first big item on the Port Authority's agenda is the one everybody has been anticipating for months: a critical vote on how the port will be run for the next several decades, marking the end of a process that began nearly a year ago.
The board is scheduled to review the value of unsolicited proposals from two private entities -- APM Terminals Inc. and a group headed by JPMorgan Chase & Co. -- offering the state billions of dollars over decades in exchange for the right to operate the authority's terminals.
The offers will be weighed against the merit of sticking with Virginia International Terminals Inc., the tax-exempt company that has served as the port's operator for 30 years.
In recent months, a plan has taken shape to make VIT more answerable and transparent to state policymakers.
The betting on the street is that the authority's board on Tuesday will choose that evolution, rather than a revolution, in how the port is run.
But the drama over the past year had its share of twists and turns. And the companies that want to replace VIT haven't thrown in the towel. So nothing is certain until the vote is taken on Tuesday.
In the meantime, let's recap how we got to this juncture and what's at stake.
Q. How did this all begin?
It's a long story, the short version of which started last spring. That's when APM Terminals filed a proposal with the state, offering it up to nearly $4 billion in today's dollars in exchange for taking over as the operator of the port's container terminals.
The deal would include giving the authority APM's $540 million container terminal in Portsmouth, which the authority began renting in 2010 at rates that will climb to more than $70 million a year by the time the lease expires in 2030.
The state announced the details on May 23.
Because the offer was made under Virginia's public-private partnership law, it set in motion a series of required actions by the state, including seeking other proposals.
A couple of other offers came in, one from The Carlyle Group, which was later withdrawn, and another from a Deutsche Bank affiliate called RREEF America LLC.
The RREEF proposal has since morphed into one from an entity called Virginia Port Partners LLC, composed of JPMorgan IIF Acquisitions LLC and Maher Terminals LLC, a New Jersey-based terminal operator. The group valued its offer at $3.1 billion, with an upfront "concession fee" of $400 million.
VIT filed its own proposal, to keep its job.
Q. With the port such an important asset to the state, putting its operation up for competition is something that everybody must support. Right?
True, the port is a vital cog in Virginia's economy. In Hampton Roads alone, it supports tens of thousands of jobs, and the spinoff is much greater across the state.
But there's also an entrenched port community that's accustomed to dealing with VIT and argues that the agency is doing a good job overall. And that community, coordinated by the Virginia Maritime Association, has pushed back hard against the idea of a major change.
The group, on more than one occasion, bused port stakeholders to Richmond for meetings related to the privatization process.
What has made the process frustrating for business leaders and others who don't have a vested interest but for whom the port is important is that there has been chronic confusion about basic facts related to the port's operations. Whether it's in financial trouble or not, whether it's safely bounced back to pre-recession levels or not -- these are questions that even now aren't settled on the eve of the authority's historic vote.
Last fall, a state House panel asked the General Assembly's watchdog arm to look into assertions that the Port Authority's current operating structure was "financially unsustainable."
Early this year, the Joint Legislative Audit and Review Commission came back with a report challenging that view, stating that the authority's "market performance and outlook appear to be more positive than suggested."
The debate, however, continues.
Last week, John Crowley, an APM senior vice president, wrote an opinion piece for The Pilot citing figures in Old Dominion University's 2013 Economic Forecast, which he said "confirms that the Port of Hampton Roads lost $70.3 million in operating income just in the past four years."
Q. Isn't this a done deal? Isn't the board simply going to ratify the reorganization it teed up in January?
Asked Thursday whether the decision was already made, Port Authority Chairman William Fralin answered with an unequivocal "no."
"The only way the board can move things is through board action," he said Thursday.
"So, the process is alive until the board votes to either accept a concession, to continue negotiations, or to end the process. So that's where we are and that's, you know, where we're going on the 26th."
At its January meeting, after a long afternoon behind closed doors, the board passed "Resolution 13-4," setting in motion, at least on a provisional basis, a corporate restructuring plan for the authority and VIT.
Part of the plan would cut duplicate functions in the two organizations.
Another change: converting VIT from a company with its own board of directors to one that would be wholly controlled by the authority.
"If we go with this reorganization, we would adopt it" on March 26, Fralin said in January, adding that passage would mean that the board had chosen to pull the plug on the private offers.
Port officials have maintained that the restructuring initiative has been moving on a parallel track to the privatization offers and was discussed long before either of them surfaced.
Q. Why are we even talking about this? Didn't the port just wrap up its second-best year ever?
True, the numbers reported by the Port Authority indicate that it was the fastest-growing container port on the East Coast last year, with a 9.8 percent increase in the volume of standard 20-foot containers moved compared with 2011.
This story, however, took shape over the years leading up to 2012, when the authority was having trouble rebounding from the recession.
In July 2011, concerned that the port was being outpaced by its competitors, Gov. Bob McDonnell overhauled the port's board, replacing all but one of its 11 citizen members.
The board's mission was to find ways to cut costs and to improve efficiencies, and it has been doing both.
The issue, from the state's perspective, revolves around the authority's long-range financial viability and its capacity to pay for znecessary capital improvements.
"We're trying to make a 40-year decision here," Fralin said in January. "What we're really trying to decide is how we're going to pay for the buildout and the capital expenditures of the port, including new facilities, for some time to come."
Most Popular Stories
- Malaysia, Flight 370 Relatives Talk Financial Help
- GM Boosting China Production Capacity
- Jack White Records Songs, Releases Vinyl in Hours
- 420 Pot Holiday Tries To Go Mainstream
- Report: Next Iran Nuclear Talks Set for New York
- Automakers Turn to China to Fuel Sales Growth
- Delay in Ferry Evacuation Puzzles Maritime Experts
- Easter morning delivery for space station
- Pope Francis, Huge Crowd Joyously Celebrate Easter
- GOP Making Bold Play for Oregon Senate Seat