The Effect of the New Security Paradigm on Port Infrastructure Development and Finances (SWUTC/05/167454-1)

Nine public ports account for 88% of all waterborne international trade in the State of Texas. Following September 11, 2001, these ports were required to implement new and additional security measures intended to deter terrorist attacks. This research project provides an overview of the financial aspects of port infrastructure development, the implementation of new security measures, and the relationship between them at these nine Texas ports. The history of the Port Security Grant Program through August 2005 is summarized to provide an understanding of the context in which ports are making financial decisions. This report also describes the financial performance of the ports during the study period (FY 1994 - FY 2004). It examines the funding approaches used to finance asset acquisition and construction, and analyzes both the profitability of Texas ports in general terms and the potential effect of new security-related expenses on port finances. The use of security fees to recoup some of the security costs is explored, as are other potential financing mechanisms. Finally, several conclusions and policy concerns that surfaced during the conduct of this research are presented. The information presented in this report was obtained through examination of public financial data, interviews with key executives at the port authorities, investigation of government sources, and through media reports.