Men's Breakfast, November 12, 2016

The Men’s Breakfast Group met Saturday, November 12th with Phyllis Saathof, CEO of Port Freeport.  Phyllis was raised in West Texas but moved to Houston at an early age.  She got a degree in accounting and worked at an accounting firm for several years.  She then took the job of financial director for the port.  After several years at the port she took a similar job with another port.  About a year ago she returned to Port Freeport as CEO of the port. 
Port Freeport is controlled by the Brazos Navigation District, a public body.  The district covers the southern portion of Brazoria County.  It is governed by six elected commissioners who serve for six-year terms.  Two commissioners are elected every two years in odd years.  The commissioners must reside in one of three navigation districts precincts but are voted on by the whole district.  The district can and does levy property taxes.  It can also sell bonds with voter approval.  Several years ago the tax rate was raised from four cents per hundred dollars of valuation to ten cents to help pay for the widening and deepening of the channel to 45 feet.  The tax rate has been gradually been reduced so it will soon return to four cents.  Commissioner Ravi Singhania said that he wants to keep it there instead of eliminating it.  Phyllis said that having the ability to levy taxes makes financial institutions more willing to loan money and therefore the port can get a much lower interest rate than otherwise.  
The port consists of the entrance channel between the jetties, channels along the Intercoastal and channels up Od River.  It also includes wharves, the two cranes and a considerable amount of land for storing and prepping cargo for shipment or for shipment to inland customers.  The distance from wharf to open water is only seven and a half miles, one of the shortest distances on the Gulf Coast.  This gives the port a competitive advantage.  The new cranes allow the port to handle container ships which are a growing portion of international trade.  The widening of the jetties helps attract the new larger Panamax ships that can use the expanded Panama Canal and make delivering goods from Asia to the Gulf Coast more feasible.  The port is also able to handle Roll-On-Roll-Off ships that import and export automobiles and other vehicles.  We have all seen the trucks carrying SUVs  to the port for export to the Middle East.  The Panamax auto carrier is wider than previous ships which makes loading and unloading faster. 
The port has ambitious expansion plans that include infrastructure improvements throughout the region.  One project is deepening the channel to 55 feet and to 51 feet near the wharves.  This is partially funded by the US Corps of Engineers.  This has been in process for about ten years.  The problem is that channel projects are funded out of a trust fund of taxes on imports.  However, Congress usually diverts some of this money into the general fund.  This means that it takes a long time for projects to work their way to the top of the priority list.  Also, project applications have to demonstrate good cost-to-benefit ratio to be funded.  For this reason, the port is only asking for a fifty-one foot depth at the wharves.  Conceivably, depths should be even greater for the next generation of ships.  It is unlikely that depths greater than sixty feet will be required because that is the governing depth in the straights of Malacca between Malaysia and Sumatra.   The port also wants to extend the wharves and add six more cranes.
Another project is to expand the rail yard at the port so that unit trains can be processed.  At present SUVs are shipped by train from Arlington to Spring and then loaded onto trucks for shipment to the port.  Being able to handle the train at the port will decrease costs and make the port more attractive. 
Related to this is a project to build a railroad to the port on the west side of the Brazos to hook up with main line railroads north of I-10.  The first step in this was to form a railroad board to build the railroad.  This board consists of two representatives from the port, appointed by Brazoria County commissioners, and two appointed by Fort Bend County.  The board will have to acquire a right of way through the counties.  The board has the right of eminent domain to do this but the hope is that this will not be needed often.  The right of way should be acquired soon before sprawl out of Houston makes the land much more expensive and right of way much more disruptive.  Finance will be a problem for the board to solve.  They are talking to short-Line railroads that might like to own the railroad and provide the financing.  Also, pension funds are interested in that a railroad would provide a long term steady stream of income which pension funds need.  One member of the group wanted to see the first locomotive to cross the Brazos.  A second railroad will provide competition to Union Pacific so UP will oppose it.  The discussion of the second railroad has made UP more willing to discuss concerns of the port.  A second railroad will also help the local chemical companies that ship product out by rail. 
Related to this is a project to widen State Highway 36 from two lanes to four up to I-10.  This is in the works and some studies have been made.  This will provide better highway access to the port and reduce traffic through Brazosport.  It will also provide an expanded hurricane evacuation route. 
The port has been buying up property in the East End of Freeport.  Phyllis said that when she started it was primarily to clear blighted areas.  A lot of the property was purchased through tax sales.  Now, the port plans to use the property for port operations.  Recently the port built twenty houses in Freeport not in the East End and exchanged them for much poorer houses in The East End.  This allowed the residents to have much better property than they would have been able to get otherwise and allowed the port to acquire more property.  The port is looking for more lots in Freeport so they can repeat the program with residents that were not able to participate in the first round. 
Related to this is the controversy in the Freeport City Council last week.  The city had acquired four lots in the East End through tax liens.  Phyllis thought that an agreement had been made with the city for the city to sell the lots to the port.  However, a developer wanted to build houses on the lots and asked the city to sell the lots to him.  There was much confusion and the council voted to release three of the lots to the developer.  Phyllis hopes that this can be revisited and the city sell the lots to the port. 
The port is on good terms with the longshoreman’s union.  The Port no longer hires longshoremen directly but shipping companies do.  The union can also help the port in negotiations in Washington and Austin.  The port itself has only thirty-five employees most of which are administrative.  The harbor pilots are also an independent entity.  However, the pilots are governed by a pilot’s board which happens to be the port commissioners.  The pilots have recently asked for a raise, but the shipping companies are reluctant to pay it because of the recession in the shipping industry from the slowing growth in China.