PORT DEVELOPMENT FRIDAY, APRIL 24, 1981 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON MER- MERCE New York, N.Y. The subcommittee, the standing committee, the legislative commission, and the assembly subcommittee met at 10:10 a.m., in the Harbor Room of Seaman's Church Institute, Hon. Mario Biaggi, presiding. Also present: Assemblyman Joseph Ferris, chairman of the New York State Legislative Commission on Science and Technology; State Senator Joseph R. Pisani, chairman of the New York State Senate Standing Committee on Commerce and Economic Development; Assemblyman Dan Feldman, New York State Legislature; Assemblyman John Brian Murtaugh, New York State Legislature; and Sam Jaffe, staff, on behalf of State Senator Marchi. Congressman BIAGGI. The meeting is called to order. This is the second meeting, the second hearing in a series that we plan to have throughout the United States. I have an opening statement that I will defer at this point because of the presence of the mayor of the city of New York who has another meeting directly hereafter. I understand, Mr. Mayor, that you have a meeting with the Governor to try and resolve some very critical problems, and I assume you will be going as a peacemaker. STATEMENT OF MAYOR EDWARD I. KOCH, MAYOR OF THE CITY OF NEW YORK, ACCOMPANIED BY HON. LINDA W. SEALE, COMMISSIONER OF PORTS AND TERMINALS AND ALLAN TUMOLILLO, ASSISTANT COMMISSIONER OF PORTS AND TERMINALS Mayor KOCH. You know that I am a peacemaker. Congressman BIAGGI. Mayor Koch is accompanied by Commissioner Linda Seale and Mr. Allan Tumolillo. Mayor KOCH. Shall I proceed then, Mr. Chairman? Mr. Chairman, I have a relatively short statement which I would like to cover, and then if I may, respond to any questions you might have, and then to leave Commissioner Seale to make her own statement so as to permit me to go back to city hall and to the Governor. (1) It is obviously a pleasure for me to appear before your committee, Mr. Chairman. The two of us served in Congress, we are old friends. You have provided so much leadership in the Congress in so many ways, therefore, it is a special pleasure to be meeting with you and with the other members of your committee, Assemblyman Joe Ferris, an old friend of mine as well. Now, there are economic forces at work today in the regional, national, and international economies which can make the Port of New York even greater than it is and has ever been. But if we fail to take advantage of them, we'll undermine this work, and undermine the one competitive edge that we now enjoy, and lead to the erosion of the regional economy. We are at a crossroads for the port, and consequently, the region, and the stakes are high, and therefore, we have to act. In 1981, the Port of New York and New Jersey, and it is that port which is one of the greatest in the world, which involves two States, and that is why we have a port authority which plays an extraordinary role under a compact between the two States. The problems and demands that are involved, and let me list them for you here, a dilapidated railroad, Conrail, which holds a virtual rail monopoly in the port district, and which faces an uncertain future. Second, high energy costs for truck transportation, costs which show no prospect of declining. Massive Federal regulatory burdens in the dredging of our channels combined with reduced Federal expenses. The institution of user fees for the dredging of our channels, thereby ending the historic Federal responsibility of maintaining the Nation's navigable waterways, and that is the key we will be talking about in a few moments. Unprecedented demand for this Nation's coal and grain, a demand which stretches our Nation's rail port systems to it's limits. A seriously weakened industrial base in the Northeast and Midwest, a base which this port has served for over three centuries. The erosion of the industrial base of the Northeast and Midwest and its resultant population loss are forces which this Nation must confront. Over the past decade, ports in the South and Southeast have capitalized on the general movement of industry and upon Federal policies which made inefficient ports into efficient ones, while we in the Northeast received far less assistance. We have an opportunity to break this pattern which has discriminated against our region. I would like to address two lines of attack that I believe we should pursue. First, the upsurge in demand for U.S. steam coal, has highlighted how difficult it is to dredge our harbors to the depths necessary to accommodate the large coal colliers. The Federal burden of regulatory redtape results in delays of 15 years or more in the completion of major channel deepenings. The 15 years it takes to deepen a channel is a result of preliminary feasibility studies, feasibility studies, cost-benefit studies, engi neering studies, environmental studies, and, ultimately, if all goes well, construction. Each year, moreover, the proposed deepening project must receive additional appropriations and authorizations from Congress. It should be noted that the cost of dredging other ports is enormous, mounting into the billions of dollars. Our port, on the other hand, is cheaper to dredge than any other east and gulf coast port. User fees for the port can and should be assessed, provided that revenues collected in a port stay in that port. Since the port of New York and New Jersey handles the most tonnage and moving the highest valued cargo, and since our costs are the lowest, a portby-port user fee system will make New York the cheapest. The Federal arrangement which supports inefficient ports canand should-be phased out. Since freight transportation is sensitive to cost, we can hope to capture a good chunk of the new coal traffic and we should enhance our general cargo capabilities. We are planning on a coal port construction here in the city of New York. The city's basic position on dredging of the harbor can be summarized simply as follows: First, user fees restricted to each port's needs; no nationwide funding arrangement which transfers the wealth from the Northeast to the South; Second, make clear that the region could fund dredging projects without any reimbursable or nonreimbursable Federal funding; Third, removal of the Federal Government from the decisionmaking process on channel deepening, which I mentioned above, since it will not be paying for the project. We will be paying out of user fees. I want to applaud you, Mr. Chairman, for your efforts to create a user fee system which would encompass not only channel deepening, but also fire protection, Coast Guard services, Customs, et cetera. I also find elements of the Reagan administration's bill to be beneficial to this port, especially the provision which allows 100 percent local funding of the dredging costs and keeps user fee revenues within the port itself. If the Federal Government could be entirely removed from the dredging process, that would be ideal. While the details of this arrangement are complex, I believe these changes will unleash the potential of this port. The second critical issue is Conrail. It is clear that the existing structure of Conrail, with its congressionally mandated labor agreements, will not produce a competitive railroad. It is also clear that simply eliminating Conrail's funding will be a serious blow to the Northeast. Healthier railroads such as Chessie and the N. & W. will not pick up the pieces. I believe that we must maintain some level of subsidy for Conrail for a definite period, substantially reduce the size of the system by eliminating the high percentage of trackage which carries a low percentage of the freight-in very rough terms, about 50 percent of Conrail's trackage carries only about 15 percent, 15 percent, of Conrail's freight-and change the congressionally mandated labor agreements which guarantee lifetime employment for many of the Conrail employees. We could not have balanced the city's budget with a law such as Congress has imposed upon itself. Similarly, Conrail cannot become profitable with laws like these. That has to be done. Instead of pursuing the balance of the full statement, Mr. Chairman, I would prefer to file it, with your permission, and to take any questions on those two issues. Congressman BIAGGI. No objection. I thank you, Mr. Mayor, but I do have a couple of questions that I would like to ask. One that comes to mind, in yesterday's Times, there was a report that an OMB study found that the Reagan budget cuts did not have a disproportionate impact on the Northeast. This conclusion seems to be clearly at odds with must of your own thinking. Would you care to comment on that? Mayor KOCH. First, let me make it clear, it is the congressional OMB, not New York City's OMB, because we take a contrary position to that. The Reagan administration, even if it were making the cuts fairly, which it is not, and I can give you the best illustration of that, Mr. Chairman, its tax depreciation provisions, accelerated depreciation favor the Sun Belt for a number of reasons, one being that it does not allow accelerated depreciation for those who lease their industrial or commercial properties, you have to own them. In the Northeast, it is more customary to lease the properties long term than it is to own them, and those people, therefore, are excluded from those benefits which are considerable. Second, it does not, in those same tax depreciation allowances that are proposed by the Reagan administration, and I am not opposed to the concept of the tax depreciation writeoff so as to encourage jobs and business, but they do not apply to the service industries. They apply only to the manufacturing industries. So we believe that the approach of the Reagan administration is to the advantage of the Sun Belt, which already has advantages, and to the disadvantage of the Northeast and the older cities. Congressman BIAGGI. Mr. Mayor, how do you feel-how does the respective coal development and possible revitalization of the commercial fishing industry fit in to your waterfront plan? Mayor KOCH. Yes, we are very desirous of enhancing New York City as a coal port, and also to enhance the fishing industry, and I am going to talk about the coal port in a very brief way, and also the fishing industry in a very brief way, and Commissioner Seale, who is commissioner of ports and terminals, can provide you with the details because she and Allan Tumolillo have been very much involved, particularly as it relates to the coal port. There is an enormous demand for American coal. We want to be that port from which it will be exported. Let me say to the environmentalists who oppose many of these areas, you mention coal and they choke. They really shouldn't. First, coal is a necessary resource locally, of course, subject to environmental safeguards, and I am for its use. It will reduce our energy costs considerably if there is a changeover from oil to coal. Provided that the environmental safeguards are there, and they are there. We are constantly opposing the objections to that. We are constantly fighting for that. I must say, Mr. Chairman, when I was in the Congress, it is really interesting about that, when I was in the Congress, and I, along with other Members of Congress, you know, the environmentalists would come in and they would say this was good for the country, well, very rarely did I question it. As the mayor of the city, I have the responsibility which is to do things that are in balance, so that if you have the most pristine of air, but nobody working, what good does it do? Therefore, there has to be a balancing of interests. Nobody will ever be urging that we use coal if the coal is going to be detrimental to the health of the city. On the other hand, there has to be an understanding that if coal can be made to work, that we will use it, since it reduces our energy costs, and permits more people to get jobs in New York City. We also want to ship it abroad. The cost-and Commissioner Seale can go into that-the cost is considerably cheaper in shipping coal from New York City, if we are to become a coal port, to Europe, than it is from any other area, any other port in this country. Provided that we can bring in the colliers, the ships, into this port, it will be cheaper, but it will require the dredging which is the key to that. Do you want to answer that, and also touch upon the fisheries. Commissioner SEALE. In terms of the economics of coal, New York has a couple of key advantages. We are closer to Europe than any other port. It takes a day less time to get there from here than it does from Baltimore or Norfolk, and it takes several days less time than from a port like New Orleans. In addition, we are the only port along the east and gulf coast that has an opportunity of dredging to a depth greater than 55 feet. We believe that it is very cost effective to dredge to 60 feet here. If there were an advantage to it, we could go to 70, or 80, or 90 feet, and the economies of scale in the increased depths are substantial. The port authority has estimated that the cost per ton of moving coal from the east coast to Europe would drop from $13 a tone to about $8 a ton, if you were able to dredge to 55 feet from the current 45 feet. If we could go to 60 feet, we expect this would drop another dollar or two off of that, so that if New York can dredge to a depth of 60 feet, we should be able to achieve cost savings in ocean transport that will more than offset our higher cost on the rail transport to the Harbor. Congressman BIAGGI. Might I interject? As contrasted to other ports, we have many areas in our port that go beyond 60 feet now; is that true? |