Earlier this week, the Port of Savannah took delivery of 4 new, super post-Panamax cranes.  These container cranes are some of the largest in the world and can handle ships that carry up to 22 rows of containers on their decks.  In addition to being huge, the cranes are environmentally friendly.  To begin with, they are electric not diesel.  In addition, they generate a significant portion of their electrical requirements internally, utilizing the pull of gravity to spin up generators.  Overall, this is another good move by Savannah to prepare themselves to accommodate the future big ships and an important step to protect the environment.  

The Jacksonville Business Journal reported yesterday that Mitsui estimates the final bill for the necessary channel dredging at JaxPort could reach $1 billion.  Dennis Kelly, general manager at the Mitsui Jacksonville terminal, said the St. Johns River dredging is necessary to accommodate the newer, larger container ships.  This need becomes even more critical in 2014 when the newly widened Panama Canal opens, allowing those larger ships to transit.  Although Jacksonville will compete with Savannah for the dredging funds, the new nuclear aircraft carrier base at Mayport will strengthen its argument.  

In an economy where we hear on a daily basis about hundreds of billions, or even trillion’s, of dollars being handed out by the government, it is easy to be lulled into thinking that a $1 billion dredging project is small.  This is still a huge undertaking for the Corps of Engineers and these funds won’t come without a significant struggle.  However, a 50′ channel depth seems to be the magic number and if you have it you have a significant competitive advantage.  When the big ships come there will only be a few mega-ports on the east coast that these ships will call on.  Jacksonville’s ability to obtain these funds will go a long way in helping to determine whether it can become one of these “winners”.

West Broad Village, the west ends new mixed use project has hit another snag.  This time it is over a misunderstanding in how much the water and sewer tap fees will be.  An article, which appeared in the Henrico Citizen outlined the saga between Unicorp, the developer, and the Henrico County Board of Supervisors.  According to the article, Unicorp’s position is that the mixed-use buildings should fall under the County’s “other buildings” classification for fee calculations.  The County, however, looked at each individual use within each building to calculate the fees.  While the difference may seem semantic, the resulting fee difference is not.

Unicorp calculated their total obligation to be $589,000.  The County calculates that same obligation to be $3,500,000.  The difference is huge and Unicorp claims it is enough to shut the project down.  They just don’t have the money in their budget to pay the higher fees.  While the discrepancy is making news now, Henrico County officials notified Unicorp and their engineer, Timmons Group, about the fee via three letters between March 26 and July 3, 2007.  Unicorp claims that they never received the notification because Timmons never notified them and the letters that the County sent to Unicorp were addressed to a marketing person, not a project manager.  

I suspect that Unicorp will have an uphill battle in getting the County to reduce the fees.  Henrico’s position is consistent with how other projects have been treated and they followed the proper protocol to notify the developer.  While I am sure it is a shock to Unicporp, county fees are a part of every development project and are one of those things you need to understand upfront and early.  It’s just one fo those “boxes” you have to check.

This latest issue surrounding West Broad Village just adds to the projects difficulties.  Obviously, the retail market (and the market in general) has completely gone out from under them, with retailers more likely to file for bankruptcy than sign a new leases.  In addition, late last year nine mechanics liens, totalling approximately $3.7 million were filed against the property for failure to pay contractors and brokers.  At the time, Unicorp cited difficulties in lining up their financing as the reason for the delays.  There has also been at least one failed acquisition of the property as Unicorp tried to unload its position in the property.  There are rumors that another group has the project under contract and is doing their due diligence.  It may have been through those due diligence efforts that the tap fee discrepancy was discovered.

The Richmond Times-Dispatch reported today that Tyson Foods, Inc. will be adding 180 jobs for a new processing line at its Hanover County plant.  Almost a year ago, Tyson announced the layoff of 190 employees.  The Company said it is pleased to be able to hire back most of the affected workers.  50 of the 180 workers have already been hired and the balance will be added over the coming months.  The plant currently has approximately 625 employees.

While I don’t have any inside knowledge of the Tyson Foods operation, I think this story may portend to what we will see more of in the US.  It appears that, prior to the new hires, Tyson found a way to operate its plant with fewer employees.  Basically, they increased their productivity and became more efficient.  It was only when they added a new production line that their hiring needs increased.  I believe that in the lean times, many more companies will find ways to be more efficient with their workforce – whether through technology or other means.  When the recovery comes, we may not need as many workers to accomplish the same level of production.  That speaks well for our national productivity, but would mean a longer more protracted job recovery.

Who knew it would take this long to update a website…  Anyway, the new and improved Moreland Advisors website is up and running.  Take a look and see what you think.  Comments and suggestions are always welcomed.  Next task is to get the Blog to have the same look and feel.

Wholesale inflation took an unexpected leap in January 2009.  Today, the Labor Department said that wholesale prices increased by 0.8% last month.  This represents the largest increase since last July and well above economists expectations of a 0.2% increase.

So, why does this economy need some inflation (some being the key word).  Our economy is driven by consumer spending.  We earn income and then we spend it at an alarming rate.  However, during this recession, consumer spending has all but dried up.  This is partially due to the freezing of the credit markets, but also due in large part to consumer expectations and confidence.  Americans are “on the sidelines” waiting to see what happens before they get back into the spending frenzy.  Why buy today when it will be on sale tomorrow?  What inflation does is add a little urgency to the equation.

If consumers anticipate that things may be more expensive if they wait, they will act sooner.  In the real estate world, investors have been sitting idle because they feel that prices are declining.  If they wait until next week/month/quarter they can get the same property for less.  A healthy dose of inflation should help them realize that prices might not fall forever.

Maintaining a healthy level of inflation (over deflation or stag-flation) will do wonders to get our economy back on track.  Even the expectation of impending inflation should be very helpful.  If anyone needs confirmation of this, take a look at Japan in the mid-1990′s (or call me and I’ll walk you through the interaction).

Today, February 18, 2009, is the day when the Ports of LA and Long Beach will begin collecting the Clean Truck Fee (CTF).  This fee, amounting to $35 per 20ft container or $70 per 40ft container, is to be paid by the cargo owner (as named on the bill of lading).  No cargo will be allowed in or out of the port unless this fee has been paid, no exceptions.  

I can appreciate the POLA/POLB position and their desire to clean up the environment.  However, I continue to question whether an additional fee is the wisest move in this economic environment.  I wouldn’t want to give a current customer any reason to take their business somewhere else.

For more information on the project, please see the Portcheck.org website.

How can this:

affect this:

Well it can in more ways than you’d think.  The animal pictured above is the Right Whale.  The Right Whale is a species of baleen whales growing up to 18m long and weighing upwards of 100 tons.  The beleaguered creature earned it’s name because whalers thought it was the “right” one to hunt due in large part to the fact that they float when they are killed.  These creatures live in three distinct areas of the world, one of which is the Western North Atlantic ocean, near the East Coast of the US.  In the spring and summer they live up around New York, and in the summer they head to Georgia and Florida – much like many snowbirds.

This annual migration puts them directly in the path of some of the busiest shipping lanes the US has to offer.  In fact, the leading cause of death for a Right Whale is a ship strike.  As you can imagine, hitting a 100 ton animal doesn’t leave the ship feeling too great either.  However, ships can be repaired, whales can’t.  In 2006, several conservation groups sued the NOAA and prompted them in 2008 to impose a cap on ship speeds when they are 23 miles (20nm) from a major US east coast port.  During the whale season (varies by port), the ship captains must maintain a vessel speed less than 10 knots when they are within this 23 mile radius.  January 2009 was the first time when an area was affected by the new regulations.

A typical ship speed for a container vessel would be closer to 25-26 knots.  This reduction in speed means it takes longer to reach our east coast ports.  In the shipping business, time is money and efficiency is everything.  Several of the east coast ports are “river ports” where ships must steam upriver once they reach the coast.  Those steaming speeds are typically closer to 6 knots.  As shipping lines evaluate where to bring their ships, the amount of time it takes to reach each port will certainly be a consideration.  It’s too early to tell, but you would think that the east coast ports, and the river ports specifically, may find themselves at somewhat of a disadvantage.

The Link: LINK

The Story:  According to the Kansas City Business Journal, BNSF Railway is slowing its efforts to build its intermodal freight hub in Gardner.  This freight hub is to be the centerpiece for the Kansas City Logistics Park – a 1,000 acre, $735 million industrial park.  Without the intermodal hub, the industrial park project is effectively dead in the water.  The projects developer, The Allen Group, had apparently been notified by BNSF at the same time as the city, county and Corps of Engineers.  BNSF maintains that progress has not stopped and they are still pursuing Corps approval for some wetlands issues.  However, the company is letting the economy dictate when the major construction will begin and end.  

In a rare mid-year budget session of the Commonwealth Transportation Board two new daily train services received funding approval.  There are still contract issues to be worked out with CSX, NS and Amtrak, but train service could begin as early as October.  The first of two services that received the funding are a daily run from Lynchburg to Washington DC, with stops in Charlottesville and Culpeper.  The second service will connect Richmond and Washington DC with an additional daily train.  Both projects will be funded for a three year trial period.  After that, a decision on whether to keep the lines operational will depend on actual and anticipated ridership.  While not a convenient as a commuter line, the new services will enhance to connection between Lynchburg, Richmond and Washington and should help keep more cars off the roads.  

I am a big proponent of an improved (and therefore useful) rail system in the US, so this is good news for me.  Hopefully, the citizens of Richmond and Lynchburg will use the services and they can be extended beyond the three year trial period.