From the day its port terminal near the Dames Point bridge opened in 2009, TraPac has stood out.
The company’s black-painted cranes, visible for miles, loomed taller than cranes at other Jacksonville Port Authority docks. The biggest cargo ships steaming up the river ended up at TraPac, whose decision to pick Jacksonville for a terminal created a first-time connection for ocean-crossing vessels.
Eight years after that spanking-new terminal opened, TraPac has tentatively signed on to a plan to move its operation two miles downriver to the Blount Island Terminal, a change in location that would cut $200 million from the cost of deepening Jacksonville’s ship channel.
Like everything else about TraPac, the consequences of these negotiations are big.
TraPac and the port authority have to work through complex legal and financial matters. TraPac has more than two decades remaining on its exclusive lease with JaxPort for its current 158-acre location. Tens of millions of dollars of debt incurred to build that terminal still have to be paid.
TraPac and JaxPort have been tight-lipped about what the negotiations could entail.
“We have quite a bit of due diligence to go through, and we’re bullish on the opportunity,” TraPac spokesman Michael Munz said last week.
JaxPort spokeswoman Nancy Rubin said talks are ongoing and “making progress.” There is no timeline.
“As always, our decisions will be based on sound business economics and in the best interest of this community,” she said.
She said the goal is to “maximize the use of all of our existing seaport terminals” for all kinds of cargo going through the port.
The toughest part of making a move on such a large scale comes during the behind-the-scene negotiations, said Stan Payne, owner of Summit Strategic Partners, a Melbourne consulting firm specializing in port matters.
“It’s difficult,” Payne said. “It’s not impossible, and it’s not unprecedented. You’ve seen it in the industry before about container lines switching terminals, and terminals being bought and sold by different operators — games of musical chairs.”
Payne previously was chief executive officer of the Canaveral Port Authority and was general counsel for the Virginia Port Authority when it went thorough a transformation that Payne said is similar to what’s happening in Jacksonville.
JaxPort recently rolled out a plan to deepen 11 miles of the river rather than 13 miles, which JaxPort says brings the cost of dredging down to $484 million. JaxPort’s financial scenarios show the city’s share of the cost would be $47 million to $150 million, depending on how much the federal government pays for deepening. The city has not committed any money, and JaxPort says it won’t make a request for a couple of years.
An 11-mile dredge wouldn’t reach TraPac’s current location, so that triggered the interest in moving TraPac where it would have access to deep water. Payne said JaxPort and TraPac have a shared interest in reducing the cost of dredging, so that could help “pull all those pieces together like a big jigsaw puzzle” in their negotiations.
“The bottom line is this is a business, and it’s a business decision,” Payne said. “If TraPac thinks in the long term they’re better off and have more flexibility with deeper water, then certainly they’re going to look favorably on it. That’s not to say that switching a terminal is easy. It’s not easy, and there are a lot of things that have to be done. But the cost-benefit is there.”
TraPac and JaxPort say the other factor behind making the move is Dames Point bridge, which arches 174 feet above the river. That elevation is high enough for the ships that call now on TraPac, and there’s enough clearance for larger vessels up to a point. But as cargo ships keep getting larger, the Dames Point bridge could someday prevent them from reaching TraPac’s current site. Moving to the other side of the span removes that obstacle.
TraPac, which is a subsidiary of Tokyo-based Mitsui O.S.K. Lines, has always banked on Jacksonville deepening the St. Johns River for the bigger cargo ships.
When Mitsui and JaxPort signed the deal to build the new terminal, they agreed the port authority would own the facility and lease it to TraPac. The financial arrangement involved three main pieces of borrowing to pay for the terminal:
• A $50 million loan from the Florida Department of Transportation’s State Infrastructure Bank, which will be paid off by using TraPac’s lease payments through 2018, according to JaxPort’s most recent annual financial report.
• JaxPort bonds in the amount of $45 million that will be paid off with TraPac lease payments running through 2023, the financial report says.
• A bond issuance for $100 million that Mitsui O.S.K. Lines is obligated to pay. The amount still owed on that debt was almost $82 million at the end of September 2015, according to the financial report.
The 30-year lease that spells out terms of the agreement runs through 2039.
David Bauerlein: (904) 359-4581