Synopsis nf Sepnrt on Port (WjarpB 0 Unari) nf (fiontttitBainnrra nf the {Inrt nf Netu ©rleana New ©rleana, Ca. fflarrl] 29 1915 Synapsis of iSryort on port Charges BOARD OF COMMISSIONERS OF THE PORT OF NEW ORLEANS NEW ORLEANS, LA., MARCH 29, 1915 It is impossible to present in this synopsis more than an outline of conditions at the Port of New Orleans, the actual advantages it now has and the potential advantages to be developed in the future. This port lies at the foot of the Mississippi Valley, the great pro¬ ducing area of the United States; the center of gravity of population of Continental United States is nearer to New Orleans than it is to New York. It has many advantages over other ports in freight rates for both import and export cargo; for instance, the rate on practi¬ cally everything shipped in any quantity from Fort Worth, Texas, which is more than 200 miles nearer Galveston than New Orleans, is the same to both ports. The same thing is true of many other large centers in Texas. From points up the Mississippi Valley it has the same or, in some cases, better freight rates than its competitors. Considering it as a distributor of imports for the Mississippi Valley, there now exists a general differential of from 18 cents per 100 pounds on first class to 6 cents per 100 pounds on sixth class and commodity rates under any rates quoted by New York to the same territory. To show the advantages this gives New Orleans, all of the territory west and south of a line beginning at about Charleston, S. C., passing through Bristol, Va., running a few miles southwest of Cincinnati, through Indianapolis, Chicago, Milwaukee and up the west bank of Lake Michigan—all of the territory south and west of this line is nearer, via the short haul railroad mileage, to New Orleans than it is to New York. New Orleans' present port facilities are second to none in the United States and, with the improvements now in operation and planned for the near future, there is no good reason why New Orleans should not only be the great port of the Gulf of Mexico, but handle 75% of the foreign export and import business from and to the Mississippi Valley. The Board of Commissioners of the Port of New Orleans, desiring to maintain all natural and other advantages, as well as seriously con¬ sidering possible and suggested disadvantages, began early in the year 1914 to investigate changes which might be found advantageous, and in September engaged Messrs. Ford, Bacon & Davis, Engineers, of New Orleans and New York, to make a complete survey and analysis of the shipping of the Port of New Orleans. 1 This report has not yet been printed for distribution, and it is thought that a brief synopsis, giving the letter of transmittal and dealing only with some of the main statements and statistics of the report, will be of benefit in disseminating a general knowledge of the Port of New Orleans, and the need of certain changes in existing con¬ ditions and practices. For a more exact study of this subject, refer¬ ence is made to the full report. LETTER OF TRANSMITTAL ACCOMPANYING THE REPORT New Orleans, March 11, 1915. Board of Commissioners of the Port of New Orleans, New Orleans, La. Hon. Ernest M. Loeb, President, Hon. A. M. Lockett, Vice-President, Hon. Walter Van Benthuysen, Secretary, Hon. Chas. D. O'Connor, Hon. W. O. Hudson. Gentlemen:— Pursuant to your directions, we have made a survey and analysis of the operating conditions and business of the Port of New Orleans, particularly respecting the traffic from which the port revenues are derived, and submit for your consideration the results of this investi¬ gation, including: First: A general discussion of port charges and other means by which various ports obtain their revenue; Second: A comparison of expenses sustained by ships for use of port facilities at New Orleans, Galveston, Mobile, Philadelphia, New York and San Francisco; Third: A classification in value and tonnage of the business of the Port of New Orleans for the year ended June 30, 1914, and particularly that from which the port derives its revenues; Fourth: Calculations and comparisons respecting various activities of ships and shipping, particularly as re¬ gards dispatch of cargo; Fifth: As a result of these considerations, a suggested sys¬ tem of charges, tolls, rates and tariffs for the use of the facilities of the Port of New Orleans. The extent and potential increase of the commerce of New Orleans justifies serious efforts to find an equable system of charges for appli¬ cation to the shipping of the port, four-fifths of which makes use of the publicly owned property administered by you. The relatively large import traffic of New Orleans gives this port an attraction to ships over many of the competitive Atlantic, Pacific and Gulf ports, but due consideration should be given not only to those features which will maintain and possibly increase this attraction, but also to any condi¬ tions which may, in the future divert ocean traffic from New Orleans. 2 The present wharf area of the port is considered ample for present shipping. Many ships, however, appear to remain in port longer than necessary and to move their cargoes at rates somewhat below the fair average which might be expected of all. The application of a consis¬ tent method of charging a fixed sum per hour for each thousand gross tons of ship at wharf, together with a rental for preferential rights to certain wharf area, should automatically work toward a high degree of use of the wharves and sheds and also proper adjustment of the various allotments. In our report which we transmit to you herewith, we have noted certain conditions affecting the present status of the Port of New Orleans as well as its future development, which in general items are presented for your consideration: First: It appears that the Interstate Commerce Commis¬ sion has no jurisdiction over port charges, includ¬ ing tolls, so long as absolute independence of joint arrangements is maintained. This assumption, how¬ ever, may be confirmed by competent legal opinion. Second: At present the Port has no traffic department or¬ ganized to— (a) Advertise the Port at the principal points of origin of freight or passenger traffic; (b) Solicit new business; (c) Develop and extend the present business of the port. Through this traffic department or other branch of the port organization, domestic and for¬ eign trade by rail, river and ocean, or a com¬ bination of these means can be constantly solicited, watched and served. Third: A system of ordinary business credits by means of which the bills of responsible users of port facili¬ ties would be paid semi-monthly, or monthly, and the work of the accounting and collecting depart¬ ments arranged to suit such conditions would be an attractive feature in the port administration. Fourth: Attention is called to the policy of the Board pro¬ viding for the more extended use of mechanical appliances and facilities for handling cargoes and the importance of such development in securing greater efficiency of wharf area and the facilities of the port. Fifth: The port with its equipment is, to a large extent, publicly owned and operated and when practicable this ownership could be made complete. 3 Sixth: If the annual surplus of the port is increased this will correspondingly improve the marketability of its securities and to an extent govern the rate of its development. Any rate system adopted in modification of that now in use should be such as to insure sufficient net earnings after operating expenses, including maintenance, to meet not only present interest charges but to provide for various reserve funds, including— (a) Renewal and replacement reserves; (b) Minor extensions of the wharf system, addi¬ tions to handling appliances and other port facilities; (c) Emergency reserves to be used for construc¬ tion purposes during periods of financial de¬ pression or while the sale of port obligations is pending. Seventh: Changes in equipment and methods of river, rail and ocean commerce necessitate corresponding changes in the port and its facilities. These changes make a fixed system of rates impracticable. Any tariff system adopted should be flexible and adjust¬ able to new or modified conditions. A large number of shippers and representatives of railroads and steamship lines have assisted in the collection of data relating to port charges and we take this opportunity to thank those who have co-operated with us in the preparation and transmission of the infor¬ mation forming the basis of this report. Very truly yours, (Signed) FORD, BACON & DAVIS. According to the United States Customs records of 1914, the Port of New Orleans, in point of value of total foreign trade, occupies second place. Questions of the best physical facilities obtainable; the most mod¬ ern and efficient methods of administration and operation; the most scientific, practical and equitable system of rates possible; a system of rates which will return to the authorities a revenue ample for obtaining and offering the most attractive port facilities and service, and at the same time placing the charges in such a way as to make the port attractive to all the shipping interests, must be considered and answered with the utmost care as the present and future of the port depends largely upon these factors. To acquaint those who have not made a study of this subject with the systems of port charges and revenues of other ports, it may be said that port administration and operation divides itself into two general principles or policies, viz: First, as a publicly owned state 4 or municipal utility, operated not as a source of profit; Second, as a privately owned water terminal, operated by private interests or steamship lines and railway systems for profit or in connection with their major line of business. There is no such thing as a 'free port." A port facility costs money to build, maintain and operate; therefore, the revenues for this pur¬ pose must be derived either from taxation of the people of the state or municipality or from a proper charge to those making use of the facilities offered. In addition to New Orleans, investigation has been made of many ports, both foreign and domestic, but more particularly of two ports on the Atlantic Seaboard, New York and Philadelphia; two on the Gulf of Mexico, Galveston and Mobile, and one on the Pacific Coast, San Francisco. The following are the different methods of obtaining revenue for the public port facilities at these places: At San Francisco: The revenue is from a system of rates most nearly approaching that now proposed for New Orleans, all the par¬ ties using the public wharves contributing to the revenue. At New York: Practically all the revenue from the use of the wharves is derived from yearly rentals, usually for long term periods of leases, to the large shipping agents and transportation companies, only minor receipts being from other sources. This leasing system practically dispenses with municipal control and is equivalent to private ownership of the port facilities. At Philadelphia: The port derives about $1,750,000.00 revenue from the general tax funds of the municipality, a minor sum only being received from a dockage charge to the ships making use of the public wharves. At Galveston: The major revenue is from a tolls or wharfage charge on the traffic passing over the wharves, the remainder being from a berth rental of about $1,000.00 per berth of 300 to 400 feet wharf front per annum, or a shed rental varying from $100.00 to $175.00, paid by the ship for each voyage it makes into the port. At Mobile: Almost the entire revenue is obtained from a wharfage or tolls charge against the traffic passing over the wharves, no charge being made for shed or wharf rental and only a nominal one for dockage against the vessel. At all of the above ports, railroads, steamship lines and private parties own more or less wharf facilities for the handling of public cargoes. It is understood that, in San Francisco and Galveston, and partly so in Philadelphia, these wharves make the same charge for the use of their facilities as do the public wharves. This is also true at Mobile with the Mobile & Ohio Railroad and the Southern Rail¬ way docks when the shipment comes in or goes out over their ter¬ minals for other railroads or is local in character; otherwise the 5 wharfage charge is generally absorbed in their freight transportation charge. The system of charges for the use of the publicly owned port facili¬ ties at New Orleans in force at the present time is that adopted by legislative act of 1896 and amended in 1900, since which time port operation has been largely revolutionized. These charges consist of: (1) A dockage charge made against the ship for occupying a berth at the wharf, and is at the rate of 2 cents per gross registered ton per day for each of the first three days, plus 1 cent per gross regis¬ tered ton for each of the next 3 days a ship occupies this berth; a total charge of 9 cents per gross registered ton, all accruing in the first 6 days of such occupancy. After this the ship may occupy the berth for 30 days free time, at the end of which time the same charge as above given is re-assessed; (2) A shed rental charge made against the ship for the use of covered wharf area in discharging or loading its cargo. This charge is at the rate of 1^2 cents flat per gross regis¬ tered ton and covers the use of this facility for not to exceed 36 days, the same as under the dockage charge. In adition to the free time above stated 10 days is allowed for the collection and storage of out¬ bound cargo prior to arrival and berthing, but should the vessel not arive and occupy its berth at the end of these 10 days free storage time, both dockage and shed hire begin to accrue against the ship the same as if it was actually at the wharf; (3) A harbor fee is charged against all vessels making use of the Port of New Orleans. The rate for this charge is $10.00 flat per vessel for all vessels of over 500 tons coming to the port in ballast or with green fruit only, but should such vesel have any cargo of general merchandise, it is charged an additional $5.00, making $15.00 in all. For vessels under 500 tons this charge is $2.50 or $5.00, depending on size. A small dockage charge is also made against steamboats and small craft making use of the public facilities. It will be seen from the above statement that all of the revenue is derived from charges made directly against the ship, no rental for wharf or shed space being charged to the shipping agent as is done at New York, San Francisco and Galveston; and no tolls charge is made against the traffic passing over the wharves as is made at Gal¬ veston, Mobile and San Francisco. This placing of the entire charge against the ship makes New Orleans appear to the steamship companies as a very expensive port for the vessels making use of the public facilities. And as over 80 per cent of the ship tonnage coming to this port makes use of the public wharves, this idea obtains with practically all of the shipping of the port. A comparison of the expense to a typical ship at the Ports of New Orleans, Mobile, Galveston, Philadelphia, New York and San Fran¬ cisco is shown by sheets inserted at the end of this synopsis. In this 6 comparison only those items of expense which are controlled by and accrue to the local interests furnishing port services are taken into account. Such charges as are made by the United States Government in tonnage dues, customs charges, etc., are not included, as also such other charges which vary as much in one port as in another as, for example, consul fees, inspection, etc. From this comparison it will be seen that New Orleans is only an expensive port from the ship's standpoint. When all items of pilotage, towage, dockage, stevedoring, etc., are considered, there is only one port in this group—Philadelphia —that is less expensive than New Orleans, and that is because of the lower base labor wages. It is apparent from this that it is not the total cost of bringing the ship into this port that detracts, but rather the application of the charges against the ship alone. For use of wharves and sheds, a typical ship and cargo pays as follows: The Ship At New Orleans At Galveston Harbor Fee $ 15.00 Dockage 463.86 Rental 77.31 $ 175.00 Total (Ship) $556.17 $ 175.00 The Cargo Tolls ., $2,372.50 Total (Ship and Cargo) $556.17 $2,547.50 At Mobile, which is considered a free port from the ship's view¬ point, the charge for tolls on cargo (assuming it to be local in char¬ acter) is $1,512.57. If not local in character, the charge for tolls is absorbed by the rail carriers. And yet the ports of Galveston and Mobile are considered cheaper ports by the shipping interests than New Orleans when, as a matter of fact, the total charge made here is very much less. The reason for this is that at New Orleans the entire charge is borne by the ship, while at Galveston and Mobile the wharfage or tolls is charged on the traffic and this is generally absorbed by the railroads or included in their over-all freight rate. It will be seen by the above analysis that the present rate scheme puts New Orleans at a disadvantage because of the way in which the charges are applied, and not because of high rates. To obtain any greater revenue, which is needed by the port authorities for improv¬ ing, maintaining and operating the port facilities, under the present system of rates would simply make this condition worse. And, further, a serious inequality arises from the fact that six days' time determines generally the charge against the ship, since the coastwise lines, requiring only two or three days time, pay for their full time at the rate of 2 cents per ton per day; the fruit lines, requiring only a little more time, likewise pay either at the rate of 2 cents per ton per day or 1 cent per ton per day for their entire time, while other 7 shipping, particularly European shipping, which requires from 10 to 15 days, pays the equivalent of much less than 1 cent per ton per day, if the total charge of 9 cents per ton per day be spread over the number of days docked. In arriving at a proper schedule of charges for port service, and the proportion of such charges each user shall bear, strict adherence to precedent is not possible as the system in use at another port may or may not prove of advantage when applied to conditions existing at New Orleans. The only test necessary to apply is whether or not such a schedule will act to disrupt present lines of trade or to add new ones. Any increase in the business of the port benefits so directly all parties at interest as to automatically take care of their several interests generally. There are three parties at interest in the service rendered to ship¬ ping at a port: First: The ship which must have adequate and safe dockage for handling its cargoes; Second: The shipping agent who must have ample wharf space, covered and uncovered, on which to collect and distribute cargo; Third: The shippers—consignees, railroads and consignors—rep¬ resented by the commodities making up the traffic passing in and out over the wharves, who demand the most modern port facilities generally that cargoes may be handled with safety and dispatch. All three of the above demands must be met by a modern port service, and it would seem, therefore, that all three of the parties making the demand should, together, pay the expenses of the port's operation. A careful consideration of the different port charges before ex¬ plained will undoubtedly result in favor of one that is distributed among all of the parties using the facilities offered—the ship, the ship¬ ping agents, and the shippers. A practice of this kind is more equable, more scientific, and more easily adapted to future conditions than any one of the mono-systems now in use at New Orleans and certain other ports. The question to be considered is only as to what pro¬ portion of the total charge made for the use of the port facilities shall be borne by each of the parties at interest. It would not appear to be a hardship on any of these three parties for each to pay one-third of the port's revenue, but, unfortunately, the pro rata can not be placed on a simple basis of the value of the individual service ren¬ dered as other conditions arise which demand very full consideration. The competition of other ports must be taken into account and the pro rata of expense fixed in such a way as not only to place it in proportion to the service rendered, but in such a way as to prevent any disruption of the present business of the port and, at the same time, to attract more business to it. 8 After careful consideration of all of these points, it is deemed proper that the total port revenue should be derived about as follows: From the ship in dockage 16.2% From the shipping agent for preferential assignment of wharf and shed area 12.9% From the tolls on traffic passing over wharves 69.6% From miscellaneous charges and sources 1.3% Total 100.0% It is believed that the above distribution of charges will make this a more attractive port. It is learned from the shipping interests that a saving of even a few hundred dollars a voyage in the expense borne directly by the ship will prove very attractive to owners and agents generally. If it does this then the Port of New Orleans is benefitted greatly as more ships will look for cargoes here. At the same time, a study of railroad freight rates at present in force to the several Gulf ports does not indicate that the traffic through this port will suffer from the pro rata of charges thus placed upon it. For, to meet the competition of the railroads serving the other ports, the railroads entering New Orleans will undoubtedly absorb most of the tolls. If, on business originating at or destined to New Orleans and local railroad points—only a small part of the total tonnage of the port—a part or all of this charge has to be borne by the consignee or consignor, it would be so small as to be almost im¬ material. For instance, a package of dry goods weighing 250 pounds would be charged a toll of 4 cents—not enough to be appreciable. Even in absorbing these charges on the traffic, the railroads of New Orleans would still have a part of the advantage they at present possess over the railroads serving Mobile and Galveston, as the tolls rates proposed for New Orleans will be generally lower than those charged at Mobile and Galveston. The rates suggested under the proposed schedule of charges are as follows: Dockage at assigned wharf berths 18 « d H > . Ui QSCU ho .S £ V « rt n P cfc a 0) O If 'u ce fc.S2 sa-5 .9 "5 w rt Pfc 00 V s 'u o