The two private companies proposed a 75-year master lease that would give them control of existing leased assets, a 100-acre terminal to be developed on the west end of the port’s island property, a 20-acre terminal for roll-on, roll-off cargo, port land on Pelican Island and the cruise ship terminal and operations. In exchange, the port would have about $60 million in debt paid off, upfront cash, 10 years of capital expenditures, annual expense payments and a share of profits from cruise and freight revenues.This level of detail is wholly inadequate for oversight. Will Galveston post the proposals online for the public to see?
As for bidder motivation, Hutchison Port Holdings looks to establish a U.S. presence, while partner Carlyle searches for its first port deal. The Carlyle Group submitted a proposal for Virginia's port operations. It inked a deal with Connecticut for 23 rest areas.
Galveston's next step is hiring a consultant to evaluate the proposal. A decision could be made in two weeks between consulting firms KPMG and Martin Associates.
The board also voted to hire Houston-based Vincent & Elkins for special legal counsel for the proposed lease, allotting up to $50,000 for the attorneys.Funny, Vincent & Elkins has a Hutchison. Ray Hutchison, husband of Senator Kay Bailey, specializes in public finance. Will the public-private partnership have access to low cost public financing? How might publicly financed assets make their way into private pockets over 75 years time? A good lawyer can help navigate such treacherous waters.
Update 3-17-11: The Galveston County Daily News reported on a bill filed in the Texas House that allows private investors to set rates/tariffs and establish/enforce rules at public ports.
Update 4-9-11: HB 3456 wasn't needed after all. The privatization deal remains full steam ahead.
Update 4-14-11: Carlyle and Hutchison pulled out of Galveston port negotiations.
