Good morning, and welcome to your Transportation Appropriations Joint Committee this morning. I'm a minute or two late getting started. I was looking for a page, he hasn't arrived yet and I didn't want to start without one, but, hey Anthony. Stand up son, we like our pages on their feet. You look good, [xx]. Anthony is a good friend of mine from Boiling Springs, I've known him for a number of years. I'm glad to have him here in Raleigh this week, done a fine job, Anthony good morning. From our Sergeant at Arms staff we have Carlton Adams, Joe Osteen and Martha Gattison[sp?] thank you all, and from the Senate we have Ted Barnharten[sp?] and Carl Roach, we appreciate the work that you do. We have an interesting program this morning one that I have real interest in there, and I hope you all are, and after presentation from the board, who also have [xx] ended up, good to see you on your [xx], and he's also a local boy, representative Frank [xx] paid him helped her to switch welcome rising. So we have a presentation from the North Carolina of Port Authority Mr. Paul [xx] the Chief Executive Officer, if you would come forward and give us your presentation, and welcome glad to know there was no fraud, that everything's moving. Thank you sir. Thank you very much Good morning I want to thank you very much, I want to thank the committee for the opportunity to make a presentation today. Introduce myself to, [xx] very quickly, as Senator RayBan said, my name is Paul closer. I've with North Carolina ports now, just about coming up on a year, and this is new for me working on the public sector side, I I've been a private sector person most of my life in the transportation industry. I grew up in this industry, globally as well as the jobs in the States here, I've worked for companies like CSX, I worked with Sea-land North Carolina based company, moved over to Mars I was in different types of positions sales, marketing, operations, finance. From Mars most recently I was working for a private company, I was President CEO of International Shipping Logistics [xx], so I can say in these past years its been a lot of fun learning about the public sector, and also I think a lot of opportunities that we have here in the State of North Carolina. If I could, I'd like to just introduce two people who are with us today, Tom Adams, if that's OK sir, and also Dan Gary. Tom is on our board, Dan is on our board, Tom is our chairman. So with that said, where is my Thank you sir, and to go please of questions. To start with conduit for economic activity. This is I've seen, this is a thin in as I go around the world. I look at transportation from the standpoint that a efficient and effective transportation network is truly a conduit for economic activity. I've seen in countries all over the world. I've seen it in our country here, I've seen it in states. When you have an efficient transportation system it definitely helps the economy and some things that we want to talk about. My job as of mission from the standpoint from the ports is to enhance the economy of North Carolina, look at different some things I've done in the past when it is return on invested capital. Or shareholder value or other types of goals, but for us it is the enhancement of the state. So as part of that what we did is excuse me we had a study done by North Carolina State University and also UNC Wormington Economics Department and what we did we asked them what what do we do for the state right now, which economic contribution that's being done because the [xx] that comes through our ports, and I think some pretty good numbers. 76700 jobs associated full time jobs associated with this is that we come through reports in the state of North Carolina, we have $707 million a year of our tax revenue that comes in associated with our business. What I think is this really a pretty good number, it's $14 billion annually economic contribution which associates with business that come through our port. So I think it's fair to say that just on the businesses it's the one benefits when it comes to this state. and today I standing infront of you two and I think this number can get bigger and things we're talking about how we can continue to improve that economic contribution to the state. I'm not going to spend a
lot of time today if there are questions please stop me talking about I think you always pray for more with different assets we have around the State. We have two port facilities in a Mohak city and in momentent[sp?]. We also have a few in land facilities screen sprawling in a Shylake. Just a quick over view have financial volume statistics 300 thousand annual containers we can talk about that with the other parts to around us, more informally in turns all program we use here we're business. And one of the things when time came when I was recruited to come into this position, we serve ourselvers from our board members that's from the chairman is to run the circle business and all I can real say to you all I think if it is questions about this is we compete with the port around us. This is business, this is revenue that comes to to us because of services that we provide, and we have to compete. We'll talk a lot about that. So with that, is $40 million of [xx] comes in to the ports of locations associated with services that we provide to our customers. We directly employ about 224 [xx] directly on any given day because the 2000 direct employees or working or I should say indirect employees working around both our port locations. These are stevedores, these are truckers, this is our pilots, this is all different folks that are associated with the business. They may not be employed by the state, but are definitely as a outcome of employment due to our activities. What do we do? We promote market and sell our port services. That's what we have to do everyday and that's what we continue to do. What I define is a full suite of container services is the container side of our business. We also have the bulk, break bulk side, that's cargo stevedoring. That's putting cargo on and off a ship. It's our bulk storage ability that we have on both locations. Warehousing, parking, and stripping a cargo. All those activities that are so important of what we can provide to our customers to have an efficient transportation system that brings them benefits to keep their business going. Now, I'm just going to talk about each of our locations, Port Wellington. I'm sure most of you have been down to the port if not I want to personally provide an invitation today, call us. We'd love to be able to give a tour at Wellington as well as Morehead City. Of that 14 billion, 12.9 billion associated with business that comes to Wilmington, the larger location, we do container business, whole break bulk business, roll on roll off business [xx] when we talk on [xx] on this is cars, autos machinery different types of activities that are real vehicles. So I go around the state sometimes I hear well you can too, what we call in the industry [xx] we can, we do it right now. It's not a huge amount business, it's something we're looking at in the future, Northern Wilmington, and also city, and we have rail service, 42 foot channel, talk more about that, I"m sure you all have a bunch of questions and discuss the pros and cons with that a little bit for the future, and what it means to us for the future. Carriers, is just a list of some of the carriers that we have. These are shipping lines on the container side that come into our port of Wilmington, Payline, Japanese, Yangling Taiwanese, Hangen, they're Korean, Casgo's Chinese, Bahari is Middle Eastern, Maersk is ICL is European [xx] business we go out to see this customers we get do more of it talks about a thrust of business that we have to get more commercial but this are truly of our shipping line customers that come in to our Port of Wilmington. Morehead City, our other location, of that 14 billion, 1.1 billion and it is associated with more head city there we do [xx] roll on roll of there as well 128 acres on the facility we have radio island, we discuss a little bit about that longer term. 45 foot channel depth of [xx] or sceneries. We've had some of our challenges in the channel there want to thank you all I want to thank the state we got some fantastic support recently fantastic all levels of the state on the basis of getting dredging which is should be coming up her next month. was great to see and we have rail service there as well customers there this are direct customers [xx] employer in the region, Goodyear, Bridgestone, Firestone, other names, rubber products, there's other things that come through that port. Very important for the long term. quick question just quickly as we discuss little bit some of the volume that come to each of our locations [xx] its retail so this is everything from hybrid grade, low, roses department store, PVC, these different companies that we have that are located in the state have Pcs in the state. A large part of that inbound business coming from Asia, other parts of the world, retailers, very big. Furniture, we import furniture into North Carolina now and that's a large part of the business that happens into our North Carolinian companies, we're selling it domestically.
Of others we have is auto parts, we do auto parts, heavy equipments, so that's going to be everything from Caterpillar to John Dere, customers we have around the state, supplying them with business textiles. We're still very much a large textile state. Maybe not as large as we have been in the past, but we do a lot of business on the textile side, we want to do more of that. That's very important for us for a long term, used to be able to assist that industry here in the States. Agricultural experts and I could go through them all, we do enough on the short size, we don't. Do we do some? We do. And this is something that we're continuing to focus on especially for the eastern part of our state. we do about 68, 000 containers a year. That's not bad. It needs to get bigger, we think it can get bigger, but it's not bad from any means 200, 000 tonnes of cargo too, so it's an amount, again part of our plan is to be able to expand that, but it's not that we're doing nothing on that basis of being able to provide services for our agricultural experts in the States. and you'll hear me use this word quite a bit today. It is competitive. We compete against the states around us. This is what the businesses turned into, the states around us how to do this well. This is an industry, believe it or know, I personally know the heads of ports of that are around us, the head of the port of Virginia is a personal friend, down in South Carolina, Gorgia we compete with them as well as part of it, they are doing everything they can to provide services, to take businesses from the ports around why are they doing that? That's part of their job to get their supply chain more efficient so hat they can provide better services to Virginia, South Carolina and Georgia, and we want to do the same for us here in North Carolina. Current status. So this is, I'm just going to break out, give you a little bit of view of how things are going so far for us, what this represents is this is PEU loosening our business that's 20, 40 equivalent unit, that's a smaller container and we measure that as volume that comes through this graph shows from 2011=-2014 and then what's happening in 2015, we've been trunking and I can tell the market around that has not been shrinking in the other port. There's various reasons why that's taken place, my big thing is I say let's poke ot the future, let's not look at the past, but toomuch happen so far this tear and there's different things that is a composite of it is so far to have, this is another fiscal year up to the month of January we've grown a container basis in Warmington by 21%, on a percentage basis we are the fastest growing in Turner port in the East Coast, we're very proud of that, that's a big step forward, not in straight numbers, straight numbers is different but on a percentage basis. Why is that happening that growth? Part of it is because of what's happened on the west coast. You all probably have heard about there was all these labor disputes, every things that's happened that's pushed business to the East Coast. But what's gone beyond it is that we offer a good product in Wellington, I hear things sometimes around the state that things we can't do in our ports. There's a lot of things we can do. We're not perfect, we need some help, we have a lot of things forward to get better, but we doing some things right, and in that with this 21% growth part of it, and the reason why it's lack of congestion, and we'll discuss a little bit more about lack of congestion that we have around our port. General cargo that represent year after year it's the start up in the Morehead City. If we're not including PCS business because there's is a separate distinct. 36% growth year over year pretty good, very petty good we're happy about it and we think it's a start. Advancing some of the commercial business I'm running it as I did this companies of we setting goals in our business I have goals that I set with my we have goals that I set with my senior management we goals and objective that we put for how else can you move organization forward a lot of you in this room today are business people yourself you know how you run your own businesses this is important and we're putting in this place everyday performance indicator so we will talk about performance indicators in this type of business everything is unit cost everything is speed velocity everything is how quickly can you get product to a customer the only way that you are able to do that efficiently is you need to have APIs other types of these indicators, I'm I putting these in place? And we want to get better with it, we're getting better. Monthly results meeting just this part we're looking business, monthly results meetings, how we do in profit and loss. New projects, not to do too quickly, I think you all know we have a wood pellets projects in [xx], is the name of the [xx] that's starting in port of Wilmington. They're breaking ground here in next couple of weeks exciting, this could be exporting of wood pellets that are two manufacturing locations South East of North Carolina a lot
of jobs there, jobs around the port, that's going to be going overseas. Food storage, some of you might be able aware that we have a third party that's looking at investing in a cold storage facility on the port of Wilmington, that's a warehouse, it's a cold storage warehouse. What's good about that is that's going to help our capabilities. This is really important in our industry, this is going to improve our capabilities to import but more importantly export poultry, hogs, other types of our commodities that need refrigeration in the state to officially get them oversees. Extending gate hours, head count efficiency, we've reduced our head count, why do we reduce our head count? Because have realized that my pledge is that I want to run this efficiently for the state, my pledge is that if we're fortunate enough to get some funds from the state we need to show that we're doing this correctly, and we're making sure that we have an efficient business. In that decrease in headcount also we're getting people on our commercial side. We need to get a better presence out there. We haven't been that great at that over time. We want to make sure we're selling hard, we're selling efficiently all around the states and we need to do that better. [xx] are profit driven. I think you all know that there's been years when we did not make money, and we were bleeding some red ink in the industry. For 2015, very happy to say a year to date, we're at two million Dollars, we are making money, we're forecasting right now at the end of our fiscal year to be about two and a half million which is fantastic, it's a step forward revenues are up almost three million Dollars year over year, net income is up almost four million dollars year over year, and a $40 million business, that's pretty good. And at the same time, we're two million over budget. Cost savings, we have cost savings programs in place. We should do it, we need to be effecient in the use of our assets and we're registering those items as well as we look at the business. advantages, we do have advantages. And there are quite a few advantages that I'll talk about. And this is what we talk about with our customers when we discuss things. Customers being the shipping side, customers being that we call beneficial cargo owners in the industry. This is again the lows, the Heinz brand, the Polo, the Caterpillar, John Dere, all the rest of them is unmatched performance. We have a goal, and our goal for our organisation is that we will have the best service on the East Coast on our container side. That means from bases of what we're doing with the cranes, of working the vessels quickly, important for our customers there. It means what we're doing in the yard on the standpoint of getting containers in and out, making it easier for truckers to come in and out and gate turn times. It's a tall order, we recognize it's a tall order but we talk every day. If Om[sp?] is good as nofopeas[sp?] or Omi is good as Transin[sp?] is, we're not going to get the business. It's not going to happen. We've lost headway in this last year's. We have to be better and can be better we right now have a lot of these areas we're better off as the other ports. We watch them manage them, KPIs and it's something that the commitment is going to look at you of going forward. That's velocity reader, we were discussing with some of the members earlier [xx] don't want to stand still. They don't make money standing still. Ships don't make money standing still. Freight doesn't make money standing still, it's a velocity business and we need to be efficient in. Cost efficient, we are one of the best if not the best from the cost perspective. We can offer low costs solutions to our customers customers not a bad thing to have and then the impeccable service. In a nut shell these four items is what we go out when we're talking to our customers this hour and it's very important we'll discuss little bit about what's happening with congestion around our ports in the US. This just the basis, I don't expect you all to look into it, it's just too much. But this is just something if what we [xx[ truck turn times, it's something we started this year. We're going to measure this down, look at what's the time a trucker is on our port, what's the time from the gate to the pedestal, what's the time of gate receipt? All these different and what we need to do is we widdle that down just to get that more and more efficient. Our goal is that we want to be able to turn the truck n 3-0 minutes on a two way transaction. What that means is trucker comes in, he or she is carrying a container, they drop it off and they pick a container up and they come back out. We want to do that in 30 minutes. The reason why that is so important, Virginia has set a goal for them for a one-way so this is one way not two way, one hour. That's their goal. They're having challenges there, they're having congestion issues. They're not close to it So we want to be able to go to business that's going to be there and say, come through North Carolina. We're doing in half an hour two-way transactions. Same thing on the South Carolina side. Those types of things are very
important when we look at the business around us. Everyone to drive through. Here's just an example from a customer prospective, we need more of these [xx] extremely well known in the industry veteran. Louis is the fourth largest importer of goods in the U. S, fourth largest, either at Target, either at Walmart, either at Home Depot, [xx] Some people lows always battle out but number three and four. You're looking in a state it's North Carolina Company we want go get more do business but the interest you had set their International logistics like I access right now we want them to love us, so we want to get more of some of the success. Now few hours I'm going to look at, I'm going to talk a little bit about the future, we're middle of putting together a strategic plan where action is completed strategic plan, I apologize I can't get into too much detail about we go through the big areas because we're presenting it to our board next week and we want to get approval there but we've put a lot of time into this plan and we're very proud about it. We're glad to challenges ahead. I think we've a lot of opportunities but I can share with you some of a basis behind it. Addressable market, this is not what we're going to talk to you about the growth we see of I think it's important to say is we can whittle down, and we can go directly into there's marketing material available Paul Pierce statictics in bound out bound data. All different things per se where is cargo moving right now and in this space this map shows this green dots there's clusters of large accounts. This where the cargo is moving in the South East, and behind each of those dots there's information of what type of cargo it is, where is it moving from? Where is it moving to? What the different ports? Who is the consignee the owner who is the shipper. This are things that we're doing to build what we have as our addressable market. How can we define how we're going to grow if we don't know what our market is or we don't know of what we're looking at, of how we can achieve some success God bless you. Next part is the data overview again not to inter date you with data but I do want to leave with you today when we talk about this market growth or we discuss where we are going there's a lot of information behind we did a deep dive, we wanted to do it this way, so that we could have very complete accurate plan of our possibilities for the future, and this is how we're using our basics for moving forward. So part of that, that just market based assessment what we are talking about, has anybody looks at a business, how you look at the possibilities that are ahead. What we discussed too, and very openly is that in my terms I call it that North Carolina, our customers, it's an under served market from an international transportation perspective. And what I mean by that is that they're being forced to go to ports away from us, it's not the most efficient means for them for inland transportation. Under served being that's it's an opportunity for us to be able to serve that better. What we want to do from North Carolina Ports standpoint so that we can help these customers in North Carolina run their business more efficiently, so it can grow. They can grow, they can prosper, they can get more jobs, and that's one of the main things we have in this market based assessment. capabilities, talk a little bit about best in class of terminal utilization, we're not utilizing our terminals, not right now. We have space in Wilmington. We can bring [xx] through. That's a good thing. Ports around us don't have that opportunity. Same thing in Moorhead city we can do it. However this same time there's some investments needed and we're going to talk to you a little bit about some of these investments. Execution, we need to execute this plan like anywhere else. Sales coverage, we have a lot of new sales people out there, we're looking at coverage, goals, getting out into the community much more in the past. Second and non operational service levels in facility investment. All of that needs to be executed to make this plan work. So what are some of the highlights from this five years strategic plan we're looking at? They're aggressive, I don't think they're impossible, I don't think they're easy. I'm not going to stand in front of you today and say this is just going to be a walk in the park and we can get this done. However with 25 plus years of experience if we can get some of this things together, we have some window to [xx] I'll discuss where I think that is, I think its possible, we're looking at doubling that contain our business in the port of Wellington, in five years. We think that's possible to do. I'm going to reinforce something else today that might not be as a popular statement but we have to have to, what I'm worried about is that we have lost a business around us. And just I will hit you with some statistics So when I was saying that we were doing, 300, 000 TEU's through to the port of Wellington each year, go to Savannah, they do three million TEUs, Charleston, Charleston does 1.7 million TEUs. The port of [xx] does about two million it
an use each year. We're a lot smaller than them. That doesn't mean that we can't get there, that we can't get market penetration, but what I worry about is there's going to be some conditions we can talk about growth, we need to improve our presence and we need to do it quickly. I would discuss more about that in time but it's so important that we really are able to start building our presence so we mantain a market picture en glow it, so that we don't become insignificant. We're not insignificant now but his boat comes which everyone is broadcasting and I think we have an opportunity in a lot of ways, we want to be able to really set a platform for North Carolina ports for the long, long time. Expand business the general terminal four million tonnes, that's doubling our business there as well. We have detail behind it, market assessment, all these things, we think it's possible to do. This is in Warmington as well as Mohak city. Execute the investment plan, I'll talk about that, we do need some help there. Channel enhancement, you always have heard about this, then we can discuss more is the basis of bigger ships, deeper ships, I'll talk more about. So it's an enhancement program that we want to undertape it, so it's not something that needs to be done now, but we need to get some path forward for the future for looking at our channel Warmington as well as Mohak city, you've all seen recently we've seen recently we've had new challenges in Mohak city with recent showing. We can't shut our ports down that gets around, if we shut them down we're not going to be able to recover and what I pledge too is that we have this in this plan and this based as of in real time of other ports around us, we want to get to a point where we can achieve long-term financial stability. I don't think it's a good model if we have to keep coming to the state and saying that we need to get investment from the state. We should be able to run our business be able to get to a sustainable amount of business that we can generate cash that we can reinvest in our business, and that's one of the goals that we're looking at getting to in this five year plan. Investing in the future, one of the other portions that we did is we were looking at a strategic plan I talked about is investments. We have some old assets there, as a state we haven't been great in of reinvesting in some of them, I have cranes in Morehead city that are 1960s vintage, they are almost as old as I am [xx] and we haven't reinvested in these assets, and we don't need to do all these over night, but it is important that we invest in our assets and I'll talk about why it's important to the commercial world as well, and discuss it, and as part of this plan I said, so what do we need to do? So to meet the terms of what we think we can do from a revenue stand point. What do we need to do from the standpoint of investment? And I know if you look at it that some of it might seem large, but we broke it into five year increments. The first five years, $114 million and it's a combination of different types pf projects we'll get into. I'll talk to you a little bit more about here in each of the areas and 134 million in the next five years. I know they seem like large amounts, and by no means at all of looking that state income through with all these, but to just give you an idea of some of the numbers around us. Florida Ports has invested $850 million over the last four years on their port activities. Georgia has invested $200, 000 in the last three years in their port activities. Georgia as a state has committed to deepening the Savanna river. Their channel that supports the savanna of the Georgia business. That's almost $500 million they're looking at, splitting it with the federal government but a huge investment for the future. South Carolina last three years, $225 million. So I know they're large amounts. I we understand that we have a lot of fiscal responsibilities in this State, but at the same time we'll talk a little bit more if it is possible some of the things that would benefiacil for us from a ports perspective. So I've had 114 which is critical and it's asking for a I'm going to start with it's very open it's and the only board I can use to a degree is embarrassed to have to come up and ask for this money. In this room, to this committee, because in a better view, in a better perspective, this is cash that we should be able to generate ourselves. This is all not needed this year if there's any way that we could get this over a three year increment. Anything is extremely helpful. There is no question behind it. What this 75 million goes to this is for birth work in the Port of Wellington to be able to expand the business there, and essentially not getting too techinical, we can serve right now one Post panamax vessel in Wilmington at a time. So that's basically 1000 footer to 11000 footer LOA, length overall that we could do. That's great, and that's a fantastic capability. We have modern cranes so that can do that we have a berth that can do that. To be able to get these other businesses we talked to the Mars of the world as we talked to the NYK's, as we talked to K-lines, all these different shipping companies is they look for redundancy, they don't
want to see that there's going to be any type of congestion. This project essentially, what it does is gives us the ability to have a second berth where we can have the Post-Panamax cranes and also carry this business. Just as point I can get the exact year, but three or four years ago, the State started funding, part of this what we call our Berth Eight reconstruction and it stops. So [xx] was something that was never planned this was essential and it was a small portion of it that started but at least it was a step forward, and this is a very important step for us now for these next three years. A sound investment, just as a portion of it this is just a time line of our container moves at the port of Wilmington just to give you a basis. You look down on the far left, we've had ups and downs, more downs recently, we're making a lot of headlight this year. 42 for a channel that took place in 2013 or 2003-2004 you were benefits associated. If I work for my advantage point of just coming in now and thinking what would critical critical items that were done in this last years that have given us capabilities we have right now. Thank goodness, 42 feet who/however that decision was made years ago to do that, that was critical because keeps us in the game and you can there's benefits, and also when we have these four post panamax screens we call them better down there now. that capability is giving us the business that we have now, that capability is giving the business that we can go to in the future. So, I think it is fair to say that when there is an investment made in port activities it does show implementable value which we know brings incremental benefits to the state. Just for a bit on the panama canal, everybody always of the Panama Canal, I know there is questions about it, is this happening? This is a real thing, these large ships are here. Its going to be opening in other year or two. It's taking a little bit of time. It's a huge, huge project, in defense this is happening, this is going to increase the pipeline coming through from Asia to The United States. This is real this ships are there now. This ships are coming through the Suez Canal because they have no other basis. It's very important that this is going to change the aspects of the East Coast. It's going to change the aspects of trade coming over the East Coast, and we want to be part of that long term. 25 year mapping I'm a transportation person the business I've been in the governor secretary's plan on basis of looking at 25 years of stay. From my stand point I love this I eat this up. Because again when I started with an efficient and a modern transportation system is what means more business. Which means more cargo, which means more economic development for the state why this is important to us this picture of wearing [xx] this is with the senior executive of Hong in a significant container company. We spoke with them why are they interested in these things, well you are Asian or European and they look at the US frankly they applaud by the way that we spend money on our ports throughout the whole country especially if you look at the ancient ports. They worry about their investment they worry about being able to get in and out of our ports. So they are very interested to hear and the understand our structure, they know that the states have their own ability to effect change. So they are very interested to hear about what's North Carolina doing as a state, is North Carolina committed to this business? Is North Carolina looking at that they see this as important for the future, because for them to make any type of commitment to bring a vessel into our port, that's a long term commitment. They don't swap these ships around easily and they make that long term commitment from any basis of business, they want to make sure that there is a support there. Support from our Assembly is huge support that we can use that we can say, it's not just me coming with a smiley face telling you about things that we have, there's a whole bunch of backing behind us because North Carolina takes the port infrastructure very important, and they see a future, and that's why when they look long term and we look it long term things that there has to be continuity in our plan. Summary five year goals, aggressive but we think attainable if we can get some help on it. If our $14 billion is not one for one, but if the 14 billion truly doubles its economic contribution, doubling could be somewhere about 28 billion, additional benefits to the state. 707 million can tour turn it 1.4 billion. Over 76000 jobs that can be 150000 plus jobs with this kind of support plus we're getting momentum and we're moving things forward. Important patches to leave you are aware today's speaker timing is critical on this we have win do back right now and this what is going to charges me up each day. Hanwell Canal extension we discussed that, that's going to
change that dynamics, there's going to be more business coming over the East Coast. North America port congestion, West Coast was part of it, that's something that just happened that's going to get cleared up in time but they're going to have their challenges. Port congestion around the US is a real concern for the customers PCOs as well as the shipping companies we don't have congestion in North Carolina port. That is a key advantage for us that we want to sell on that we think it's a very good time to be able to get additional business. Migration to US East Coast distribution what that means is what happened on the West Coast when they shut it down, that's going to be a long term impact of retailers, other importers, exporters, bring their distribution near supply chains over the East Coast. Happened in 2002, happened back in the 90's, it's going to happen again, it's a perfect time, shifting supply chains to take advantage of it. Demographics said, we live in a great part of the country, you look at the demographics the South East is going to continue to grow, more people, more business, that means more cargo. All these things coming together we think we have great timing on the basis of being able to do something on stand point of increasing our Valium which is getting increased business through the state, which is going to be, and what we want to be is I used the word an accelerator of business. Very honestly and I'll pick North Carolina ports right now as an accelerator of business in our state, and I'll pick the word decelerator but we want to get to the stage that we have more services we can offer this is more ships coming in from different areas so we can be an accelerator of business to the state like some of our ports around us. So with that said sir. Thank you, that's it's presentation, Before we have any questions and I hope there are some, senator Lee nice to see you committing, senator Lee prior to coming this body was the chairman of state ports authority boarder, Tom Adam, we're glad you're here and we look forward from you and committees and whatever you wanted to. Members of committee do we have questions for Mr. [xx] Representative Bauer[sp?] So, it's nice to hear business terminology coming from that [xx] and I appreciate that. Back in on slide 3 grid you had a figure of 707 million, at least I think it was million, in revenues, tax revenues to the state. First can you explain What that means? Exactly what that means? And I'll start with it if I can. I'm not an economist, so I'm just a transportation guy, but what that includes is a combination from the businesses itself that are paying taxes in the state to people who are employed that are paying of both income taxes, as well as other types of property related type taxes. So when they run their model my understanding of it, again I can get better information for you, is that it's associated with that business that's bringing in these tax revenues. Follow-up, Sir. no sir, I'm sorry not exactly, not at all. Representative Shephard Thank you Mr. Chair, Mr [xx], what percentage of the business that we have is export versus the import business. We're actually two sizes on a in the business in [xx] both side we're more of an export type of location reduce the maximum [xx] but it's mostly export on our container side business we are about 50 50. Which is a real advantage for us because in most locations in the US were an import nation so were able to whatever we can bring in typically what happens is we got the great ability to export in North Carolina [xx] which is great which is great follow up [xx] thank you Mr Chairman thank you Mr [xx] for coming in this morning and sharing this information with this and I appreciate your enthusiasm that you're bringing to the table as well as your business practices to the North Carolina reports, I'm curious when is the last time that you had an audit. An audit? Yes we have the annual audit through the state audit agency so we have an annual audit where they offer an opinion and it would be common to what you would see in of private companies so [xx] yes the audit itself yes sir we will make sure we get that too. Thank you Mr. Thank you sir, Ladies and gentlemen a couple of things and I'm so glad this, Ben [xx] here this morning and has [xx] and paper with him. I would like to make a couple of comments and I'm going to ask you a question from that. Understand that we're the fastest growing port on the East Coast. Yes sir. The people of North Carolina are being undeserved, that's the
problem, and I also want to make a statement that I believe that North Carolina is the only we're the port on the East Coast, whose port received no money from the general fund. The problem thirdly, do not be embarrassed to come before appropriations committee and asking for money that is our Job. So, my question to you is if for some reason, in this ammunition to the house notices and rights to give you this money, the're going first in the budget will you meet your goals? If we're able to get that 75 million sir that we're talking about over the three years, we will meet those goals what I wanted to hear. Very good. I appreciate it. I think we all appreciate what we've heard, and we respect you. That's okay. Please accept us to come forth and do all the mistakes the're doing these are our people they are not underserve Representative [xx] Just begins, one member of the house approach would they be able to receive their goals and they received it in a much more timely fashion, more than shorter than a three year period time. That's a good question sir. It would definitely no question help us, however, it does take time to be able to get this business through, but we'll be able to exceed them if we get some [xx] there's no question that time is so critical here. But governing the business is a pretty good goal that's out there, and we're ready to stand behind it but we'd look at doing more if there's no question. Representative Brig, Martin, I'm sorry. Pardon me sir. I get it all the time. Thanks you chair even if it's just for a comment, thank you very much for your presentation. Thank you very much for the great role fortified, and whole business permit and everything else in our state. Just an observation, you're in my district right now, so your facility is repelled as far as its possible to get from my district and that's your call time, and we prefer to keep it far away. Just to make it clear that we here in my district recognize the clear economic benefit that you provide to the rest of the state, and at a time where I'm a little bit concerned we're focusing too much on urban roads east, west to keep my kind of thing, just know that folks far west of you get the huge role you play in benefitting us here. Well, and I appreciate that, thank you very much for that. We were in, if I could say this, we were in Charlotte yesterday and we have some work to do on the Charotte side as well. We have some great support of different members that are in that area, but we have to get out in the market more, and that's one of the pledges that we have to you is, we need to get out in market, we need to be more visible. I appreciate the comments you've said Sir, but what I want to pledge is next year hope you don't tell me, all of you see is or you hear things about North Carolina Ports out there in North Carolina because that's what we have to do, that is something we need to do. And thank you Representative Martin, but in transportation hope that the county allowance means nothing, and party allowance means nothing, we should all stay any further question? There's none. Thank you very much. Thank you sir You were well prepared and well done. Thank you very much. Thank you for your time. Yes sir. Next presentation will be on the global transprotr, Mr Lully Lapten, the logistics director, global transfer, welcome. Mr lapten. Thank you, pleasure to meet you. Take your stand Thanks. Thank you very much. Good morning everyone, my name is Rudi Clapton, I'm the executive director of the Global Transpark I have a slightly different background than Paul did, Paul as you heard has a very diverse background from the commercial side. I came from the military, I spent most of my career as an aviator, and then the last part part of my career when you start to get old in the Navy and your eyesight do as bad as they start to send you out on ships so I spent about the last 10 years in the Navy on ships and I was fortunate to end up out in Japan and have command of USS Blue Ridge which was the command ship for the Seventh Fleet. What Paul Dente was part of the helicopter pilot like I am, so I'm glad to have that association with him. Thank you for the opportunity Mr. Chairman to address the committee. I'd like to take a few minutes to talk to you about the global transpark and the positive economic
impact it's having in the Eastern part of the State. The goal with transport choice is beginning back with a concept paper by John Ca-Sauder back in 1990 which folks on the creation of a multi- mortal manufacturing facility built around an airport which he termed as an airtropolis that could provide just in time deliver your products to the global market. The consensual investment of fully build up the park back in $733 millions. The general assembly established an air cargo authority as an independent agency in 1991 with broad authority with operating calmers and a site location was determine through an RFP in 1992, to which there were 11 respondents. [xx] was selected due to its airport infrastructure, its undeveloped around the airport, its proximity to military bases in our ports, and potetial for rail and highway access since being established the authority has been funded by a number of sources, Received funding coming from the Estate's fund which I'm sure all of you are familiar with, which is paid off in fiscal year 13. the authority remained an independent agency until it was realigned under DOT in 2011. We have a 20 member board which 10 full-time employees and three part time employees have available transport that can take care of daily operations. Yes sir. Thank you. Yes, and I used to be able to talk and plunder [xx] I'm losing some of that skill. Yeah, that's right the GTP possessed in the excellent combination of facilities and infrastructure that continues to improve over per time, we have a real spur in the park that was completed in 2010. We've recently completed the highway 148 interchange with U. S Highway 70 which gives us interstate access back to i795 and i95. We have 902 acres of developable land and 13 facilities available, most of which fall in about four-four permit area under the Clean Water Act at the facility, and all of that falls under foreign trades on 214, which provides duty and tax relief to participating businesses, not just at the global transport, but for the 23 counties in South East part of North Carolina. This is a visual representation of what I just want on the blue area, you see there is a blue harsh line along that the outline of the drawing on the map is the four-four perimeter, in the green area that you see the're mitigation lines that the GTP had to purchase in order to for the damages that were incurred, when it extended the run way at the airport since it's establishment the GDP has has received approximately $549 million in investment from public and private sources. This represent 75% of the conceptual investment 68% of which has occurred in the last seven years. Additional capital investment is scheduled for this year, air system has $34 million in additional investment for 2015 which includes additional $10 million in new starts this year and $24 million in project completion that will occur this year that started in previous years as you can see the some examples of the things you're doing there automatic file replacement machines extremely expensive but necessary for ramp-up and production that they are going through right now and they have completed of the second article that you see there. They're also planning investments for 2016 which they would not share with me, The ecconomic impact that The Global Transpark, there have been two studies that have been done, which highlight the positive impact that GTP has had on the region and the state. The first is the commerce department, economic impact analysis in 2010, which reported an overall impact of 42.5 million with the 2.4 million impact from the standpoint of look when state tax is derived from that and then in 2012 the division of [xx] completed North Carolina Airport study and reported that the GTT Cancensen[sp?] Regional Jetport impact was $219 million overall of 46 million of people, payroll and $5.8 million look when State taxes, and that study included industrial assets at the port and not just air for the air side. Suppose study showed growth in a positive impact overall the general fund. The historical employment for the GTP there has been a relatively steady trend until this year when we
saw the reduction of 30 jobs over the previous year, but what you don't see on this chart is if there's 59 public sector jobs, people that come to work at the GTP every day. There's also at the entrance of the Global transpark an additional 200 23 jobs associated with four businesses that utilize GTP infrastructure and benefit from being in that location. So this is an important very important to the four [xx] counties that are within 3-0 miles of the global transpark. And The average salary at the Global transpark. Is much higher than state region and county average. There's a reduced agreement faced with spirited systems that establish the requirements for use in the GoldLeaf Foundation grant that was used they billed out the facility and there were two minimum requirements that had to be met, one of which was a minimum number of job creation and a minimum amount of capital investments which you can see in the tables their. Their spirit is met their aggregate capital improvement investment since 2008 every year and they this year they reported 92.2 million in aggregate, but they did not meet their 2014 employment goal which was 375, as for that there's a claw back provision in the inducement agreement which we've invoked and provided notice to the company on the 12th of March that we're to begin the process of pouring back a portion of the Golden beef grant. Now the A350 program is a pretty robust program from the standpoint of number of orders that the company has, but they've gone from a transition from a development to a production workforce. That drove some of the wars of jobs and then there were some delays with regard to production rate increases with some of the customers, so that drove some of the job losses the projection ramp-up that they perceive in the future is going to be incremental and the production that they need would drive the increase highly. But based on the current agreement, their work statement the hiring will not will not meet the Geodly[sp?] foundation requirements, as a result the company has been working on a number of projects that we've been involved with in, working through. They try to beat those numbers up because I can tell you the Spirit is very happy with the relationship they have with North Carolina and are committed to being successful here and we are very happy with the relationship that we have with Spirit. You know in 2014 we began a review of the budget operation and personnel requirements, in order to develop a balanced budget at the authority, as a result to that work we've been able to drive our expenses down by about $2.2 million and generate a positive cash flow in both 2014 and 2015. This is our projected cash flow in 2015, which is about $93000, which we intend to use for maintenance and repair. In the positive correlation you see between the revenues and expenses reflect our commitment to our budget discipline. On that position that's fluctuated somewhat over the last few years, mainly due on interest payoff associated with a steep fund which is that will show up on the screen. Anyway the one on the far left that you see in front of you, a restatement of $86 million that was being spirit of lease hold and premise that was carried in GTP books, when we were audited that year. The auditor had us pull it off, because that was being carried on their books and our books, and they said hey, that can only be carried in one place. And I think the confusion stems from the fact that in the lease agreement it says that GTP owns the facility, so the controller was carrying this capital improvement on the GTP books and then finally on the far right you see that there's a pay off associated with this [xx] dropped to 38 in the payable drop from 38 to 10. 8 million. These are some of the specifics with regard to our debt reduction efforts In our effort to improve the bottom line, but as a result you can see that we've got about $900, 000 production and the annual expense is going forward as a result of the work we've done. Long term obligations have been reduced by 62% this year, which basically is the number of loans we have, we
started with eight loans, we little back down to three and we're working right now to refinance the final two [xx] in order to give us the best terms in interest rates going forward. Marketing efforts has been somewhat broad, and the years part till now, we have taken a fresh look at our approach to how we focus on how marketing the GTP, we're trying much more focused with regard to our core industries, sustaining our existing tenants, partners that we do business with today, and building relationships. We're also investigating ways to use online analytics to enhance our understand up potential customers that will enable us understand who is looking at our facility and why, and we're going to develop more detailed online facilities and descriptions that will allow us to use metadata to increase our own line of visibility. These are projects that can interchangely benefit by locating at the GTP. The staff due to tremendous amount of work compelling the debt on this projects, which includes construction cost, jobs, salaries and tax are generated to help us better focus on the industries that we want to try to attract the GTP. Perhaps most importantly, what we've been able to do is generate renderings and concepts with regard to these projects that we can use to market and attract business, and I can tell you one of the other things that we are always focused on is, when we're looking at prospects and other opportunities, is how we can synergise what we're doing with the port authority, and utilizing their assets, and where we, when they went as well. Based on the assets that we have available at the Global TransPark today, the authority has the capacity to generate revenue, and to grow the Commerce Department, and Division of Aviation Studies, I think validate that. We've made significant progress with regard to addressing the issues or reducing our expenses which was a point that came out in a PVD study in 2011, and I believe the authority can become a self sustaining entity, and to achieve this I think that recommended a predictable appropriation reduction based on revenue growth measure against the prior year to be considered. Infrastructure improvements are important economic growth and job creation, there are a number of projects currently underway or that have been funded recently funded and approved that will improve access not just to the GTP but to the region and the rest of the state as well, many of the high way projects that you see here are [xx] fulfilling the governor's 25-year transportation vision and hoping that the Highway 70 Code or from Moore Head West to the rest of the State, we need to improve rail perpetration in the Eastern part of the state, we've seen enough take in the track traffic at the Global Transport and we're working with Division II now to fund the project, to widen the the main road, the main therafair[sp?] through the park, because it's not holding up well and this is not a function of state, but the last want to hear the redundant and reliable electrical power is and becoming an issue and a topic of discussion with many of our new tenants. A lot of the processes that they use rely heavily on reliable and redundant power and that's something that we will work with spirit as they work through this with their power suppliers in order to ensure that we have what prospects need in the future. We were talking to a company just recently and the guy asked, one of the guys asked me how clean the electricity was, and so can give you a little more of, and he wasn't talking about was it made from coal, were you burning coal, he wanted to know what the hearts were and cycles and some of the process they use for software integration was very equipment they use is very particular to the quality of the electrical power that they have Mr Chairman subject to the committee questions that concludes my presentation. members of the committee questions, Representative Thomas Thank you Mr. Chairman, relative to the question [xx] the power Yes sir my guess is as we talk to with the provider I know around the state, other provider support with industrial areas for example to commit saving that up on site right
the cost of the business of the future will rely heavily on that, and especially if you're in an area that I'm not going to say problem but could see an occasional storm such a magnitude that would leave them pretty much powerless for an extended period of time unless they have that other capability onsite. Have you made any [xx] Stephen has talked to both the power supplies, and I think it's just a matter of figuring out how to redirect some of the infrastructure from a elect rical perspective is in place to now get them what they need, so that they don't have these concerns about burn outs and those sort of things. Follow-up Mr. Chairman. Are you looking more from the spirit only or more holistic up on the hope[sp?] side. More holistic in naming because we've had more discussions about some of other types of businesses activities that can take place, they've started to ask questions about the quality and the electricity and they're just the reliability but the quality of it so this is something that we got to do some leg work in order to really understand what's there. But from a reliability perspective the Spirit has already started talking to do in elected cities about that because they both serve office. I think we'll figure something else but so the provider is who? We have two providers there: Duke energy comes from one side and then Elected City which is the city of Kansas, that comes from the other side. Okay. Okay Southside and Eastside. Thank you, Mr. Chairman. Thank you. Representative Shepard. Well, my question Mr. Lipkin[sp?] is about the utilities that are served there, and I was wondering if you were on the city of Kenston because their rates are so much higher than everyone else's and I didn't know that you were on the City of Kinston [xx]. Partially. Partially? Yes. Right. What are the differences? Do you know the differences in the rates of the City of Kinston versus the other [xx]. I can't quote them but I know they're higher, and I know that because during part of our review we went through your facilities and looked at the utility bills, and some of them were so high that I closed the buildings and moved the people out of them into other buildings so that we could conserve funds that we were paying in utility costs. So Sir, Follow up sir. Yes Sir. Well, I do want to make a mention there is a Bill in the House that will [xx], if I'm not mistaken, that will give you some relief from the burden of electric signals. Thank you sir. Thank you sir, any other questions from the members? Thank Mr. [xx] I know that's what you got [xx] no problem [xx] this is all you [xx] but I do have a question on slide 15. Youre talking about the mortgaging of Upper Sands. Historically when we were [xx] and out of focus Well, they're not. I'm going to get to slide 15, Yes Sir And I'll save us all the anxiety of going back and looking at this presentation while I was here in 2011, but I'm going to tell you that slide looks the same and so I'm trying to figure out, or I need more explanation of what has been done and what's the definition of [xx] versus [xx] versus what I was told in 2011 because I'm still a little perplexed at the lack of, I'm not perplexed, I think I know the reason but what can you do? Tell me what's going on for me? What this focus really mean as relates to what I was told back in '11 about being focused? I haven't seen what was written in 2011 so I didn't see that brief and [xx] no it's not this chart because I didn't reference any old briefs when I prepared this one and I can tell you that we weren't asking ourselves what are we getting in return for the money that we're paying for marketing efforts whether it was a magazine an article we just couldn't do it and logically we still can't so we started to back away from that now and look at ways where we can measure that we are paying for or what we are investing in some of the marketing and realize a return from that, how many people are responding to hits on our website, those types of things. One of the things we've recently done is we've gone one of our logical providers because they have a program where they would advertise your facilities they're using electricity on their website. We were doing that before and we got a tremendous number of feedback from the company on people that are viewing our facilities on that site.
So that's an example where we're trying to focus in on areas that will provide us a return than we can see and then hopefully pursue that. Because from an analytic perspective one of the things we haven't been able to do is in so many situations see who is looking as some our facilities. Which will allow us to go back and start a dialogue with them on what it is they're looking for, and what we can do to facilitate them potentially using one of our facilities. [xx] quickly overtime, go ahead. No we got it. Sometimes I know in mt business [xx] just hope that people come to you [xx] but we are counting on [xx] yes, how about that. We're in most cases reacting to queries that we get, but there is also, we do talk to some of our prospects and some of our tenants about people they are doing business with and talk to those businesses about relocating there, because there are logistic savings, potentially could be realized potentially by having a supplier in the same area as a tier one company like Spears that uses [xx] and never parts with that sort of things. Thank you sir. Yes sir. There are four, are you sure? Okay thank you. Mr. [xx] thank you so much, we appreciate it. Members before we adjourn I want to tell Bryson and Anthony that Representative Ager[sp?] has a test for you in his office on this morning's presentation, if you'll stop by and pass that you may graduate and you may not. Other than that meeting this adjourned.