(bright upbeat music) - [Announcer] This is a Carolina Business Review special presentation on location at the Wando Terminal for the South Carolina Ports Authority in Charleston, South Carolina.

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- This seems like an appropriate place to have a discussion about economic activity, transportation and infrastructure.

I'm Chris William, and welcome again to the most widely watched and longest running program on Carolina Business Policy and public affairs coming to you from location, on location, in fact, at the South Carolina Ports terminal at Wando Welch.

We hope you stay with us because in a moment, we will unpack this broad discussion about what transportation infrastructure and economic development are like now given all the other items going on in this economy.

Stay with us because five leaders will talk about it in a special two-part Carolina Business Review, starting right now.

- [Announcer] On this program, Jim Newsome former president and CEO, South Carolina Ports.

Barbara Melvin, president and CEO, South Carolina Ports.

Christy A.

Hall, South Carolina's Secretary of Transportation.

Harry M. Lightsey, South Carolina Secretary of Commerce.

And Bill Sandifer, South Carolina State Representative.

(upbeat music) - Welcome to a very special program, as you've heard us talk about now at the beginning, at the top of this dialogue, sitting with me now is we're going to take a couple minutes to talk to Jim Newsome and Barbara Melvin.

They are the outgoing and the ingoing chief executive officers of the South Carolina Ports.

We are, as you know, on the Wando Welch Terminal here in Charleston, and that's meaningful in a couple of ways.

The big way is we are going to unpack the idea of infrastructure, economic development, transportation.

But before we do that, let's talk to the chief execs and our special guest, Jim Barbara, welcome to the dialogue.

And thank you again so much.

- Thank you.

- Welcome to Wando Terminal.

- You know, I said this right before we started.

Do you ever get sick of this view?

- (laughs) Never.

- Never.

I could sit all day and watch you.

- I mean, that means something.

This is your job and you're still.

- All we hear is the chain when we hear this noise.

- And it's amazing the talent that's out here doing this work, it's very skilled work.

And I think we can underappreciate that and we're not careful.

These are really, really skilled and dedicated people to do this work.

- Yeah, we wanna take a couple minutes, Jim, and I'll start with you to not just acknowledge the last 13 years of leadership you've had here and when you came in.

Certainly congratulate you on the next chapter.

And I don't wanna say retirement.

You're not old enough to do that and you've got so much energy, but Jim, congratulations.

- Thank you.

- I think my personal opinion and others have said that the ports are in a completely different place than 13 years ago, and set now for Barbara and beyond, but talk about the growth in about a minute here.

Talk about the growth, where, what you've seen the last 13 plus years, and what's been so exceptional for you.

- Well, when I joined the port, we needed to get back on a growth track and manage the thesis of handling big containerships.

So we've been fortunate, we've doubled our volume really in the time that I've been here and we've been, most importantly, we've been able to build really relevant infrastructure.

We didn't have one crane that could handle big container ships in 2016, we have 15 here now.

We built a new container terminal, built an inland port network and deepened our harbor.

So we're in a long cycle infrastructure business and we've done that really, really well.

I don't think another port has better infrastructure.

And because we did that, we were able to make a transition in our cargo base from manufacturing, which is still very, very important to us into the retail distribution segment, which is about three times the GDP of manufacturing.

So we're headlong into retail distribution now, and that's really the upside for growth in the port going forward, having Walmart here, having Amazon and others in the future.

- So the deepening project is about complete well enough to say it.

- Big, complete Barbara, and.

- Yeah, so the first four contracts of the deepening project will be complete within a couple of weeks.

The last contract, which takes our harbor depth to 48 feet between the Leatherman Terminal and our North Charleston Terminal will be finished this fall.

So we are really excited to be able to offer 52 feet of water to our biggest container terminals, both Leatherman and the Wando Terminal right now.

- And all this infrastructure fits together.

They're not standalone projects.

There's a whole orchestrated theory behind why we did what we did.

- So what Barbara fast forward, it all sounds great.

And it should, the work that has been done, not just by Jim and the team and you.

What are the pressure points?

What do you look at and say, yeah, but we gotta get that right, and this is not done by far?

- Oh, it's never done.

I mean, I think certainly a port learns the lesson that if they sit on their laurels, the world will pass them by.

So we have to continue to invest.

We've put more than $2 billion combined into this facilities for the last six years.

And that's our money that is state money, Congressional money.

So I think Jim has helped us set the table.

We are now hosting guests from the retail industry.

That's something we have to continue to focus on if we're going to reach our goal of growing at two times the national port market, we have to take care of our manufacturers.

You know, we have to finish infrastructure.

We have to build a dual served intermodal rail facility that the state funded for us this year and also offer alternative transportation to just truck by implementing a barge.

So there's never a lack of anything to do around here and our team, I'm very lucky.

This team was in place, it's been in place.

Jim has raised the level of all of our games.

And so I get to see the benefit of that as the team continues to grow for the next decade.

- The biggest piece of any business, whether it's profit, nonprofit government agency is the cost of people, the ILA or the International Longshoremen's Association There is a rub and I'm not going, don't need to go into it deeper than that, but where is the dispute and how much will that play into where the port goes?

- Well, so we had in the Southeast and the operating ports have what we call a hybrid labor model.

We have state employees working alongside of members of the International Longshoremen's Association, who are really are partners of ours in providing a product.

And we've had this hybrid model since the start of containerization.

So long story short, the international of the International Longshoremen's Association would like to see this model changed in the Southeast.

And we're just not amenable to that.

So to respond to that, we filed a charge at the National Labor Relations Board, an administrative law judge upheld the merit of that charge and now it's waiting for review by the full board.

And we hope to have that done within the next year because this operating model is the model that works in the Southeast.

- If that decision goes counter, what are the next moves for ports like the SCPA?

- Well, we don't think it's gonna go counter.

I mean, obviously we would appeal because again, the precedent of having this model is significant in this type of matter.

And the shipping lines have always stayed out of that.

It's part of the public policy of our state.

It's the public policy of Georgia to own and operate and staff to ports the way we've always done it.

And that's critical.

If we're gonna invest the money, we're gonna run the port the way we wanna run it.

- Speaking of shipping, Barbara, shipping people, the cruise lines, the entertainment part of this, would seem like it's a natural piece for the port to manage.

And you have, and cruise ships have come into Charleston.

That seems like that is going to be sun setting and cruise ships will no longer be coming into the holy city, what's the timeline on that?

Why did that decision end up being made?

- So there are two parts to our cruise business.

And one was the home porting, which is you would come to Charleston, get on a ship, go on your cruise, return to Charleston and drive back home or fly back home.

That's the piece of our business that will sunset at the end of 2024.

We will still host board of calls here in Charleston beyond that timeframe, and it will fit very nicely with what is planned to be the redevelopment of Union Pier terminal, which is warehousing downtown.

As you can see, it's rustic at best, and it's a Marine terminal.

And we think that given the opportunity for redevelopment, it's a transformational and positive impact on the City of Charleston.

And it will allow for us to build phase two of the Leatherman Terminal without returning to the bond market in what is a very contentious situation right now with regards to the economy.

So we think that being able to utilize the proceeds from that sale is most beneficial to us, to our largest part of our business segment, which is container volume.

- Would there ever be a time when cruise ships just don't come into Charleston anymore because of that, whatever happens?

- You know, I don't see that.

I think that Charleston has always been a port city.

I think it's important for us to remember our roots and celebrate those roots.

And it's just about attracting the right port of call business here.

And I believe that with engagement from our community and the city and our tourism sectors, which we are not in, this is just a maritime business for us, but we think with that input, it will be a great business that will continue for years to come for this day.

- Okay.

- And the Union Pier property is likely the most valuable and interesting piece of real estate on the East Coast of United States, where we can really reunite the City of Charleston with its waterfront.

They're largely blocked from it today because of the fencing there.

- Yeah, okay.

Thank you both.

- Absolutely.

- Stay with us because right after this, we're gonna bring in leadership to expand the dialogue further.

- [Announcer] Carolina Business Review is the most widely watched source for business policy and public affairs across the region for more than three decades, and seen each week on all PBS stations in the Carolinas.

You can also watch online at carolinabusinessreview.org and follow us on Twitter, LinkedIn, and Facebook.

So join us each week for a public dialogue with key leaders across the Carolinas, as we discuss the issues that matter to you and your community.

- Welcome back, a port seems like it is an exact fitting place for the kind of discussion we are having.

As you can tell, we have expanded our panel and we are at the Wando Welch Terminal here in the South Carolina Ports Authority at their site.

It is important to bring in our panel as you've just heard.

And I would welcome the three of you.

And thank you for taking the time to do it all of 'em.

VIP's extraordinary, no doubt.

Madam Secretary, Christy Hall, I'm gonna start with you.

Let's expand this to inflation.

It's on everyone's mind.

We're all talking about either our personal balance sheets or our businesses, but it certainly is going to change the calculus of how we move forward.

What kind of dialogue you having internally?

And not just Secretary Hall, the projects that are coming out of the ground or you're working on now, but what in meaningful way does it change the way you start to figure out what your projects are going to be?

- Yeah, Chris, that's an excellent question and observation, and it's something that we look at and talk about regularly.

As a matter of fact, as soon as we finish here this afternoon, I'm heading to meet with the CEOs from a lot of our paving industry here in South Carolina, to talk specifics on supply chain concerns, cost escalation and things like that.

So for us on the highway and bridge side of things here in South Carolina, what we're looking to do is to recognize, first of all, the cost impact of doing business and how that fits into our contingencies we already have planned on our projects.

We are seeing a little bit higher numbers than we had previously planned, but we're still able to absorb those within our budget and program, without any delays at this point.

And really for us, it's about managing the risk.

How much risk are we assigning to the contractors and making a good balance of that so that the contractors don't, I guess, overly bid that risk factor into their pricing to us.

So communication with the industry is absolutely critical, whether it's contractors or the material suppliers.

- You know, Barbara, inflation is clearly gonna be higher on your watch here at the port now, as you heard Secretary Hall just talked about managing the risk of it, how are you gonna approach that?

- You know, I think very similarly, we are a capital business and we are watching cost escalations.

You wanna make sure that you don't add so much escalation in that it prevents you from building a project because time also can be expensive when you need the infrastructure now.

But I think too, we always talk about the capital side of these things.

And I think the human side of this is something as the leaders of our organizations, we all have to make sure we are keenly aware of what do we need to be doing for the cost of living for our employees?

What is the real cost of inflation when you're talking about transportation to, and from work, buying food, buying gas.

So I think we have to manage both sides of this.

It's new if you're new in the workforce, you haven't done this because we haven't faced this in the workforce in a while.

So we relied a lot on Jim teaching us how to manage through this and we'll continue to do so.

- Yeah, I remember the misery index, so they relied, but I think also more broadly.

what is the impact of what needs to be done to control inflation?

So if we're really gonna raise interest rates to do that, what's the impact on the retail economy, on our business volume-wise and things of that nature.

- Secretary Lightsey , I mean, you don't, excuse me for saying it this way, you don't have the luxury of just one industry.

You've gotta talk to the constituents of all industries.

How do you approach this?

- Yeah, so it's a little bit different for us.

Unlike Secretary Hall and Barbara and Jim, we don't manage a huge capital intensive business ourselves.

I mean, we are partnering with our businesses that are here in the states.

So I think just as Barbara mentioned, many of these businesses really haven't managed through an inflationary period ever in their history.

So really working with our businesses that are here in the state, helping them understand the impacts on their business, how the cost of capital that Jim talked about, what that's gonna do in terms of trying to estimate what their cost of expansion might be going forward, or any capital project that they have underway, the impact on their business from the consumer side, is it gonna dampen the appetite for the types of services and goods that they're providing?

So that's one big part of it.

And then the next part of it is the businesses that are looking to locate in South Carolina.

We're making sure that the sites that we have are as ready as we can possibly make 'em because it is gonna be incredibly difficult and expensive going forward to get the right utilities in place, they're like right power and water and sewer in particular, these are very capital intensive infrastructure projects to make, to get those sites ready.

- Well, let me stay with you for just another minute here as Jim talked about the rate of the interest rate going up, will people look to commerce, would industries and businesses look to commerce to help them solve that issue?

- Yeah, I think that's traditionally one of our major roles is really to work with our businesses that are here in the state to help them solve business problems.

And I think, one of the things we have and like we sit here at the port and what an incredible advantage to have the port in times, an inflationary period where speed and access to markets is incredibly important.

And we sit here with this port within one day's truck drive of 70% of the US population.

You know, that's incredibly important to businesses that are looking to locate in the United States.

And so it's an incredible asset for us to be able to go to businesses and say, you can locate here in South Carolina.

Our cost of doing business is low in South Carolina.

We have incredible assets like the port, we have the highway system, east, west, north, south access to rail.

So those are all assets, God-given assets that can be decisive in terms of businesses that are looking to locate here.

- Your honor, we haven't forgot about you over there by the way.

(laughs) So it's longtime chairman of Labor, Commerce and Industry Committee in the State House.

Is there a way to solve this cost, this dramatic increase in inflation?

Is there a way to solve it through policy?

- I'm not sure that there is, but we're certainly looking at every avenue possible, but at the same time, if you look at what we've done with the state's budget this year, the coming year, - Right.

- we've set aside more funds than we have at any time in history in the event that we have a recession because of the inflation.

And I think the two personally, I believe that they go hand and glove.

A recession can be brought on by inflation and we are certainly going through an inflationary period at this time.

- Is anyone on this panel, are you anyone expecting a recession?

How would you handicap a recession at this point?

- I think myself.

- Yeah.

- I think there's probably a seven out of 10 possibility of a recession.

- Okay.

- And we really haven't had a significant recession since 2009.

The one we had in 2020 was two months.

It's arguable that raising interest rates to slow down the economy could tip us there.

- Yeah.

- I think the difference in the infrastructure Christy builds and that we build, it's not subject to month to month variations in the economy.

We're building long cycle multi-year infrastructure that's well planned.

And as long as we believe in the growth in the south, which we do, that's not gonna change if the economy changes short.

- Yeah, Chris, if I could just follow up on that point, I'm of the opinion that the rate at which we put our work out to the industry and to market, makes a huge difference on the amount of pricing we get back to it.

So to some extent, we're able to control our pricing by the regularity of the work that we're putting out, the communication that we're providing to the industry and the material suppliers so they can plan long term and mid-range on their gathering a material, securing of the workforce, getting ready to bid and work.

So it's creating that environment that's conducive to continuing to grow and expand our existing programs.

- So you're not afraid of it?

You're not afraid of a recession?

- No, I think we're just ready to proceed forward, keep pushing projects out, basically feed the beast, is what I call it.

Internal to the agency is we wanna grow that market of highway and bridge builders in South Carolina and be attractive as a region to bringing in more and more industry into the state to complete our program.

- You were laughing a little too quickly when she said feed the beast.

Is that 'cause you identify with it?

- Well, no, I just thought it was very clever turn of the word, so, no particularly.

- She look it too when she said it too.

- And I think too, as a port, Chris, it's our job to try to keep costs of inflation down.

If you can be fluid in the supply chain, you are doing, you're making a contribution to keeping the cost of goods as low as possible.

So we have to keep investing so that others are successful.

- And Chris, - Please.

- let me interject if I may, because I have to look at this from a totally different perspective than anybody else on this group.

And what I have to do is look at how as a state we prepare ourselves for whatever the eventuality might be.

If it's a recession, we have to plan for it.

I remember in '08, '09, we had to borrow a billion dollars from the feds to take care of the unemployment fund.

We do not ever want to get in that situation again.

Right now we are very, very solvent, but we need to stay that way and it's critical that I helped to look after that part of the equation.

- So just recently the State House, the general assembly in South Carolina had agreed upon a record high, high water mark, no pun intended budget of 13.8 billion.

That's a pretty big number.

How much of that is allocated for rainy day as you just said?

- And I don't remember the exact number, but it is significantly larger than it has ever been before.

We actually created a new rainy day fund in addition to those that we already have.

- Are there any other and not to keep going down this rabbit hole survey, are there any other levers that policy that you can pull that you and your constituents can pull?

- Yeah, I think one of the things that in my capacity as chairman of the LCI Committee, is that I have to make sure that those things that we pass into law governing how businesses operate are truly pro-business, that they're beneficial to the business community, no matter whether it's a mom and pop or a gigantic operation.

We've got to be ready to help those people to succeed in business.

- Let's do a couple one offs specific to the port, but not just specific to the port.

The idea that there was a supply chain crunch, that was months ago, seems like it's all fixed now, 'cause nobody's really talking about it, but is it fixed now?

- Well, we, I mean, Chris, we didn't know what a pandemic meant to demand it for container services in the supply chain.

I thought our volume would go down, but we couldn't buy services, so Americans spend X percentage of their income so we bought goods on steroids basically.

So we're importing record volumes today.

And what is a pretty rigid supply chain?

The supply chain doesn't have a lot of flex up and down, terminal like this has so much capacity, so much truck capacity, so much chassis capacity.

We had the unusual advantage of being able to open a new terminal just at the right time.

You can call it great planning or dumb luck either way, but it was opening.

So we had a little buffer there, but the supply chain is still challenge because there's not enough warehouse capacity to handle imports.

So if you don't have enough warehouse capacity, the containers, the next alternative, it's a perfect weatherproof mobile warehouse.

- And by us investing in our own chassis pool and putting more than 1000 of our chassis in long term leases on the street, we have taken what is a utility and turned it into a competitive advantage.

So that's why you see better fluidity here than what we were able to see about five months ago and our vessel queue is down, but we are taking this time to prepare that it might come back.

We are moving into what is typically a peak season for shipping.

And so this is the time for terminal recovery.

It's time to get our house back in order and be ready for the next large amount of business that will be coming.

- I mean, who would've thought a shortage of toilet paper would've made everybody aware of a supply chain.

- No doubt.

- But it's really is a supply chain.

That term is relevant.

And as with any chain, it's as strong as the weakest link.

So we have to bring everyone along.

A lot of players that deliver cargo in that supply chain.

We gotta make sure everyone's up to speed in doing that.

- We just have about a minute left Secretary Hall at best of times, transportation comes under the gun from the public because our roads aren't wide enough, our bridges aren't et cetera, et cetera.

So during a supply chain crisis, it's gotta be doubly hard for you, is it?

- Oh yes.

Certainly because you have more trucks on the road and during the pandemic, you had changes in travel pattern and schools open or closed.

And so it was a constant push and pull on the infrastructure to be able to move people from point A to point B.

- Okay.

Please stay with us.

We're gonna give you a chance to weigh in on the supply chain.

Mr. Secretary, I know you got a little bit to say about that.

All of us, thank you.

Stay with us in this heat.

If you're watching us, we are again coming from the Wando Welch Terminal here at the South Carolina Ports Authority.

It is the end of part one.

Next week, we restart this dialogue and we'll be back.

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Thank you.

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