Port of Wilmington faces headwinds
The 2018 deal leasing the Port of Wilmington to a private operator, Gulftainer, was hailed as a win– offering the promise of new jobs, private investment into the port, and millions in annual operating fees to Delaware.
But contributor Karl Baker reports Gulftainer is facing some headwinds to reaching those lofty expectations.
A series of events at the Port of Wilmington last Thursday morning left workers temporarily without paychecks, causing some to threaten a work stoppage at a facility that moves millions of tons of goods annually.
The drama caps months of what appear to be financial stresses for the port’s private operator, and becomes the latest event to highlight growing tensions among the unionized workforce.
More than two years ago, leading politicians and union officials cheered the privatization of the Port of Wilmington -- a facility that had anchored Delaware’s industrial sector, but also regularly operated at a loss.
Delaware's 50-year lease with Emirati-based Gulftainer was billed as a way to end losses while bringing to Delaware thousands of new jobs, hundreds of millions of private investment dollars, and millions more in annual operating fees to state government.
Gulftainer executive Badr Jafar told a crowd of Delawareans celebrating the deal in late 2018 that their partnership could "propel the Port of Wilmington towards becoming the principal gateway of the U.S. East Coast."
Now, a year after Covid first shook the global economy and caused the port's business to plunge, the goal appears less certain.
Gulftainer's local subsidiary, GT USA Wilmington, faces disputes in court over money, has delayed construction on a new Edge Moor container port, has parted ways with members of its finance staff over the past year, and has employees from at least one union local claiming it isn’t providing adequate health and retirement benefits.
Adding to challenges, Delaware environmental regulators last month fined GT $530,000 for what the state described as installing and operating 15 generators at the facility without a permit. The port operator appealed the fine with a claim that the state made factual errors in its violation order.
Officials from GT USA Wilmington did not respond to requests to comment for this story.
Delaware Department of State officials, who oversee the port’s lease with the state-owned Diamond State Port Corporation, did not agree to an interview. Delaware Secretary of State Jeff Bullock responded to questions over several emails.
In one, he said Thursday’s events could be part of “the port rumor mill.” But, conversations with and among union employees suggested it is more complicated.
Workers standing outside of the International Longshoremen’s Association building in Wilmington’s Southbridge neighborhood Thursday morning could be heard talking about work stoppages. Yet, when approached, they denied that a workforce dispute existed.
One said he believed a delay in paychecks to be a technical glitch.
At a separate union facility outside the port's front gates, Delaware Public Media spoke with 10 workers who said their paychecks had not been wired that morning, as is normal. Some claimed that various port employees had temporarily stopped working, as a result. Claims that it was a technical glitch did not appear to ease their frustrations.
One warehouse worker, who only wanted to provide his first name as Malik, said the previous week's paychecks also came in late.
"All I can simply say is if a man works weeks on end, doing all this overtime, you should be able to take care of this man," he said. "How long can you take before you have to pay your bills?"
By Thursday evening, most workers appeared to have received their money, though the episode sparked a desire among some to know more about their employer's finances.
STATE AMENDED PORT DEAL
Bullock in his series of email responses left certain questions unanswered, including one about the current size of the port's workforce.
But, when pressed, he did reveal previously unreported details about the Delaware's deal with the port, and in particular an amendment made last year to the terms of GT’s lease, called a concession agreement.
The amendment, referenced in the notes of a state audit late last year, reduced the “per-unit concession fee” GT pays annually to the state.
Bullock said the amendment changes the volume-based payments GT makes to the state during the first nine years of its lease, “in exchange for approximately $13.4 million in loan forgiveness and other debt reduction."
The debt, Bullock said, originated when GT paid costs associated with closing the 2018 deal, “as well as some of the legacy costs of employee benefits.”
The taxpayer-owned Diamond State Port Corporation "would have had to pay them back over time, but with the change we got rid of a lot of debt,” he said. Bullock did not reveal the interest rate paid by Diamond State on the loan.
In Dec. 2019, a Department of State spokesman said GT had made quarterly payments totaling $7.1 million to the state during the first year of the lease. At the time, state officials projected that payments could rise to $13 million a year over the next 10 years.
Under the now-amended lease terms, GT paid Delaware $6.1 million during the 2020 fiscal year, which ended June 30. It will likely pay $4.5 million for the 2021 fiscal year ending this coming June.
Shortly after GT and the state quietly amended the lease, the normally taciturn company sparked a very visible legal dispute when it blocked Wawa fuel trucks from entering the port and filling their tanks with gasoline or diesel at a port fuel terminal.
GT said the fuel terminal’s new owner, Buckeye Partners, owed it $1 million in unpaid fees. Buckeye disputed the claim and called GT’s fuel-truck blockade “an extortion attempt.”
During a trial last month, Delaware Vice Chancellor Travis Laster pleaded with the sides to settle the case themselves, calling it a business dispute, not a legal one. He said the case seemingly ignored the “obvious mutual benefits” between the two multinational companies.
Despite the judge’s pleading, there is no sign a settlement will occur prior to a ruling on the trial, which is imminent.
“This whole thing is a nonsensical experiment to me,” Laster said to lawyers representing GT and Buckeye at the end of trial.
GT also awaits a ruling on a lawsuit with Murphy Marine Services, a Delaware ship loading company that claimed the port operator carried out “bulldogged” efforts to strip it of millions of dollars in value while it was acquiring its port operations.
Mike Kelly, an attorney for Murphy Marine, said he can not comment directly on the suit, given a court decision is pending, “but I will say that these folks clearly are not honorable people."
An attorney for GT did not respond to a request to comment.
Last month, Norfolk Southern added to the litigation pile with a claim that GT refused to pay hundreds of thousands of dollars in rail storage costs.
A health care fund manager also is claiming that GT was “unjustly enriched” last fall when it failed to pay nearly half-a-million dollars in port employee health care contributions.
Port employee and longtime union activist Julius Cephas said health care premiums charged to workers within his local skyrocketed this year after GT changed coverage for those employees.
The company also has not contributed to a retirement plan, he said.
"We've been working for three years without a pension," Cephas said of employees within his local, who had received Delaware's state worker pension prior to GT's takeover of the port.
Cephas, who a decade ago was a principal opponent to a port privatization proposal with Kinder Morgan, today claims that GT has not addressed grievances made by him and others within the union. He suggested that Bullock visit the port and speak with employees there where he can "see more from on the ground."
A section within the Port of Wilmington concession agreement that refers to union employees is redacted from public view.
Elected president of his local late last year, Cephas lost his position after his union was merged into another local that also operates at the port.
MILLIONS IN INVESTMENTS
GT’s lawsuits land as the company and the state attempt an ambitious expansion of the port’s operations at its Christina River location, while also building an entirely new container port along the Delaware River at the site of the former DuPont Edge Moor facility.
The 2018 lease required GT to invest $40 million with its first two years in Delaware towards the expansion of the Christina River facility. It also obligated the company to spend $250 million at the Edge Moor port by Dec. 31 2020, “subject to any extension.”
Just months after it took over, GT secured a credit line of up to $350 million through a mortgage on the 50-year lease, according to documents filed with New Castle County. The interest rate was not disclosed in the documents, and three senior finance staff members, who left GT over the past year, either declined to comment for the story or could not be reached.
Bullock said GT has complied with its investment obligation to date, and shared an iitemized list of spending at the Christina River port. It includes a nearly $13 million reconstruction of the port’s Berth 6, a $6.3 million investment in refrigeration racks, and $8.6 million for container cranes, called rubber-tyred gantries.
Parallel investments at the Edge Moor facility have not kept up with the lease's $250 million goal. Bullock said that is because the economic downturn over the past year cut too deeply into the port’s shipping business.
“Also, the state and federal governments have still not permitted the facility, so no construction can begin,” Bullock said in his email.
Government import and export records kept by the United States Census Bureau show that the value of goods through the Port of Wilmington fell nearly 48 percent from 2019 to 2020 to about $6 billion.
In Spring of 2020, GT received financial relief after it secured between $5 and 10 million from the federal Paycheck Protection Program. That money was earmarked to retain 500 jobs, according to federal data.
The issue of workforce retention is another that has drawn criticism from Cephas' local. Posted last week on a wall within the union office is a letter Cephas wrote to members last month, describing his requests to GT for details about its contract with the Goodwill of Delaware and Delaware County to provide temporary non-union laborers.
The outspoken union leader said in the letter that Goodwill was sending 100 workers to the port. But Colleen Marrone, CEO of the Goodwill of Delaware, said only seven of its workers were employed at the port in early April. They were there, she said, to "meet peak demand." She did not know whether there is a defined end to the contract with GT.
Nevertheless, Cephas in the March 10 letter stated that if GT failed to disclose details of the contract, the union would have to "proceed accordingly."