Dr. Al Parish's letter to Contain the Port from January 8, 2003

Contain the Port responds to Dr. Parish's letter regarding port impact studies.

January 12, 2003

Dear Dr. Parish,

  The main reason we use the term "black box" to describe the SPA’s economic studies is due to our prior experience with the SPA's Mercer report. The $900,000 Mercer report stated the SPA was responsible for over 83,000 jobs in our State.  The public was not allowed to see the inputs or surveys, and was only allowed to see the answers, with no explanation given as to how the answers were determined. Webster defines a “black box” as  “having its function, but not its components specified”.   If we do not know what went in, and are only able to see the answer, we refer to it as a "black box". It is unfortunate the SPA has denied ordinary citizens the right to see what inputs or components  (supplied by the very agency paying for the study to tout its importance) were put into the "black box".  The 2002 Legislative Audit Council report determined there were 5,326 jobs directly related to port activity, not the 83,000 number the SPA had been using to solicit funds from our State.  The previous CFO of the SPA, expressed concern over the SPA’s  self-financed studies.  "Say you have a plant in Anderson County that sends a very small shipment through Charleston. Do you count all the jobs in shipping and transportation departments of that company?"  

 To further our concerns, the 2002 Legislative Audit Council report states " Neither Mercer Management Consulting, nor the chief consultant for the study (who is no longer with Mercer) were able to provide us the surveys and complete data supporting the numbers and conclusions of the Mercer Report. Consequently, we were not able to verify all of the numbers. Since the SPA has based a large part of its terminal development strategy on the Mercer report, it should have retained all the supporting documentation."   We hope you find this as troubling as we do.

 We would really like to understand the particulars of how your port economic study was conducted. Would you please send us a copy of the software with all the inputs used to come up with your results?

We would also like to see your report's list of the specific companies surveyed, the jobs directly and indirectly attributable to the SPA's port operations for these companies, and the number of actual containers these companies shipped through Charleston on an annual basis. By identifying specific companies, we can use the reasonableness test to see how the software is performing. For instance, how many South Carolina jobs at BMW, Michelin, and Fuji did your report find were directly port related and indirectly port-related? How many containers do these companies ship annually through the Port of Charleston?  We have attached a chart below that we would greatly appreciate you filling out to help our State understand the specifics of your study.

We  question your assertion that the SPA suffered reduced container volume in 2000 and 2001 that was “mostly owed to capacity constraints”.  The SPA's own records show their  berths only occupied 25% of the time in 2000 and 2001. Another possible capacity constraint, container storage congestion, was addressed in the Legislative Audit by the SPA's unwillingness to charge the shippers storage for empty containers. The LAC stated,  “The SPA could also improve its use of terminal space by better management of empty containers. We found that the SPA has not enforced provisions regarding the length of time empty containers remain on the common user areas of the terminals.”    The shipping lines were storing their empties up to 500 days for free, creating an "artificial" storage crunch. What specific documentation could you share with us to justify your reasoning about capacity constraints existing at the SPA container terminals in 2000 and 2001?

Another concern we have is trying to determine  who really bought the software used in the modeling for the study. As stated in the Post & Courier on January 6, 2003, " While State Ports Authority officials are quick to note that they didn't commission the study, they did purchase the $70,000 computer model that produced it" . According to the paper, you hope to pay back the SPA the $70,000 as revenue is earned from your group’s use of our State's software. Yet in your letter below you state, " First of all, the Port did not pay for the model,  the Center for Economic Forecasting did and provided the impact study as a service to the citizens of South Carolina." We would appreciate some clarification on who really purchased  the software that conducted this unbiased study.

One major problem we have had with the current SPA management is accountability. The Legislative Audit Council addressed this issue by saying, “The SPA is making decisions that affect public policy and that have local and statewide impacts lasting 20 years or more. Therefore, the activities of the SPA should be conducted with as much openness and public scrutiny as possible. In addition, the State Ports Authority is also a public agency, and therefore it is accountable for its decisions to the public.”   

Thank you, in advance, as we hope you can allow us to learn more about  how you conducted your study. We look forward to your answers and will be glad to post them on our website as well as the inputs supplied to you by the SPA.

Regards,

Frank Heindel

Contain the Port

Dr. Parish responds
Subject: Re: Impact Study
Date: Tue, 14 Jan 2003 11:10:30 -0500

I will be happy to provide you with some of the details you asked, such as the jobs directly attributable to the Ports by industry (SIC code)and by geographic region.  I cannot provide you with the details by company as the Center for Economic Forecasting promised confidentiality
to the companies surveyed.  They provided us with some information that do not wish published (and for good reason--competitors would find
it useful) and we will and have kept that promise.  I will be glad to provide with copies of the survey questionnaires but once the data is collected, I
shred the responses to ensure confidentiality; if that bothers people, too bad.

I can also provide you with details of the REMI model, as much as you like. As far as the Legislative Audit Council's work, what they measured
is what is called port industry jobs.  In other words, jobs of packers, warehousers, long shoremen, etc. that work in jobs that directly provide
service to the port operations.  The numbers from our survey are not too different than those of the LAC (about 7000 approximately).  But no one,
and I mean no one, with an ounce of common sense (which excludes virtually all of the legislators that tout the LAC audit), believes that that is all of the
port operations impact.  For example, does anyone believe that BMW would have located to SC at all if the port were not here?  If someone does,
then I would gladly like to sell them the Cooper River Bridge as they would be totally economically ignorant.

Despite the fact that all jobs at BMW would be legitimately attributable to port operations, in our study we assumed that the auto industry would
downsize by only 25% becasue it could use Savannah for most of its cargo (not all of it however as Savannah does not have the capacity).

So by any standard anyone wishes to place on it, our study is very conservative.  If someone wishes to replicate the study, I invite them to do so.
They can put in the hours of work and expense to do it.  I have very little patience with people who criticize studies that others do just because they
don't like the results and can no offer no study of similar comprehensive structure to refute it.

As to costs, the SCSPA did not pay one single dime for this study.  They did NOT buy the model.  The Center for Economic Forecasting at Charleston Southern University did; the license with REMI is with us, not the SCSPA. This study was done as a service to the citizens of this state, period. If you wish a copy of the full study, I would be happy to provide it to you.  But it is not free. The full study is about 1000 pages long and
provides tremendous detail; the cost is $500 per copy and will be available in bound form by mid February.

Al Parish

Al Parish, Ph.D., Director
Center for Economic Forecasting
Charleston Southern University
9200 University Blvd.
Charleston, SC 29423