Budget alarm bells ringing for some at South Carolina’s ports agency

Containerized cargo shipments have been slipping at the Port of Charleston (above) and other ports.

Seven consecutive months of declining cargo volumes at the State Ports Authority have some members of that agency’s board questioning whether it’s time to take a magnifying glass to the budget.

CEO Jim Newsome calls the decline a seasonal blip. Others say they’d rather be prepared if the declines continue.

“I want to have eyes wide open if it truly is not seasonal, what levers we’re going to start pulling,” said SPA board member Rick Stanley, a vice president at GE Power and Water in Greenville. Stanley, during a meeting last week, said GE is closely reviewing its budget as the world economy slows, and it might be good for the SPA to do the same.

“Our view is that the economy is worse than what you read in the paper, and so we’re looking at everything right now,” Stanley said of General Electric, one of the SPA’s biggest customers with its exports of gas turbines. “The first place we look at is contracts, overtime ... but we’re starting to pull the levers now.”

Among the items under scrutiny is the SPA’s spending on outside contractors to do legal, political lobbying and public relations work.

“I’d like more information on who’s doing business on our behalf,” Stanley said. “Are there any conflicts? Are the amounts right?”

The SPA has paid more than $8.1 million to 23 such contractors over the past three fiscal years, according to documents obtained by The Post and Courier under the S.C. Freedom of Information Act. While that’s a sizable number, it represents less than 2 percent of the SPA’s total expenses for that period.

More than half of that money was for legal services, such as real estate transactions, litigation over a proposed cruise terminal and public finance issues. Another $3 million was spent on marketing and public relations, such as awareness campaigns for harbor deepening and an economic impact study. The rest has gone toward lobbying related to harbor deepening and other issues.

Pat McKinney, a Charleston real estate developer and chairman of the SPA, said he wants the audit committee to compile a report of contract spending for the board’s review.

McKinney also wants the board to “have a more extensive review of the budget” before it comes up for final approval in June. The board “will, for informational purposes, look at how it’s put together so we have a deeper understanding of it before it comes to us,” he said.

Board member Mike Sisk, chief financial officer of Infrastructure Consulting and Engineering, said the audit committee he chairs will meet more frequently than in the past.

“We want to understand more in depth the budget process and really look behind the macro numbers,” Sisk said.

The most immediate concern, however, is the SPA’s containerized cargo volumes, which were down 7.5 percent in January compared to the same month last year.

Containerized cargo volumes have dropped each month since the fiscal year began in July, and they are now 2.2 percent below forecasts.

Newsome said the SPA is prepared if volumes don’t rebound in the spring, as they usually do. He said the agency would freeze hiring, encourage early retirements and delay filling vacancies when employees leave.

“Business trips, everything from A-to-Z gets reviewed,” Newsome said. “I like to think we do that anyway, but you do it with more zeal in that circumstance.”

Newsome added that he doesn’t think the cost-cutting will be necessary. The Port of Charleston is entering its busiest stretch of the year and, despite slowing trade worldwide, Newsome expects containerized cargo volumes will get back on track by spring.

Even with the consecutive monthly declines, the figures aren’t all that bad. The numbers this fiscal year have beaten last year’s totals in five of the seven months. And for the year to date, volumes are up 3 percent. That’s better than most U.S. ports and three times the worldwide average.

There are other positive numbers for the SPA. Revenues are up by nearly 13 percent this fiscal year compared to last year and earnings have increased by nearly 26 percent. Breakbulk cargo — the type that must be loaded individually rather than in a container — has increased by 12.2 percent over last year. And South Carolina just announced a record $30.9 billion in exports in calendar 2015.

“I think we’ll see a trend back up in the next couple of months,” Newsome said. “And, hopefully, March will be significantly stronger.”