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Charleston port's rail yard cost balloons, but taxpayers promised they won't pay extra

Palmetto Railways intermodal facility at Navy Base (copy) (copy) (copy)

A rendering shows the port-served rail yard  the State Ports Authority plans to build near the Leatherman Terminal on the former Navy base in North Charleston. File/Provided

The price tag for a rail yard and barge system that would serve the Port of Charleston has increased by $94.4 million since the project received initial approval from legislators earlier this year.

But the State Ports Authority said it can reduce the extra costs so taxpayers won't be hit with a bigger bill than originally proposed.

Most of the cost-cutting involves removing a $51 million loan from the budget. The S.C. Commerce Department loaned the money to Palmetto Railways to help pay initial costs for the rail hub, to be built in North Charleston. Repayment of the debt was supposed to come from the project's funding, but it was removed from a budget presented on Nov. 9 to the Joint Bond Review Committee.

The SPA, which is building the rail yard and barge system, did not mention the loan during the presentation and referred questions about it to the Commerce Department. Alex Clark, a spokeswoman for the agency, said the loan has not been repaid. It's not clear from where the funds will come from to repay the money, which Commerce has said is needed for future economic development efforts.

Even without the loan repayment, the project's $593.4 million projected cost has ballooned by $43.4 million in recent months — an amount lawmakers said they are unwilling to pass on to taxpayers.

"I want to be absolutely sure that you have no intentions of asking the General Assembly to fund that $43.4 million," state Sen. Nikki Setzler, a Democrat committee member from Lexington, asked Barbara Melvin, the SPA's chief operations officer.

"No intentions, sir," Melvin replied.

Melvin said the SPA will try to reduce the $43.4 million through "value engineering" — a process in which a developer and contractors seek less-expensive materials and processes without sacrificing functionality.

"We will engage selected contractors to actively provide value engineering solutions, and we are confident that we will be able to deliver value engineering on this project," Melvin said, adding "we feel confident we will be able to do that and stay within" the original $550 million request.

The higher costs are due to rising construction material and labor expenses, Melvin said.

The General Assembly included $200 million toward the rail and barge project in this year's budget and is expected to fund the remaining $350 million in coming years. The reluctance to finance it all at once has pushed the rail yard's opening date back to 2025, Melvin said.

Setzler said legislators in Columbia can't fund the rest until the SPA provides a detailed financial statement for the project. Melvin said the maritime agency plans to submit that information in its next quarterly report.

The rest of the money could come from state revenues or from federal COVID-19 aid South Carolina received this year. Melvin said the SPA is also looking at potential federal grants that could help pay for the barge project.

The rail yard — officially known as the Navy Base Intermodal Facility — will be linked to the new Leatherman Terminal and will give the Norfolk Southern and CSX railroads a place to load and unload cargo containers moved to and from the port by rail cars.

A barge system is also proposed for the SPA's Wando Welch Terminal in Mount Pleasant, where containers would be sent by water to the Leatherman site and then loaded onto trains.

Jim Newsome, the SPA's CEO, has said the projects "are crucial for the continued competitiveness of the Port of Charleston," which seeks on-site rail service like that offered at the Port of Savannah.

The rail yard has already received approval from the Federal Railroad Administration and the Army Corps of Engineers and would round out roughly $2 billion in improvements at the port, including the new terminal, cranes and other equipment, and the deepening of the Charleston Harbor shipping channel so that it can accommodate heavier ships.

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Reach David Wren at 843-937-5550 or on Twitter at @David_Wren_

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