Tunnel VisionAn Analysis of the Proposed Tunnel and Deepwater Port in Brooklyn

November 1998

Hugh O’NeillMitchell L. Moss

Taub Urban Research CenterRobert F. Wagner Graduate School of Public ServiceNew York University4 Washington Square NorthNew York, NY 10003-6671Telephone: (212) 998-7500 Fax: (212) 995-3890http://urban.nyu.edu/

CONTENTS

Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Part One, The Brooklyn Hub Port and Cross-Harbor Tunnel . . . . . . . 8

Part Two, Maintaining a Competitive Port . . . . . . . . . . . . . . . . . . . . . 16

Part Three, Revitalizing Brooklyn’s Economy . . . . . . . . . . . . . . . . . . . 25

Part Four, Supporting New York City’s Manufacturing Sector . . . . . . 31

Part Five, Improving Regional Mobility . . . . . . . . . . . . . . . . . . . . . . . 36

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Taub Urban Research Center

The Taub Urban Research Center at New York University’s Robert F. Wagner GraduateSchool of Public Service explores issues and challenges affecting cities and metropolitanregions. The Center issues reports and conducts forums that include participants from gov-ernment, business, nonprofit organizations, and the academic community. The Center isnamed for Henry Taub, a trustee of New York University, who has been a major benefactorof the Center since 1981. Additional funding for research is provided through grants fromcorporations, foundations, and government agencies.

About the Authors

Hugh O’Neill is president of Appleseed, a New York City consulting firm. From 1975through 1978 he was Deputy Commissioner at the New York State Department of SocialServices. He later served as Deputy Secretary for Economic Development under governorsHugh Carey and Mario Cuomo and as Assistant Executive Director of the Port Authority ofNew York and New Jersey. Mr. O’Neill is a graduate of Manhattan College and holds a Ph.D.in political science from Columbia University.

Mitchell L. Moss is the Henry Hart Rice Professor of Urban Policy and Planning andDirector of the Taub Urban Research Center at the Robert F. Wagner Graduate School ofPublic Service. He has served as chairman of New York University’s InteractiveTelecommunications Program and has directed projects for the Alfred P. Sloan Foundation,Charles H. Revson Foundation, National Science Foundation, and Andrew MellonFoundation. Profressor Moss is a member of the Board of Directors of the Citizens Unionof the City of New York. He is a graduate of Northwestern University and holds an M.A.from the University of Washington and a Ph.D. from the University of Southern California.

EXECUTIVE SUMMARY

In recent years, the search to strengthen New York City’s economy has led several public offi-cials to advocate the development of a new port complex on the Brooklyn waterfront. To con-nect this new port to the nation’s freight distribution network, a new rail-freight tunnel wouldbe built under New York harbor.

Advocates of the two projects suggest that the Brooklyn “hub port” and rail tunnel might yieldseveral important benefits:

• They would help maintain the competitiveness of the New York-New Jersey port,by providing new facilities that can accommodate a new generation of large con-tainer ships and by avoiding the high costs associated with deepening the channelsthat serve the New Jersey side of the harbor.

• They would help revitalize Brooklyn’s economy, generating thousands of new jobs.

• The rail tunnel would bolster New York’s manufacturing sector, by providing betteraccess to low-cost rail transportation.

• The rail tunnel would reduce highway congestion through a reduction of trucktraffic on some of the City’s most crowded roadways.

However, a systematic analysis of the proposed rail tunnel and hub port suggests that theproject would, in fact, provide few—if any— of these benefits.

Maintaining a Competitive Port

To maintain its position as a leading center of maritime trade, the New York-New Jersey portmust accommodate steady growth in the overall containerized ocean shipping volume. In par-ticular, it must accommodate a new generation of very large container ships. Doubts as towhether the port can adapt accordingly stem from the high costs and environmental complica-tions involved in dredging the channels that serve the New Jersey side of the harbor.

Proponents of a Brooklyn hub port argue that the new port would provide the additionalcapacity that will be needed. Furthermore, because the channels serving the Brooklyn water-front are both naturally deeper and closer to the open sea, the hub port could more easilyaccommodate very large, deep-draft container ships.

In two important respects, however, the Brooklyn hub port proposal is seriously, and probablyfatally, flawed.

• The cost of building both a major new container terminals from scratch and across-harbor tunnel would be exceedingly high—more than $4 billion, according toa 1997 consultant study prepared for the City’s Economic DevelopmentCorporation. Measured in terms of capital cost per additional unit of capacity, thecross-harbor tunnel project would be 50 to 100 percent more expensive thansimply expanding existing terminals and dredging the channels on the New Jerseyside of the harbor.

• Even with the proposed cross-harbor rail tunnel, a major new port complex on theBrooklyn waterfront would generate several thousand new truck trips each day onthe extremely congested, physically obsolete Brooklyn roadways. Without a majorincrease in highway capacity, a Brooklyn hub port would fail to be competitive.

Revitalizing Brooklyn’s Economy

A new Brooklyn port complex handling 1.2 million containers per year would generate about19,000 new jobs in the New York area, 7,000 to 10,000 of which might be located in Brooklyn.

The price of these new jobs, however, would be the displacement of several thousand existingjobs, as well as several thousand new jobs that might be created in Red Hook and Sunset Parkif the City were to pursue an alternative “mixed-use” development strategy on the Brooklynwaterfront. Net new job creation could ultimately be minimal, or even negative.

Displacement of existing jobs could possibly be minimized if marine terminals were developedon a combination of new landfill and existing vacant land. Such a facility, however, would bemuch smaller and would generate less than half the number of new jobs projected above.

Apart from the issue of net job-generating effects, the hub port proposal is intrinsically flawedbecause it fails to capitalize on Brooklyn’s genuine economic development potential: its role asa vital part of New York City’s knowledge-based, information-intensive economy. Rather thanlook toward the next century, this project is an attempt to recreate the Brooklyn economy ofthe 1940’s, an Industrial Era project that is ill-suited to the information age.

Supporting New York’s Manufacturing Sector

Proponents of the cross-harbor tunnel assert that it would help revitalize the City’s manufac-turing sector, by providing better access to low-cost rail freight service.

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Admittedly, there are some New York City manufacturing enterprises that would benefitfrom improved rail freight access, such producers of recycled paper, for example. But theoverwhelming majority of the City’s manufacturing firms and most firms that might locatehere in the future are not involved in the movement of goods by rail.

Even if it offered much better rail service, New York City simply would not be a competitivelocation for most of the high-volume, mass-production industries that heavily rely on railfreight. In contrast, the City can provide a competitive location for companies that manufac-ture high-value specialty products, many of which are closely tied to specialized local markets.

Furthermore, New York City’s emerging manufacturing firms ship and receive goods bytruck. They are unlikely to benefit very much—if it all—from the construction of a new railfreight tunnel.

Improving Regional Mobility

Mercer Management Consultants estimate that the total volume of freight moving into andout of the downstate New York region will increase by 23 percent over the next 25 years.Both the City and the region now depend heavily on the movement of goods by truck. Evenwithout a Brooklyn hub port, and even if it does little to help the City’s manufacturers, across-harbor rail tunnel could still prove worthwhile if it helps the City and the region toaccommodate this projected growth in traffic.

Mercer estimates that by 2020 a cross-harbor rail tunnel could reduce the volume of goodsentering or leaving the region by truck by 7.5 percent. But since most freight, including in-and outbound rail freight, would still be transported by truck within the City, the overall per-centage reduction in truck traffic would be much smaller.

New York City and New York State should therefore consider whether other investmentssuch as improved cross-harbor float service and improvements to major truck routes mightbe more cost effective in accommodating projected freight traffic growth.

An Alternative Agenda

It is essential to recognize the importance of making the New York-New Jersey port morecompetitive as well as the importance of strengthening Brooklyn’s economy, sustaining theCity’s manufacturing sector, and improving freight service into and out of the region. Thereare, however, far more effective ways to achieve these goals than building the proposed railtunnel and hub port.

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A more competitive port.

Cost-effective strategies for ensuring the competitiveness of the New York-New Jerseyport might include:

• Developing new container terminals in Bayonne and Jersey City, whichhave more available waterfront land and better landside access thanBrooklyn. These areas also present fewer dredging problems than PortNewark-Elizabeth.

• Expanding the existing Howland Hook Terminal on Staten Island.

• Improving productivity at existing container terminals through investmentsin more efficient equipment, better rail and highway connections, and newinformation technology.

A Strategy for Brooklyn’s economy.

New York City should pursue a multipronged strategy to strengthen the economy of itslargest borough. This approach might consist of the following:

• Promoting mixed-use waterfront development, by allowing more flexiblezoning, making city-owned land available for such development, imple-menting targeted public investments, and avoiding concentrated undesir-able waterfront uses.

• Preserving Brooklyn’s role in maritime trade by concentrating on labor-intensive “niche” cargo.

• Investing in Brooklyn’s schools, colleges, libraries, and cultural resources aspart of a strategy to develop the human infrastructure necessary to com-pete in the 21st century.

Strengthening the manufacturing sector.

There are several ways in which New York can enhance its competitiveness as a manufac-turing center:

• Reducing the cost of doing business in the City by promoting competitionin the production and distribution of energy, reducing taxes that greatlyaffect manufacturers, and continuing efforts to reduce the cost of workers’compensation.

• Making city-owned land more readily available for the development ofmodern industrial facilities.

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• Using the City’s education and training resources more effectively to sup-port the development of a skilled manufacturing workforce.

• Supporting industry-based efforts to enhance New York’s competitive-ness such as those of the Garment Industry Development Corporationand the Brooklyn Chamber of Commerce.

Improving freight service.

While a cross-harbor rail tunnel might be of some value in improving freight serviceand reducing congestion, there are other solutions that may be more cost effective. Theyinclude the following:

• Improving cross-harbor car float service.

• Continuing to improve existing rail freight facilities such as the StatenIsland Railroad.

• Improving truck access on major highways, such as the Cross-Bronx, theGowanus, and the Van Wyck, as well as on local truck routes.

• Strengthening the air cargo industry at and near John F. KennedyInternational Airport.

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INTRODUCTION

During the past two decades, there has been heightened awareness that public investment playsa vital role in enhancing private-sector productivity and economic growth. The administrationof Mayor Rudolph Giuliani has repeatedly recognized this principle—even in difficult times—through its commitment to capital spending on streets and sewers, funding for school con-struction, and the creation of the City’s new Transitional Finance Authority.

Several public officials and civic organizations in New York City are calling for the develop-ment of a major new “hub port” in Brooklyn, along with the construction of a new tunnelunder New York Harbor that would connect the Brooklyn waterfront with Northern NewJersey’s extensive rail freight network. Advocates for these long-discussed projects claim thatthey would provide a number of important benefits.

Proponents suggest that together, the new Brooklyn port and the cross-harbor tunnel wouldhelp maintain the competitiveness of the New York-New Jersey port, by providing new facili-ties that can accommodate a new generation of large container-ships, and by avoiding the highcosts associated with deepening the channels that serve the New Jersey side of the harbor.They also suggest that the hub port and rail tunnel would help revitalize Brooklyn’s economy,generating thousands of new jobs in the City’s largest borough. In addition, proponents haveargued that the cross-harbor tunnel would help revitalize New York City’s manufacturingsector, by providing better access to low-cost rail transportation. By the same logic, it wouldalso reduce highway congestion and improve air quality, through reduced truck traffic on theCity’s highways.

Unfortunately, the proposed hub port and rail tunnel are unlikely to deliver any of these bene-fits. A Brooklyn hub port would not provide an effective solution to the competitive problemsof the New York-New Jersey port, and it represents the wrong way to realize Brooklyn’s eco-nomic development potential. A cross-harbor tunnel would benefit very few of the City’s man-ufacturing enterprises and would at best have a modest impact on truck traffic in the City.Moreover, a Brooklyn hub port would almost certainly increase the volume of truck traffic onsome of the City’s most congested highways.

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Organization of the Report

1 Part One of this report briefly describes the proposed Brooklyn hub port andcross-harbor rail tunnel.

2 Part Two discusses whether a Brooklyn hub port would represent an effectiveresponse to the challenges the New York-New Jersey port faces. It also pres-ents alternative approaches to making the port more competitive.

3 Part Three considers the hub port’s potential contribution to Brooklyn’s eco-nomic revitalization and suggests other approaches to bolstering the bor-ough’s economy.

4 Part Four discusses how a cross-harbor rail tunnel might (or might not) helpsustain New York City’s manufacturing sector, as well as other strategies thatcould prove more effective in sustaining manufacturing.

5 Part Five examines the tunnel’s possible impact on highway congestion andcompares it to other ways of improving freight service in the City.

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1THE BROOKLYN HUB PORT AND

CROSS-HARBOR TUNNEL

We begin with a brief description and recent history of the hub port and rail tunnelproposals.

The Decline of the Brooklyn Waterfront

For much of this century, the Brooklyn waterfront—stretching from the Brooklyn Bridgesouthward to 65th Street in Bay Ridge—was the leading center of maritime trade in the NewYork-New Jersey port. Since the early 1960’s, however, the volume of cargo moving acrossBrooklyn’s piers has rapidly declined. This decline was primarily a consequence of the “con-tainer revolution.” In place of the traditional, labor-intensive method of moving individualcrates, bales, bags, and pallets on and off a vessel by hand, shipping companies began to movecargo in twenty- or forty-foot-long steel containers. Huge cranes could quickly lift these con-tainers off a ship and onto a waiting truck chassis, allowing the cargo to move quickly to itsfinal destination.

Anticipating the container revolution, the Port Authority began building the world’s first portspecifically designed to serve containerships in the late 1950’s on a large tract of vacant land inElizabeth, New Jersey (see Figure 1). In Brooklyn, however, the broad expanse of open spacerequired for large-scale container operations was simply not available, due to the dense checker-board of industrial buildings and residential blocks extending up to the waterfront.

Moreover, New York City officials initially showed little interest in containerization, reflectinglocal longshore unions’ concerns about protecting Brooklyn’s labor-intensive breakbulk opera-tions. Not until the 1970’s did the City and the Port Authority finally develop a small container-port in Red Hook. By that time, the volume of marine cargo handled in Brooklyn had declinedby 90 percent, and Elizabeth had become the unchallenged center of maritime activity in theNew York-New Jersey port.

Brooklyn does not claim the only “working waterfront” in New York City, however. In the late1970’s and early 1980’s, the Howland Hook terminal on Staten Island—serving as the principalhub for United States Lines—emerged as a major containerport. Container operations at

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Howland Hook ceased after U.S. Lines went bankrupt in the late 1980’s, but the terminal wasreopened in 1996 and container traffic has since grown steadily.

In contrast, the Brooklyn waterfront continues to languish. Today, a mix of container andbreakbulk activity in Red Hook and facilities for handling cocoa and coffee at the City’sSouth Brooklyn Marine Terminal are all that remain of the borough’s long history of mar-itime trade.

Bigger Ships…

Since the late 1980’s, changes in the shipping industry and in the nation’s ports have led somepublic officials to take another look at the feasibility of developing a major new containerport in Brooklyn. The first of these changes is the development of a new generation of verylarge containerships. As the volume of cargo carried along the world’s sea lanes has grown,shipping companies have sought to improve productivity and reduce costs by increasing thesize of their vessels. In the 1980’s, “post-Panamax” containerships—ships too large to fitthrough the Panama canal, each with a capacity of more than 4,000 “twenty-foot equivalentunits”— were introduced in the transpacific trade.1 Today, the newest containerships carrymore than 6,000 TEUs.

Bigger ships require deeper berths and channels. The largest ships in service early in the nextcentury will require channel depths of more than 50 feet. This is at least ten feet deeper thanthe channels that take ships from Lower New York Bay into Port Newark-Elizabeth. Already-authorized dredging projects will increase channel depths to 45 feet, but additional dredgingwill clearly be required before Port Newark-Elizabeth can serve the largest containerships.

…Bigger Problems

Fifteen years ago, deepening the port’s berths and channels to serve larger ships might nothave been an especially daunting challenge. The federal authorization and permittingprocesses were erratic and time consuming, and the cost of dredging was substantial—espe-cially in the Kill Van Kull, where deepening the channel requires not just dredging up mudand sand but cutting into bedrock. But in the end, there would have been little questionabout the technical or financial feasibility of the project.

What has changed in the past fifteen years, however, is the perception of dredging as an envi-ronmental issue. In 1988, largely in response to protests against ocean dumping of sewagesludge, Congress approved the Ocean Dumping Act, which prohibited disposal at sea of anymaterial with “other than trace contaminants.”2 At the same time, advances in testing tech-nology were making it possible to test the mud, sand, and rock being dredged from thebottom of the harbor for the presence of contaminants such as dioxins in infinitesimallysmall amounts—as small as parts per trillion. This is the equivalent of being able to detect a

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quantity of hazardous material the size of a peppercorn that has been evenly dispersedthroughout a cubic mile of dirt. While it is not at all clear that contamination in such minuteamounts presents any significant environmental or health risks, environmentalists and clean-ocean advocates began campaigning for an end to the traditional method of disposing ofdredged material, which was dumping it at a site six miles east of Sandy Hook, commonlycalled “the Mud Dump.”

In 1991, the U.S. Environmental Protection Agency promulgated new standards for treatmentof dredged material based on the new tests. This resulted in the reclassification of most ofthe mud being dredged from New York Harbor from Category I (clean material suitable fordisposal at sea) to Category II (suitable for ocean disposal under certain restrictions) or III(unsuitable for ocean disposal). The new standards also made the requirements for manage-ment of Category II more stringent. In 1993 under pressure from environmentalists, theEPA again tightened its standards regarding the trace levels of dioxin that would be allowedin material being deposited on the ocean floor.3

The new federal regulations have sharply increased the cost of disposing of dredged materialfrom $3 to $4 per cubic yard to as much as $100, or even more. As a result, the cost ofdredging required to accommodate larger ships has also escalated, as have the challengesinvolved in finding acceptable places to put dredged material.

The new requirements have greatly increased the cost of maintenance dredging at Newark,Port Elizabeth, and Howland Hook and have heightened the cost of deepening channels to45 feet. But it is not yet clear how they will affect the cost of dredging the port’s channels toa depth of 50 feet. Material that is excavated at lower depths may prove to be cleaner thanthat which is found on the harbor floor. Nevertheless, disposal of dredged material will beexpensive.

In a report prepared for New York City’s Economic Development Corporation, Booz-Allen& Hamilton estimates that based on some fairly pessimistic assumptions about the levels ofdioxin tainting that will be found, the cost of excavating the channels serving Newark andElizabeth to a depth of 50 feet will be more than $2.4 billion.4 And even if costs prove to bemuch lower, the complex federal authorization, funding, design, and construction process willtake at least ten years to complete.

Brooklyn Reconsidered

The costs and challenges associated with dredging have led in some quarters to renewedinterest in Brooklyn’s potential for port development. The South Brooklyn waterfront hasone major advantage over Port Newark-Elizabeth: because it is closer to the main navigationchannels in New York Bay, and because the channels serving Brooklyn are naturally deeperthan those serving Newark and Elizabeth, the dredging required to accommodate the largest

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containerships in Brooklyn would be much less extensive. Recognizing Brooklyn’s dredging costadvantage, New York Congressman Jerrold Nadler and other public officials have called fordevelopment of a major new containerport on the Brooklyn waterfront.

While no definitive plans for development of a Brooklyn hub port have been formulated, theconcept would involve creating new facilities for loading and unloading large containerships, aswell as associated support facilities, in the area between the existing Red Hook Marine Terminaland the Brooklyn Army Terminal (see Figure 2). At a minimum, the new port would requireseveral hundred acres of waterfront land and possibly more than a thousand acres. A prelimi-nary study prepared by Booz-Allen & Hamilton for the City’s Economic DevelopmentCorporation projects phased development of a 1,100-acre facility with an ultimate capacity of3.4 million TEUs.

As envisioned by Booz-Allen, part of the new facility would be built on existing land, and parton new landfill. Booz-Allen’s conceptual plan suggests filling in two areas: the Atlantic Basin,south of the existing Red Hook container terminal, and the area between the existing bulkheadand the pier line at Bush Terminal in Sunset Park.

The total cost for the new facility would be approximately $3.1 billion, including $550 millionfor dredging.5

A New Rail Link

If relatively low dredging costs are Brooklyn’s great advantage, poor landside access is its greatweakness. Rail access to the waterfront is severely limited, and truck access depends on theobsolete and extremely congested Gowanus Expressway. To resolve this problem,Congressman Nadler and other advocates of maritime development in Brooklyn have pro-posed construction of a new tunnel under New York Harbor that would connect the Brooklynwaterfront to Northern New Jersey’s dense rail freight network.

The idea of building a rail tunnel from New Jersey to Brooklyn is not new. It was one of manyprojects included in a plan for regional rail freight integration adopted by the two states whenthe Port Authority was created in 1921. The Port Authority, however, was never able to securethe cooperation (or financial participation) of the major railroads that served the region in the1920’s, and without their support, the plan was doomed.

To further complicate matters, New York City Mayor William Hylan opposed having the PortAuthority build a Jersey City-to-Brooklyn tunnel. Instead he favored a Staten Island-to-Brooklyn tunnel, built and controlled by the City; but this proposal also failed. A few yearslater, with the onset of the automobile age, the Port Authority began shifting its emphasis fromrail freight to the development of vehicular bridges and tunnels.

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As with the hub port, detailed plans for a rail tunnel have not yet been developed. Two varia-tions have been proposed. One would connect the existing 65th Street rail yard in Brooklyn tothe Greenville Yard in Jersey City; the other would connect 65th Street to the North Shore ofStaten Island and the recently rehabilitated Staten Island Railroad (see Figure 3). Preliminaryestimates put the cost of either alternative at about $1 billion.

While establishing a new rail link would be essential to the development of a Brooklyn contain-erport, rail advocates note that the case for the cross-harbor tunnel does not necessarily dependon development of the port. Direct rail service from northern New Jersey into Brooklyn, theyargue, could benefit a wide range of local businesses and consumers, by reducing the cost ofmoving goods into and out of the City.

Based on a preliminary analysis of alternatives for improving rail service into Brooklyn, NewYork City initiated a “Major Investment Study” in 1997. It offered a more detailed study of thecosts and benefits of the proposed rail tunnel—a necessary first step in the process of seekingfederal funding for the project. The study is scheduled for completion in 1999.

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2MAINTAINING A COMPETITIVE PORT

The rationale behind the development of a Brooklyn hub port is based on the argument

that construction of such a facility, in combination with a cross-harbor rail tunnel, represents

the best hope for maintaining the competitiveness of the New York-New Jersey port. This sec-

tion examines the plausibility of that argument.

The Challenges of Growth

For the most part, the challenges facing the New York-New Jersey port are essentially positivein nature: How can the port respond most effectively to the opportunity for sustained growthin maritime trade?

Accommodating larger ships.

Perhaps the most immediate challenge is the need, described in Part One, to accommo-date a new generation of large containerships. In the intensely competitive world of oceanshipping, the major carriers are constantly looking for ways to drive down the unit cost ofmoving a container from Southeast Asia or Japan to the U.S., or from the U.S. to Europe.Over time, this has meant cramming more and more containers into larger and largerships. The first generation of containerships (in the 1960’s) carried 600 to 800 boxes. Bythe late 1970’s, ships with a capacity of 2,000 twenty-foot equivalent units were common.Of the new ships delivered between 1995 and 1997, nearly two-thirds were rated at 4,000TEUs or more.

The newest ships in the Europe-to-East Asia trade are rated at 6,000 TEUs; and the firstships of this size are scheduled to enter the transatlantic trade within the next fewmonths. A leading industry consultant predicts that by the year 2010, a third of all con-tainer traffic will be carried on ships of more than 4,000 TEUs. These very large ships canreduce the “per-slot” cost of transporting a container by as much as 50 percent.6

(It is important to note that very large ships will not account for all of the growth in mar-itime trade. On some routes, carriers will instead choose to make more frequent calls,using smaller ships. Evergreen, one of the world’s largest container lines, recentlyannounced plans for a new service between the Atlantic coast of South America andmajor U.S. East Coast ports using seven 1,100-TEU ships.7)

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Table 1 Projected Composition of Containership Fleet, 2010

Number Average % of TotalClass of Ships Size (TEUs) Capacity

Feeder 701 585 6.9%Handy 940 1,400 22.0Sub-Panamax 414 2,426 16.8Panamax 489 3,822 31.2Post-Panamax 261 5,295 23.1

Source: Booz-Allen

Amortizing the enormous capital costs of very large vessels means keeping them con-stantly on the move; it is a basic principle of the maritime industry that “ships don’tmake money while they’re sitting at the dock.” As a result, ships have gotten bigger andthe number of ports at which each ship calls has declined. Over time, the trend is thusfor container traffic to be concentrated in a smaller number of larger ports.

To achieve this hub port status, ports need to be able to accommodate very large ships.Physically, they need the following:

• Channels that are deep enough and wide enough to accommodate theseships;

• An adequate number of large berths;

• Enough upland space to handle the complicated logistics of quicklymoving thousands of containers on and off a ship; and

• The rail and highway connections needed to move cargo efficiently toinland destinations.

Hub ports also need to be cost competitive—especially with respect to the cost andproductivity of longshore labor. And it helps—although the success of the ports ofSeattle and Tacoma suggests that it may not be essential—to be situated in a denselypopulated local market.

While a detailed evaluation of New York-New Jersey’s competitiveness as a hub port isbeyond the scope of this report, we can note that the port scores fairly well on most ofthese criteria. In terms of the total area available (or potentially available) for containeroperations, it is the largest port on the East Coast and one of the largest in the world.Port Newark-Elizabeth has excellent connections to the interstate highway network, andHowland Hook’s highway access is almost as good.

Extensive investments in rail freight infrastructure have translated into improved railservice between the New York-New Jersey area and markets in the Midwest. Furtherimprovements, however, will be required to handle projected traffic growth. And throughthe joint efforts of the New York Shipping Association and the InternationalLongshoremen’s Association, New York-New Jersey’s historic labor cost disadvantage hasbeen steadily reduced. For the first time in thirty years, New York-New Jersey can nowplausibly claim to be cost-competitive with other East Coast ports as a gateway to theMidwest.

For the New York-New Jersey port, the most serious barrier to competing effectively forhub port status remains the problem of channel and berth depth and the high costs andregulatory difficulties associated with dredging. As Table 2 shows, the port is at a real dis-advantage on this score relative to some leading competitors—although several othermajor ports also face serious problems.

Table 2 Channel Depths of Selected North American Ports

Port Depth (feet)

Seattle 175Long Beach 76Halifax 60Hampton Roads 50Baltimore 50Los Angeles 46Oakland 42Savannah 42New York-New Jersey 40-45Charleston 40Jacksonville 38

Source: Journal of Commerce

The impact of the dredging problem on the port’s competitiveness was recently broughthome when Sea-Land and Maersk (two of New York-New Jersey’s three largest cus-tomers) announced that they would seek proposals for the development of new containerterminals from five other East Coast ports. A Maersk executive characterized the requestfor proposals as “certainly tied to our frustration over the inability of New York port offi-cials to make others understand that the future of ocean commerce is directly tied totransportation infrastructure. We have these big new ships coming to the East Coast thissummer and must soon realize their unit-cost benefits...”8

Some industry experts see the Sea-Land/Maersk RFP as an attempt by the two carriers topressure New York-New Jersey to accelerate its dredging program—and to extract morefavorable lease terms—rather than as evidence of a real desire to leave Port Elizabeth.

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But it is also a clear signal that New York-New Jersey cannot afford to take for grantedits status as the East Coast’s leading port.

The threat that the port faces was further dramatized in July 1998, when Maersk’snewest containership, the Regina Maersk, called at Port Elizabeth for the first time. Thenew ship has a capacity of 6,000 TEUs, but it carried only a fraction of its capacitybecause fully loaded, it would not have been able to clear the channels leading into PortElizabeth. Maersk executives have acknowledged that the Regina Maersk’s visit wastimed in part to send New York-New Jersey officials a message about the port’s vulnera-bility.

Accommodating long-term growth.

While the ability to accommodate the largest ships may be the most pressing challengefacing the New York-New Jersey port in the near term, the steady growth of thenation’s maritime trade means that in the long run, the port’s competitiveness will alsodepend on its ability to handle a much larger volume of cargo.

For the past several decades, America’s international merchandise trade has generallygrown faster than its domestic economy, and this trend is expected to continue into thefuture. Continued growth in international trade will mean continued growth in containertraffic. A forecast prepared for the City’s Economic Development Corporation in 1997projected that under the “most likely” scenario (essentially one that assumes no changein New York-New Jersey’s position relative to other ports and is not limited by capacityconstraints), the volume of containers moving though the port will more than triplebetween 1995 and 2020, from 2.3 million TEUs to 7.3 million per year.9 A somewhatmore conservative forecast prepared for the Port Authority in 1997 projected a totalvolume of 6.2 million TEUs in 2020.10

Table 3 Containerized Cargo Forecasts for the New York-New Jersey Port, 1995-2020 (thousands of TEUs)

1995 2000 2010 2020

Booz-Allen 2,262 3,366 5,355 7,319Port Authority 2,262 2,654 4,127 6,186

Sources: Booz-Allen, Port Authority

Booz-Allen & Hamilton estimates the current capacity of New York-New Jersey con-tainer terminals at about 4.1 million TEUs—enough to accommodate projected growthunder their “most likely” scenario through about 2005. Under the Port Authority’s fore-cast, the port would reach this volume in 2010. Under either scenario, accommodatingprojected long-term growth will require a substantial increases in container-handlingcapacity within the next ten years.

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Based on the port’s results for 1997, these forecasts may need to be revised upward. Thevolume of container traffic through the New York-New Jersey port grew by 13.8 percentin 1997. Containerized cargo moving to or from the Midwest grew by 27 percent. For thefirst time in this decade, New York-New Jersey increased its share of North Atlantic con-tainer traffic, from 53.3 to 54.6 percent.

This strong performance continued through the first half of 1998, although Asia’s eco-nomic problems have since begun to erode the port’s export volume. Nonetheless, NewYork-New Jersey imports much more ocean cargo from Asia than it exports, and Asianimport traffic is still growing. Moreover, with its strong ties to Europe and Latin America,New York-New Jersey is much less dependent on Asian trade than West Coast ports. Theoutlook for continued growth thus remains positive.

There are generally three ways in which the port might increase its container-handlingcapacity:

• Physically expanding the port, that is, expanding existing terminals ordeveloping new ones;

• Reorganizing the use of land within the port to increase total container-handling and storage capacity within the same physical “envelope;” or

• Accelerating the movement of containers into and out of the port,increasing the annual throughput of containers per acre of terminal space,rather than increasing the number of acres.

In the long run, accommodating the kind of growth forecast by Booz-Allen and the PortAuthority will probably require some combination of all three of these approaches.

Is a Brooklyn Containerport the Answer?

At first glance, the development of a major new containerport in Brooklyn might seem to bean ideal solution to the twin challenges facing the Port of New York-New Jersey. It wouldenable the port to serve very large containerships with much less dredging than would berequired in Elizabeth or Howland Hook; and it would also provide the added capacity neededto accommodate long-term growth in container traffic. But further examination suggests thatthe concept of a Brooklyn hub port is seriously flawed and unlikely to provide a solution to thecompetitive problems of the New York-New Jersey port.

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High cost.

The cost of developing major new container facilities in Brooklyn would be quite high.As noted in Part One, Booz-Allen estimates the cost of developing a 1,100-acre ter-minal complex, along with the proposed cross-harbor rail tunnel, at approximately $4.1billion. As Table 4 shows, the cost of the proposed Brooklyn facility, measured in capitalcost per unit of capacity, would be 54 percent higher than Booz-Allen’s estimate of thecost of dredging the Newark-Elizabeth channels to a depth of 50 feet and doubling thesize of the Port Elizabeth container terminals.

Table 4 Capital Cost of Capacity Increases: Brooklyn vs. Newark-Elizabeth

Total Annual Capacity Capital Cost

Acreage (000’s of TEUs) per TEU

Brooklyn 1,129 3,387 $1,224

Newark-Elizabeth 1,825 5,475 797

Source: Booz-Allen & Hamilton

Moreover, dredging of the Kill Van Kull and Elizabeth channels to 45 feet has alreadybeen authorized; work is scheduled to begin later this year. When compared to the incre-mental cost of going from 45 to 50 feet, Brooklyn’s cost disadvantage is even greater.

Calculation of the ultimate net cost of various alternatives to city and state governmentsand users is complicated by current uncertainties about the availability of federalfunding. Under existing statutes, 65 percent of the cost of deepening federal channels—that is, the major shipping channels in the harbor—is borne by the Army Corps ofEngineers. But this funding is subject to the vagaries of the budgetary process. Thisyear, for example, the Clinton Administration has proposed a sharp reduction in thefunding of dredging projects. And the recent Supreme Court decision invalidating thefederal harbor maintenance tax has created further uncertainty about the future of fed-eral financing of maintenance dredging. The federal government will almost certainlycontinue to meet some dredging costs, but how much is not yet clear.

In contrast, the federal government does not contribute to the construction of marineterminal facilities. The full cost of building new container terminals in Brooklyn wouldthus have to be financed locally.

Advocates of the cross-harbor freight tunnel have suggested that the project could beeligible for federal transportation funding as a “project of national significance.” Theycite as precedent the federal government’s contribution to the development of theAlameda Corridor, which will improve rail and highway access to the ports of Los

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Angeles and Long Beach. But the availability of federal funding for such projects—andwhether the cross-harbor tunnel could qualify—are uncertain at this point.

On balance, the fact that Washington will continue to share the cost of dredging but willnot help finance terminal development means that Brooklyn’s net cost disadvantage—interms of costs that would have to be borne by state and local governments or shippers—is probably greater than its total cost disadvantage.

Inadequate truck access.

In addition to cost considerations, the Brooklyn waterfront presents a problem that fur-ther calls into question its suitability as a site for a major new container terminal: seriouslydeficient truck access. While improved rail facilities and services are critical to the NewYork-New Jersey port’s ability to compete for Midwestern cargo, 75 percent of all con-tainer traffic through this port originates from or is bound for destinations within a 260-mile radius of the harbor. As a result, more than 85 percent of all containers are carriedto or from the port by truck. (Moving containers by rail is rarely cost effective for trips ofless than 700 to 1,000 miles.) Even if New York-New Jersey succeeds in significantlyincreasing its share of Midwestern and other long-distance cargo, it is unlikely that theshare of all containers carried by rail would ever increase beyond 30 percent.

To handle a growing number of very large containerships and to provide significant relieffrom overall capacity constraints, we can project that a new container terminal wouldrequire a capacity of at least 2.0 million TEUs per year. We can further project that with70 percent of its cargo arriving or departing by truck, a container terminal of that sizelocated on the Brooklyn waterfront could add 3,500 trucks per day to the GowanusExpressway—a highway that is already severely congested as well as structurally obsolete.11

Some proponents of the development of a Brooklyn hub port have suggested that theproblem of truck access could be resolved by first moving all of the new terminal’s in-bound cargo via the new cross-harbor tunnel to a New Jersey intermodal rail yard, wheremost containers would be shifted to trucks. (For outbound cargo, the process would bereversed, with containers transferred from truck to rail in New Jersey for delivery to theBrooklyn port.) While this arrangement would keep most container traffic off theGowanus, it has two serious drawbacks. The extra step would add to the cost of moving acontainer via the Brooklyn port and would increase the time required to move cargo fromthe pier to its final destination. Under these conditions, a Brooklyn hub port would find itdifficult to compete against ports that offer faster and more direct highway connections.

It is difficult to envision a Brooklyn hub port being competitive without major improve-ments in truck access. This might require construction of a major new highway to replacethe Gowanus. But a new highway would cost anywhere from $1 billion to well over $2 bil-

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lion, a cost not included in Booz-Allen’s estimate of the cost of a Brooklyn hub port.New York State has already rejected the idea of building a new highway, opting insteadfor a major reconstruction of the existing road. This approach would ensure the struc-tural integrity of the Gowanus for the next several decades, but will not increase itscapacity.

Given the critical nature of this problem, it might make sense for New York City toconsider the alternative solution of building a Brooklyn-to-New Jersey tunnel that wouldaccommodate both trains and trucks. Such a facility would allow trucks to reach or leavethe waterfront without venturing onto the Gowanus. At the tunnel’s eastern end, itcould connect with the Portway, a new truck-only route now being planned by the NewJersey Department of Transportation. (A combined rail-truck facility would probablynot be feasible in the case of a Brooklyn-to-Staten Island tunnel; there is no point alongthe Staten Island waterfront that would offer easy connections from the tunnel to boththe Staten Island Railroad and the Staten Island Expressway.)

A combined facility would, however, be substantially more expensive than a rail-onlytunnel and would thus, like a new highway, add to the already significant cost disadvan-tages associated with Brooklyn port development.

Building a More Competitive Port

A major new Brooklyn container terminal is not a realistic solution to the competitive prob-lems of the New York-New Jersey port. Keeping the port competitive as a center of con-tainerized shipping will instead require aggressive action on several fronts. Among these arethe deepening channels and berths, reconfiguration of port facilities to make more effectiveuse of the available land, improvements in rail and truck access, and steady improvements inproductivity.

There are several areas within the port that are more promising than Brooklyn as potentiallocations for expanded container operations. We will highlight two of them here.

Reconfiguring Bayonne and Jersey City facilities.

The New York-New Jersey port could enhance its long-term competitiveness by reor-ganizing the use of land within the port. For example, because they are located onUpper New York Bay, marine terminals on the Bayonne-Jersey City waterfront (seeFigure 1) would, like Brooklyn, need only limited dredging in order to serve very largecontainerships. But the Bayonne and Jersey City terminals, which already have railservice and are located just a short distance from New Jersey’s major interstate high-ways, could more easily develop the landside connections that are so problematic inBrooklyn.

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The Global Marine Terminal is already one of the port’s busiest container terminals and itis also the only such facility in the New York-New Jersey region that is privately owned.Both the Defense Department’s Bayonne Military Ocean Terminal, which will soon bemade available for civilian use, and Port Authority’s Auto Marine Terminal could be con-verted relatively easily for use as container terminals. (Automobile carriers, which do notrequire the same depths as large containerships, could be handled at shallower-draft facili-ties such as Port Newark.) Together, these two properties could provide 400 or more acresfor development of new container terminal and 1 to 1.5 million TEUs of additionalcapacity—at about one-third the cost per TEU of a Brooklyn containerport.12

Developing Howland Hook.

The recent interest in the development of a Brooklyn hub port in part reflects a desire toensure that the New York City side of the harbor benefits from the continued growth ofmaritime trade. But the City’s greatest asset in the competition for port business is not theBrooklyn waterfront but rather the Howland Hook Container Terminal on Staten Island.Howland Hook has an existing base of container traffic. The Goethals Bridge and thenewly renovated Staten Island Railroad provide excellent landside connections. And thereis space to accommodate substantial growth, both at the existing terminal and on vacantindustrial land nearby.

The City’s top priority in negotiations with the Port Authority, as well as the state and fed-eral government’s interest in redeveloping the port, should be to ensure that HowlandHook gets the level of investment and the marketing commitment it needs to capture asignificant share of the expected growth in North Atlantic container traffic.

Improving productivity.

Given the density of development around the harbor, the high cost of waterfront land,and the even higher cost of creating new land, the physical expansion of the New York-New Jersey port commensurate with projected growth in container traffic will not be pos-sible in the long run. New York-New Jersey’s continued competitiveness will depend onits ability to increase the productivity of port land to increase the annual throughput ofcontainers per acre of terminal space.

Improving productivity will involve action on several fronts, such as investment in cranesthat can perform more “lifts” per hour and improvements in rail and highway connectionsfor speedier movement in and out of the port. It will also require greater use of informa-tion technology to improve the efficiency of port logistics and minimize the time con-tainers spend on the ground. Just as companies like Walmart have substituted informationfor inventory, the twenty-first century containerport will have to substitute informationfor acreage.

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3REVITALIZING BROOKLYN ’S ECONOMY

Even if the construction of a Brooklyn hub port and cross-harbor rail tunnel is not the

most effective way to maintain the competitiveness of the New York-New Jersey port, one

must ask if these projects are justifiable in terms of their potential contribution to economic

revitalization in Brooklyn and to the creation of much-needed blue-collar jobs.

Some Benefits to Brooklyn…

The potential benefits of development of a new hub port in Brooklyn are significant. Amajor new container terminal of the size envisioned by the City could provide jobs for 1,000or more longshore workers, workers who under the current contract with the InternationalLongshoremen’s Association are paid $23 or more per hour.

In addition to the jobs directly involved in loading and unloading containerships, a new ter-minal would generate thousands of additional jobs for other workers, including truck drivers,train crews, warehouse workers, customs brokers, and security guards. The Port Authorityestimates that every 1,000-container increase in the volume of container traffic through theport generates 2.8 new jobs on-site, and 13.2 off-site (see Table 5).13 Based on this estimate,we can project that a facility handling 2 million TEUs of new traffic annually would generate3,360 jobs on-site and 15,840 off-site.

Table 5 Incremental Impact of Increased Container Traffic

Jobs per 1,000

On-site jobs Containers

Ocean transportation 0.06Marine cargo handling 1.80Local water transportation 0.54Support services 0.40

Off-site jobs

Trucking 4.00Rail transportation 0.50Warehousing 2.30Wholesaling 2.40Trade-related services & government 4.00Total direct jobs 16.00Indirect and induced effect 13.00

Source: Port Authority of NY & NJ25

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Not all of these jobs, however, would be located in Brooklyn—or even in New York City. For severalreasons, Brooklyn is unlikely to develop the kind of large-scale regional distribution facilities that havegrown up in northern and central New Jersey. Among them are the following:

• There is relatively little land available in Brooklyn on which to develop such facilities.

• Poor truck access makes Brooklyn a difficult location for distribution activity.

• Distribution facilities can be developed at a considerably lower cost in outlying parts ofthe region.

Given these limitations, a major new Brooklyn containerport might be expected to generate 7,000 to10,000 new jobs in the borough.

…But at What Cost?

Whatever its benefits, development of a hub port would entail substantial costs as well. For Brooklyn,the greatest cost might ultimately prove to be opportunity cost—the cost of not seizing alternativeopportunities for development that a new containerport would foreclose.

During the past several years, a variety of neighborhood organizations, Brooklyn community boards 6and 7, and the City Planning Commission have all formulated proposals for the revitalization of theBrooklyn waterfront.14 While the details of these plans vary, they have two major elements incommon:

• Accommodation of a wide mix of uses on the waterfront—including maritime industryoperations, but also including other commercial and industrial uses, residential develop-ment, and recreation.

• Providing extensive public access to the water’s edge.

Construction of a major new containerport in Brooklyn would severely limit opportunities for thesealternative types of development. In fact, if the new containerport were as large as that envisioned byBooz-Allen, it would effectively preclude any of them. And containerport development would alsoensure that large stretches of the waterfront would be completely inaccessible to the public.

Moreover, while some of the land on which the proposed containerport would be built is now idle,some of it—for example, the Bush Terminal and Industry City areas in Sunset Park—is already inactive use. These areas, as well as long-dormant industrial areas along the Red Hook waterfront, havein recent years provided low-cost space, close to Manhattan, to a wide range of new enterprises asdiverse as the manufacturing of furniture and home furnishings, apparel, food products, support serv-ices for video and film production, and “big-box” retailing.

The Southwest Brooklyn Industrial Development Corporation estimates that about 15,000people work in the Sunset Park industrial area, which extends west of Third Avenuebetween17th Street and 65th Street. Depending on its ultimate configuration, a major newcontainerport could displace several thousand existing jobs—and thousands more that mightbe created over the next decade if alternative types of waterfront development were allowedand encouraged.

Business and job displacement could be minimized if the development of new containerfacilities were limited to existing vacant land and newly created landfill. But creating severalhundred acres of new landfill would be expensive and time-consuming and could also raiseserious environmental issues.

Even if creating new landfill proves feasible, the total acreage that could be created by fillingwould be limited. At Bush terminal, for example—one of the two areas targeted for creationof landfill in the Booz-Allen report to EDC—filling the area now occupied by old fingerpiers and all of the underwater land between the bulkhead and the pier line would createabout 82 acres of new land. Filling in Atlantic Basin would create about 25 acres. Thus, evenwith extensive landfilling, it would be difficult to create more than 200 acres of new con-tainer terminal capacity in Brooklyn without major displacement of existing waterfront busi-nesses. A 200-acre terminal would probably generate fewer than half the number of new jobsprojected above.

Taking into account the potential displacement of existing jobs and the loss of new jobs thatmight be created under alternative waterfront development scenarios, the net job-generatingimpact of a Brooklyn containerport is likely to be minimal, especially in relation to the publicinvestments required. In the long run, it could even be negative.

This discussion of opportunity costs is not purely speculative. Brooklyn may already bepaying the cost in the form of “planner’s blight,” the kind of stagnation that occurs whenpolitical and governmental commitments to more ambitious (and often highly unrealistic)long-term plans lead local officials, property owners, and investors to pass up more imme-diate opportunities for development. Just spending several years studying containerportdevelopment can undermine the pursuit of more realistic alternatives.

The Right Future for Brooklyn?

Whether or not the containerport represents the most productive use of the waterfront, theproposed project is questionable in terms of the future it implies for Brooklyn. It is alsoquestionable in terms of the priorities for allocation of public capital that flow from itsvision for Brooklyn’s future.

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The principal source of New York City’s competitive advantage has long been in the knowl-edge- and information-intensive sectors of its economy, such as finance, business services,print and electronic media, the arts and education; and the City’s reliance on these sectors willbe even greater in the future.

Rather than seeking to recreate the Brooklyn economy of the 1940’s, New York’s economicdevelopment strategists should be asking how Brooklyn can most effectively build on theadvantages it already enjoys as a vital part of the worldwide information economy’s central city.Some of Brooklyn’s most vibrant sectors exemplify its strengths in this information economyas well as the role the borough could play in the future. They include:

• The thousands of enterprises large and small that provide specialized goods andsupport services to Manhattan’s finance, business service, and design-related indus-tries.

• The growing community of artists and arts-related enterprises that has emerged inWilliamsburg and Red Hook.

• The global financial information services that are concentrated in Metrotech.

• The borough’s higher education sector, including Polytechnic University, LongIsland University, Saint Francis College, Brooklyn College, the State UniversityHealth Science Center/Downstate Medical Center, Brooklyn College, New YorkTechnical College, and other schools.

Moreover, Brooklyn has leading cultural facilities, such as the Brooklyn Academy of Music,Brooklyn Museum, and Brooklyn Historical Society, that attract visitors from around the worldand that are vital elements in maintaining the intellectual capital of the city and region.

Further, as technological innovation and global integration make it possible to do businessfrom anywhere, the competitiveness of cities in the global marketplace increasingly depends ontheir attractiveness as places to live. The quality and diversity of Brooklyn’s neighborhoods isthus essential not only to the borough’s own future but to the future of the entire City. This suggests that planning for the future of the waterfront needs to take into account itsunique potential as a resource for making Brooklyn a more exciting, more attractive place tolive. It further suggests that investments in facilities that help define the quality of neighbor-hood life—schools, libraries, cultural institutions, public transit, parks, and other publicspaces—deserve high priority in the City’s planning for use of its scarce capital funds. Oneither count, construction of a major new containerport is a highly questionable use of a verylimited resource.

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Strengthen Brooklyn’s Economy

Even if it were feasible, development of a major new containerport would probably not bethe most effective way to realize Brooklyn’s economic development potential. There are sev-eral steps the City could take to strengthen the economy of its largest borough.

Promoting mixed-use waterfront development.

As noted above, several studies of the Brooklyn waterfront have recommended mixed-use development—that is, a mix of residential, commercial, industrial, maritime, andrecreational uses—as the best way to realize the waterfront’s development potential. TheCity could help promote this type of development by:

• Rezoning waterfront areas to permit more flexible, mixed-use develop-ment.

• Making City-owned waterfront land available for mixed-use development.

• Investing in the public improvements such as environmental cleanup,better public access, and new recreational facilities that would help attractpeople and private capital to the waterfront.

• Resisting the all-too-evident temptation to randomly “dump” undesirableuses such as car impoundment lots, waste management facilities, and sexshops along the waterfront.

Preserving maritime activity.

Promoting mixed-use development need not mean abandonment of Brooklyn’s role inmaritime trade. As the volume of traffic through the New York-New Jersey portincreases, Brooklyn could benefit from new opportunities for growth. This would espe-cially be so if the expansion of container terminals elsewhere in the harbor forces therelocation of facilities that now handle non-containerized, break-bulk cargo. Breakbulktrade may represent an especially attractive opportunity for Brooklyn, since it is typicallymore labor-intensive than containerized cargo-handling.

In the long run, it might also make sense to consider relocation of the existing RedHook container terminal to the now-underutilized South Brooklyn Marine Terminal inSunset Park. SBMT would offer more space, easier access to the Gowanus, and the railconnections that Red Hook lacks. Moving container operations to SBMT would alsoopen up new possibilities for mixed-use development in Red Hook.

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Investing in Brooklyn’s human resources.

As New York City’s economy becomes increasingly knowledge-intensive, educationbecomes more and more critical to the economic fortunes of its residents. Probably noinvestment the City could make in Brooklyn would have a greater long-term return thaninvestments in upgrading the quality of the borough’s schools and colleges.

Brooklyn will continue to need jobs for those of its residents who lack the skills and apti-tudes for—or are simply not interested in—work in finance, business services, and otherleading knowledge-based sectors. But the best way to ensure that the City generates a widearray of blue-collar jobs in the future is to ensure its continued primacy as a center of theinformation economy. If the City is strong in its knowledge-intensive “export” sectors,support jobs in construction, maintenance, transportation, distribution, tourism, retailing,health care, and other fields will follow.

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4SUPPORTING NEW YORK CITY ’S

MANUFACTURING SECTOR

While proposals for the development of a hub port and a cross-harbor rail tunnel are

usually linked, advocates argue that the benefits of the tunnel would not be limited to the

maritime industry. Some have suggested that by providing the kind of direct rail freight

service the City has historically lacked, the cross-harbor tunnel would help stimulate a revival

of New York’s manufacturing sector.

The Decline of the Manufacturing Sector

The desire to find a strategy that would lead to a resurgence of manufacturing in New YorkCity is understandable. Between 1955 and 1995 manufacturing employment in New York Citydeclined by 70 percent, from about 950,000 to 260,000.15 The loss of manufacturing jobscontributed to the steep decline of industrial areas and working-class neighborhoodsthroughout the City.

The reasons for the decline of New York’s manufacturing sector are many and complex.Among the most commonly cited causes is the relatively poor quality of freight transporta-tion in the City. Even during the “golden age” of American railroading, New York’s rail infra-structure was never very well developed. Much of the freight bound for Manhattan,Brooklyn, or Queens was brought to rail terminals in New Jersey and had to be floated, fer-ried, or trucked into the City.

Many of New York’s industrial areas also lack direct access to the network of interstate high-ways that, beginning in the 1950’s, played an increasingly important role in the movement ofgoods. Among the thousands of companies that joined the exodus of manufacturing firmsfrom the City, many were seeking easier access to rail services and highway interchanges.

How a New Rail Link Might Help…

Proponents of the cross-harbor tunnel argue that better rail freight service would make NewYork a more attractive location for manufacturing enterprises, by lowering the cost ofmoving goods into and out of the City. In particular, the cross-harbor tunnel might makeindustrial areas on or near the Brooklyn waterfront more attractive for those types of manu-

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facturing enterprises that are particularly dependent on rail transportation, such as large-volumefood processors, producers of recycled paper, or other processors of recycled materials.

…But Why It’s Not Likely to Help Very Much

While it is true that poor freight access may have contributed to New York City’s decline as amanufacturing center, many other factors were also at work. It is worth noting that other majorU.S. cities that enjoy much better rail freight service than New York have also experiencedsteep declines in manufacturing employment in the past four decades. In both Chicago andCleveland, for example, manufacturing employment declined by 63 percent between 1958 and1987.16

Given the changes that have occurred in New York’s manufacturing base, it is unlikely that theproposed cross-harbor rail tunnel would do much to help those goods-making enterprises thatremain in the City, or to encourage the development of new ones. The types of manufacturersthat can flourish in New York City, or that are likely to locate here in the future, are with fewexceptions not involved in moving goods by rail.

During the past decade, several studies have sought to identify the types of manufacturingenterprises for which New York provides a competitive location.17 They include:

• Producers of specialized goods that are used by one or more of the City’s majorindustries. Some examples are makers of mannequins for the fashion industry, spe-cialized office products for the financial services sector, high-end baked goods forrestaurants and hotels, theatrical lighting, etc.

• Makers of consumer products targeted to particular local or regional markets suchas makers of specialty food products for the City’s various immigrant communities.

• “Design-based” manufacturers, whose ability to compete is rooted in the quality oftheir designs or in their relationships with the City’s unique concentration of designtalent in fields such as fashion, furniture and furnishings, graphics, and even toys.

While firms that match these descriptions can be found across a wide range of industries, theytend to have certain characteristics in common.

• They tend to be characterized by high-value, low-volume production. Many oftheir products are highly customized.

• Their products tend to be time sensitive.

• In many cases, their products are a complex mix of goods and hands-on customerservice; ready access to customers is critical.

• With few exceptions, their businesses do not involve high-volume processing ofindustrial commodities.

• Their customers tend to be concentrated primarily—although by no means exclu-sively—in the New York area.

In contrast, New York City is generally not an attractive location for enterprises engaged inroutine mass production of highly-standardized goods or high-volume commodity pro-cessing. For such enterprises, competitiveness is largely a function of cost, so they tend tolocate in lower-cost areas.

Different types of manufacturing require different types of transportation services. The man-ufacturing firms for which New York City is an attractive location are generally not majorusers of rail freight service. The great majority move their goods by truck; some are also fre-quent users of air cargo services. The limited relevance of rail service to New York City’smanufacturing sector is evident in Table 6, which lists the major commodities that accountfor almost all of America’s rail freight traffic.

Table 6 Commodities Shipped by Rail, 1995

Percent of Total

Commodity Group Railcar Loadings

Coal and coke 39%Metals, ore and minerals 18Chemicals, hazardous materials 10Grain 8Other food products 6Automotive products 6Lumber and forest products 4Paper products 3Scrap and waste material 3All other freight 2

Source: Mercer Management Consulting

There are, of course, some New York City manufacturers—as well as some that the Citymight be well-positioned to develop or attract in the future—that would benefit fromimproved rail service. They include producers of recycled paper, other processors of recycledmaterials, newspaper printing plants, and some food processing businesses. It might, however,be more cost effective for the City to improve service to this relatively limited number ofenterprises through incremental improvements to its existing rail freight infrastructure and byencouraging new enterprises to locate in areas such as the South Bronx and the North Shoreof Staten Island, where the City and State have already invested heavily in rail freightimprovements.

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Manufacturers are, of course, not the only current or potential users of rail freight services inNew York City. There might be other sectors of the local economy that could benefit from railfreight improvements, a question that the next section of this report will address.

But in spite of some real advantages, there is simply no reason to believe that the constructionof a new cross-harbor rail tunnel will contribute in any significant way to the preservation orrevitalization of New York’s manufacturing sector.

Sustaining New York’s Manufacturing Sector

While a new rail freight tunnel would not do much for the City’s manufacturing enterprises,there are other ways in which New York could enhance its competitiveness as a manufacturingcenter.

Reducing the cost of doing business in New York.

While New York will never be able to compete for manufacturing jobs purely on the basisof cost, the City can do much to enhance its competitiveness by working continually toreduce the cost disadvantages associated with doing business here. Strategies for reducingmanufacturing costs in the City might include the following:

• Promoting competition in the production and distribution of energy.

• Reducing taxes that fall particularly heavily on manufacturers, such asenergy taxes.

• Support for ongoing efforts to reduce the cost of workers compensation.

• Providing suitable sites and flexible space.

The limited availability of modern, flexible industrial space and of suitablesites for development of new facilities is one of New York City’s mostserious disadvantages in competing for manufacturing activity. In planningfor the redevelopment of underutilized industrial land, the City should takecare to ensure that adequate space is available for the development ofmodern manufacturing facilities.

• Developing a skilled manufacturing workforce.

As in other sectors of New York’s economy, the skill levels required forwork in the manufacturing sector are increasing. But perhaps because man-ufacturing has long been perceived as a declining, “dead-end” sector, NewYork’s schools, colleges, and job training programs have not—with somenotable exceptions—been geared to preparing young people for careers in

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manufacturing. As a result, many manufacturers cite difficulties in findingskilled workers as one of the disadvantages of doing business in NewYork. The City could improve its competitiveness in manufacturing andexpand career opportunities for young people who are not attracted to“the office economy” by building stronger links between manufacturingenterprises and the City’s schools and colleges.

• Strengthening industry cooperation.

During the past decade, several New York City organizations, such as the Industrial Technology Assistance Corporation (ITAC), the BrooklynChamber of Commerce, and the Garment Industry DevelopmentCorporation, have shown how industry-based organizations can enhancethe competitiveness of local manufacturing enterprises. The City shouldseek to build on these initiatives by replicating them in other manufac-turing industries.

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5IMPROVING REGIONAL MOBILITY

Even if it would do little to help New York City’s manufacturing sector, a cross-harbor rail

tunnel might still be a worthwhile undertaking if it proved to be a cost-effective way to meet a

broader range of transportation needs for the City and the region. This part of the report

examines the proposed tunnel’s potential for improving freight transportation and reducing

congestion in the New York area.

The Benefits of a Rail Freight Tunnel

The proposal for a cross-harbor tunnel must be evaluated against the backdrop of a region thatdepends heavily on an aging and highly congested highway network for the movement ofgoods. According to Mercer Management Consultants, 70 percent of the 142 million tons offreight carried into or out of New York’s downstate counties in 1995 were moved by truck.Only about 2 percent moved by rail. During the next 25 years, Mercer expects the volume offreight moving into and out of the region to increase by 23 percent, fueled by population andemployment growth, growth in per capita income, and increased reliance on “exporting” solidwaste, rather than disposing of it locally18. The result of this growth will be even greater stresson the New York area’s congested highways.

A cross-harbor rail tunnel might reduce the volume of freight moving into and out of down-state New York by truck in two ways:

• Goods that are now carried by rail to intermodal terminals in northern New Jerseyand then brought to New York by truck (or for outbound traffic, moved to NewJersey rail terminals by truck) could instead be carried into or out of the City byrail, thus eliminating a certain number of trans-Hudson truck trips.

• The availability of direct rail service might convince some shippers who would oth-erwise rely solely on trucks to move their goods into or out of the City to ship byrail instead.

In a 1997 study conducted for the City’s Economic Development Corporation, Mercer ana-lyzed the potential impact of a cross-harbor rail tunnel on the “modal split” of New York areafreight traffic. Mercer estimated that a tunnel linking the Greenville Yards in Jersey City to theBrooklyn waterfront would increase the volume of goods moving into or out of downstate

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New York by rail in the year 2020 from a “baseline” volume of 10.2 million tons to 19.4 mil-lion tons—that is, from 5.8 percent of total freight volume to 11 percent. A tunnel linkingBrooklyn to the North Shore of Staten Island would increase rail volume to 19.8 million tons,or 11.3 percent of the total.

Viewed from another perspective, the Greenville-to-Brooklyn tunnel would reduce by 7.5 per-cent the volume of goods entering or leaving downstate New York by truck; the Staten-Island-to-Brooklyn tunnel would generate a 7.8 percent reduction. This would mean reducing thenumber of truck trips into or out of the downstate area by about 713,000 for the Greenvilletunnel, or by 729,000 for the Staten Island tunnel.19 As Table 7 shows, the benefits to the NewYork area would be significant in terms of reduced shipping costs, reduced wear and tear onhighway infrastructure, and better air quality.

Table 7 Annual Benefits of a Cross-Harbor Rail Tunnel

($ in thousands) Greenville Staten Island

Tunnel Tunnel

Reduced truck trips 712,579 728,669Shipper savings $39,850 $46,551Reduced highway and bridge repair/construction $30,094 $32,583Reduced energy costs $8,521 $9,399Value of improved air quality $282 $368

Source: Mercer Management

Clarifying the Benefits

Impressive as the benefits of a rail tunnel may be, they need to be kept in perspective. A 7.5percent reduction in the volume of goods entering the City by truck would not translate into asimilar reduction in truck traffic within the City. For example, if a container filled withTaiwanese consumer electronics bound for a Manhattan discount store were carried by rail toBrooklyn rather than to South Kearney, it would still have to be carried into Manhattan bytruck. Thus, the truck-to-rail shift projected by Mercer would not, as some rail tunnel advocateshave put it, “take 700,000 trucks a year off our highways.” Instead, it would make most ofthose truck trips somewhat shorter.

A cross-harbor tunnel would take hundreds of thousands of trucks off the Port Authority’sinterstate bridges and tunnels and off the Verrazano Bridge. But congested as they sometimesare, these crossings are not the most stressed elements of New York’s highway network.Movement of goods within the City would still rely heavily on such obsolete and overburdenedfacilities as the Cross-Bronx and Gowanus Expressways, as well as on local streets.

Moreover, the estimated reductions in truck trips cited above are based on the assumption thatno user charges will be imposed for use of the cross-harbor tunnel. If tunnel users had to paycharges averaging about $5.00 per ton—a rate that would cover annual operating costs, butonly a fraction of the tunnel’s capital costs—Mercer estimates that the number of trucksdiverted from the trans-Hudson highway network would drop to about 435,000 for theGreenville tunnel and about 445,000 for the Staten Island option.20

The figures cited above are from an analysis of the impact of developing a rail tunnel withouta Brooklyn hub port. A hub port would substantially increase the volume of freight movingthrough the tunnel. This increase, however, would represent new traffic rather than a shift fromthe roads. Moreover, as noted in Part Two, most cargo would be carried into or out of aBrooklyn hub port by truck. The net effect of developing a new rail tunnel in tandem with a2 million TEU-per-year container terminal would probably be a substantial increase in thenumber of trucks moving into and out of the City.

Tunnel advocates point out that the economics of the project could be improved and that thevolume of truck traffic diverted could be increased if the federal government were to pay asubstantial part of the project’s capital cost. But the case for federal funding may depend onthe tunnel’s being linked to a Brooklyn hub port; if its only real purpose is to relieve localhighway congestion, it might be difficult to justify the tunnel as a “project of national signifi-cance.” And for the reasons discussed in Part Two, the development of a Brooklyn hub port isat best a remote possibility.

Are There Alternatives?

Given the high cost of building a cross-harbor rail tunnel—at least $850 million, and probablymore than $1 billion—and the required time of at least a decade to complete it, it is reasonableto ask whether there are other investments that would more quickly and more cost effectivelyimprove the movement of goods into, out of, and within New York City.

Improving car float service.

One of the more promising alternatives is improved car float service between theGreenville Yards and the Brooklyn waterfront. This would essentially mean an upgradingand expansion of the service now provided by the New York Cross-Harbor Railroad.Mercer Management estimates that improved carfloat service could increase the volume ofrail traffic entering the downstate counties by 4.2 million tons per year over the “basecase” and would reduce truck trips into and out of the area by about 365,000 per year. Itwould thus produce nearly half the benefits of a rail tunnel, but at an estimated capitalcost of $115 million, or about one-eighth the cost of a rail tunnel. (Imposing a $2.50 perton user fee would cut the projected truck trip reduction to about 195,000 per year, but it

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would also generate enough revenue to finance the entire project without public subsi-dies.21)

Moreover, the federal government will cover part of the capital cost of improvedcarfloat service. The transportation statute enacted by Congress in 1998 (TransportationEfficiency Act for the Twenty-First Century, called TEA-21) specifically authorizes $15million for the project.

Improved car float service could be a particularly attractive option for low-value, lesstime-sensitive cargo such as building materials. It would also make it easier for the Cityto export solid waste by rail. And in contrast to the proposed tunnel, improved car floatservice could be in operation in just a few years.

Improving existing rail facilities.

There are also more modest improvements in rail facilities that might help improvefreight services in the City. These, for example, might include continued redevelopmentof the Staten Island Railroad and completion of a direct connection between the HuntsPoint Market and the Oak Point Link in the Bronx.

Improving truck access.

Even if New York City and New York State are prepared to invest much larger sumssuch as a billion dollars or more to improve freight services and reduce congestion, it isnot clear that a cross-harbor tunnel would represent the most effective use of these cap-ital funds. Under a best-case scenario, after completion of a new tunnel and associatedimprovements, rail facilities would still handle only a small percentage of the City’sfreight traffic. New York’s businesses and consumers would still be overwhelminglydependent on trucks to move goods into, out of, and within the City.

The City and the State therefore need to compare the costs and benefits of the pro-posed tunnel with the costs and benefits of carefully selected improvements in NewYork’s major truck routes—notably, the Cross-Bronx, the Gowanus, and the VanWyck—as well as local streets that handle high truck traffic volume.

Improving air cargo service.

Since the 1960’s, air cargo has played a larger role in New York City’s economy thaneither rail freight or maritime trade. But the air cargo industry has never received thelevel of attention or support that state and local officials have given to rail and maritimetransport. State and City governments should give much higher priority to improving aircargo service. Improvement efforts might include better truck access to Kennedy

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Airport and the surrounding area, expanded and modernized air cargo facilities both onand off the airport, and continued efforts toward improved security.

Unlike the proposal to develop a hub port in Brooklyn, which is unlikely to prove eco-nomically feasible or cost effective under any conceivable scenario, a new tunnel con-necting “geographic Long Island” to New Jersey might make sense in the long run, if thevolume of traffic on the region’s highways continues to grow at the pace forecast byMercer Management and others. Meanwhile, there are alternatives that can be imple-mented much more quickly and at a much lower cost. The City should aggressively pursuethese alternatives.

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CONCLUSION

New Yorkers often lament that their City has lost the capacity—or perhaps the will—toundertake ambitious, large-scale public works. The proposed Brooklyn hub port and railtunnel clearly appeal to those who dream of once again launching the kind of bold, visionaryprojects that helped make New York great.

But maritime and rail freight facilities are fundamentally about commerce. If they don’t makesense commercially, they ultimately will not make sense at all, regardless of how visionarythey may seem. And what’s worse, the unrealistic pursuit of these projects is already dis-tracting public attention from less ambitious, but more realistic, incremental improvementsthat will have a much greater payoff for the long-term economic development of New YorkCity.

The economic future of New York City does not lie in its past glory as a maritime center.Rather, New York City must look forward, not backward. The proposed hub port and railtunnel are Industrial Era projects ill-suited for the information economy of the 21st century.Furthermore, the proposed hub port and rail tunnel represent a genuine threat to many ofthe communities and industries currently located in southern Brooklyn.

This report identifies alternative economic development strategies for strengthening the mar-itime industry in the New York-New Jersey region. Most important, we believe that theefforts to strengthen Brooklyn should build upon its current assets as a place to live andwork. The proposed hub port and cross-harbor tunnel are costly, unjustified investments thatdivert public policy from more intelligent and viable investments in economic and commu-nity development.

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NOTES

1 The great majority of marine cargo containers are either twenty or forty feetlong. Vessel capacity is therefore commonly expressed in “twenty-foot equiva-lent units,” or TEUs. A twenty-foot box is counted as one TEU, and a forty-foot box as two. The volume of containerized cargo handled by various portsmay also be measured in TEUs.

2 Edward J. Sheppard, “Obstacles to Port Operation and Development:Dredging and Environmental Constraints,” in Intermodal Freight Terminal ofthe Future (Washington, D.C.: Transportation Research Board, 1996), p. 36.

3 Booz-Allen & Hamilton, Feasibility of Study of “Hub Port” Development,March 20, 1997, p. B-4; Sheppard, op. cit.; Transportation Research Board,Environmental Regulatory Process: Does It Work? Dredging U.S. Ports (June1994), pp. 14-15.

4 Booz-Allen & Hamilton, op. cit., p. IV-6.

5 Ibid., pp. IV-10-IV-18.

6 Appleseed, The Effects of Technological Change on Freight Transportationand Distribution Activities: Implications for America’s Cities (Washington,D.C.: Office of Technology Assessment, July 1995), pp. 16, 64-66; JohnVickerman, quoted in Bill Mongeluzzo, “Megaports are facing increasing problems,” Journal of Commerce, Feb. 20 1998, p. B1; Journal of Commerce,March 23, 1998, p. 9A.

7 Peter Tirschwell, “Evergreen to Start North-South Service,” Journal ofCommerce, March 24, 1998, p. 1A.

8 Terry Brennan and Rip Watson, “Sea-Land, Maersk Eye Big East CoastTerminal,” Journal of Commerce, May 6 1998, p. A1.

9 Booz-Allen & Hamilton, Feasibility of Study of “Hub Port” Development,March 20, 1997, p. III-7.

10 Port Authority of New York and New Jersey, unpublished estimates, 1997. ThePort Authority’s more conservative forecast reflects the near-term constraintson growth that result from the port’s current inability to accommodate thelargest containerships.

11 This estimate is calculated as follows: • 2.0 million TEUs x 70 percent moving by truck:= 1.4 million TEUs• 1.4 million TEUs / 1.67 TEUs per container: = 840,000 containers• 840,000 containers / 360 days: = 2,333 containers/day

Some trucks entering the port will be either picking up or dropping off a container; some will do both. A single container may thus generate one or twotruck trips. Assuming an average of 1.5 trips per container, 2,333 containersper day:= 3,500 truck trips/day

Calculating the average number of trips per day probably understates typicalweekday volume, which in the case outlined here could be as much as 5,000per day.

12 Vickerman Zachary Miller et al., Phase II Presentation of MOTBY MaritimeFeasibility Study, September 26, 1966; Vickerman Zachary Miller et al.,MOTBY Maritime Feasibility Study: Phase III Presentation, November 26,1996.

13 Port Authority of New York and New Jersey, unpublished analysis.

14 See, for example, New York City Department of City Planning, Plan for theBrooklyn Waterfront, 1994; Community Board 6, Red Hook: A Plan forCommunity Regeneration, 1994; and Buckhorst Fish Hutton Katz, Inc., SunsetPark Waterfront: A Planning and development Strategy to Reunite the SunsetPark Community with Its Waterfront, 1991.

15 Mitchell Moss, Hugh O’Neill and John Kedeshian, Made in New York: TheFuture of Manufacturing in New York City, New York University, Taub UrbanResearch Center, 1995, p. 3

16 Curtis Skinner and Frank Braconi, “Manufacturing Design and the Land UseDebate,” Citizens Housing and Planning Council, December 1994.

17 See, for example, Telesis, A Strategic Audit of Manufacturing in the New York-New Jersey Region, Port Authority of New York and New Jersey, 1989; HughO’Neill, Mitchell Moss, Reinventing New York: Competing in The NextCentury’s Global Economy, New York University, Taub Urban ResearchCenter, 1991; Moss, O’Neill, Kedeshian, op. cit.; and John Beam, Designed inNew York/Made in New York, Municipal Art Society of New York, 1997

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18 Mercer Management Consulting, Intermodal Goods Movement Study: New YorkCity Rail Freight Access, January 1997, pp. II-6, II-7.

19 Ibid., pp. IV-4, V-7.

20 Ibid., pp. VI-10, VI-11.

21 Ibid., p. VI-12.

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