Port Task Force 02.26.2015

Evaluation of the Market Business Environment Analysis

Hon. Alvin Brown Mayor, City of Jacksonville

Theodore N. Carter

Executive Director Office of Economic Development

City of Jacksonville

John D. Baker Co-Chair, Port Task Force

JAXPORT, Jacksonville Port Authority Executive Chairman, Patriot Transportation Holding, Inc.

Principal Researcher:

Herbert M. Barber, Jr., Ph.D., Ph.D. CEO, Xicon Economics

Contract No. 10066 February 2015

Engineering Economics

for the Jacksonville Port Authority

Xicon. We grow economies.

Xicon Economics Page 2 of 102

Xicon Economics Post Office Box 61478

Savannah, Georgia 31420 United States of America

www.xiconeconomics.com +1 912 536 4182

Intellectuals solve problems; geniuses prevent them.

Albert Einstein



Individuals serving this Investigation The following individuals served the investigation addressed herein:

Theodore N. Carter, Executive Director, OED, City of Jacksonville Edward W. Randolph, Business Development Manager, OED, City of Jacksonville John D. Baker, Executive Chairman, Patriot Transportation Holding, Inc. David Kaufman, Senior Director, Planning & Commercial Development, JAXPORT Linda M. Williams, Director, Corporate Performance & Compliance, JAXPORT

Members of the Port Task Force The Port Task Force was established in March 2014, to focus on JAXPORTs strategic priorities for growth and development in the trade and logistics industries, including the channel-deepening project that would allow larger cargo ships to utilize JAXPORT. The members of the Port Task Force include:

John Baker, Executive Chairman, Patriot Transportation Holding, Inc. Martin E. Stein, Chairman & CEO, Regency Centers Lathun Brigman, General Manager, Beaver Street Fisheries Alvin Carpenter, (retired) President & Vice-Chairman, CSX Moody Chisholm, President & CEO, St. Vincents Healthcare Joe Debs, Executive Vice President & Chief Marketing Officer, RS&H Dr. Adam Herbert, (former) President, University of North Florida and Indiana University Ray Holt, Jacksonville City Council Member, District 11 Paola Parra Harris, Attorney, Harris Guidi Matt Kane, Owner, Greenshades Software Robert Lufrano, MD, (former) Chairman & CEO, Blue Cross & Blue Shield of Florida Mark Middlebrook, Executive Director, St. Johns River Alliance Janet Owen, Vice President for Governmental Affairs, University of North Florida Ron Townsend, Communications Consultant and (former) President, Gannett Television Dr. Quinton White, Executive Director, Marine Science Research Institute, Jacksonville University

This investigation represents a small portion of the efforts of these individuals on behalf of the City of Jacksonville and, moreover,

the citizens of Jacksonville MSA, the Greater North Florida Community, and the United States.



About the Researcher

Herbert M Barber, Jr, PhD, PhD is the Chief Executive Officer of Xicon Economics. He has over 25 years of experience leading, managing, and analyzing endeavors in industry and infrastructure. Dr. Barber is an expert in infrastructure economics, particularly as it relates to solving complex economic and financial issues associated with the implementation and operations of large projects in industry and infrastructure. Prior to joining Xicon, he served for 11 years as the CEO of Seminole Southern, an engineering and management firm. Prior to that, he was as a Senior Project Engineer with Fluor Corporation and Jacobs Engineering for several years. Dr. Barbers professional and scientific research interests focus on the development, analyses, and use of econometric models for estimating the potential statistical effect and causality that projects in industry and infrastructure have on economic variables, with particular emphasis on return on capital investment. He has conducted over 250 scientific and technological studies involving the infrastructure-economics nexus. Dr. Barber earned a BS in civil engineering from Georgia Southern University, as well as an MS in industrial management, where his research concentrated on the use of smart logistics as a means of controlling cost escalation on industrial projects. Dr. Barber also earned an advanced MS and PhD in industrial technology at Florida State University, where his research focused on construction engineering. He earned his second PhD in engineering, with a concentration in engineering economic systems, from Mississippi State University. Through his research at Mississippi State University, Dr. Barber developed econometric models that allowed him to investigate the statistical effect that global infrastructure projects have on economies of scale, as viewed through the larger infrastructure-economics nexus.

About Xicon Economics

Xicon Economics is a highly specialized engineering economics consulting firm that uses higher order mathematics to solve complex financial and economic issues in industry and infrastructure. Our experts consist of approximately 20 senior professionals, all of whom have earned research doctorates coupled with nearly 30 years of experience in industry and infrastructure. Our experts are some of the most established professionals in their fields, and are well known within the scientific communities in various countries. We have conducted over 1,500 scientific studies in the areas of infrastructure economics, energy economics, and manufacturing economics in over 20 countries. Additionally, we have published 15 books and textbooks on various topics in engineering and economics. Further, our experts hold seven US patents. The primary markets we serve include infrastructure, energy, manufacturing, and government, and our expertise includes the areas of finance, research, economics, and engineering as it relates to applying higher-order mathematics to solve complex financial and economic problems associated with economic output.

We bring intellectual rigor, objectivity, and real world experience together to solve some of the worlds

most complex engineering, economic, and financial challenges.



No.

Objective

Key Findings, in Lay Terms

1

Review the previously conducted economic impact model as it relates to validity of the methodologies employed and validity of the models and subsequent findings

Just the Facts presents a basic overview of the findings of this study. The overview must be considered in context with the accompanying study.

1. Content validity and construct validity existed in methodologies employed by Martin Associates.

2. Overall methodologies used by Martin Associates appeared reasonable. 3. Projections were lower than those generated by Martin Associates.

2

Conduct an independent investigation of the business growth potential at JAXPORT, with and without deepening

1. Data were analyzed using sound econometric techniques. 2. Multiple scenarios were developed to analyze data through CY 2020. 3. Without regard to harbor deepening and maintaining status quo, the

following is expected through CY 2020:

Inbound container tonnage: steady increase

Outbound container tonnage: slight decrease

Inbound break bulk tonnage: steady decrease

Outbound break bulk tonnage: steady decrease

Inbound bulk cargo tonnage: rapid decrease

Outbound bulk cargo tonnage: stable with slight decrease

Inbound auto/tractor tonnage: rapid decrease

Outbound auto/tractor tonnage: rapid increase 4. Projections were lower than those generated by Martin Associates. 5. Not deepening harbor will not alter current container tonnages adversely. 6. Opportunity costs of not deepening the harbor are substantial.

3 Conduct a cost-benefit analysis of

harbor deepening

1. Projected financial cost of harbor deepening: USD812.6 million 2. Projected non-federal (local) share of harbor deepening: USD394.0 million 3. Net jobs, optimistic scenario: 3,743 4. Net jobs, conservative scenario: 1,872 5. Net business revenue, optimistic scenario: USD7.5 billion 6. Net business revenue, conservative scenario: USD3.8 billion 7. Total net benefits, optimistic scenario: USD7.8 billion 8. Total net benefits, conservative scenario: USD3.9 billion 9. Benefit-cost ratio, optimistic scenario: 9.63 10. Benefit-cost ratio, conservative scenario: 4.82 11. Payout, optimistic scenario: CY 2022 12. Payout, conservative scenario: CY 2023

No. Objective ust the Facts

J

Conclusion

Harbor deepening at JAXPORT is financially feasible and economically feasible. - Xicon Economics



Evaluation of the Market Business Environment Analysis

Principal Researcher:

Herbert M. Barber, Jr., Ph.D., Ph.D. CEO, Xicon Economics

Contract No. 10066 February 2015

for the Jacksonville Port Authority



Acknowledgements

Xicon Economics hereby expresses its sincere gratitude to the following persons, who fully supported Xicon Economics and the efforts of its researchers while completing this study.

Theodore N. Carter

Edward W. Randolph John D. Baker

David Kaufman Linda M. Williams



Table of Contents

Page EXECUTIVE SUMMARY

. 11

INTRODUCTION

. 20

PURPOSE

. 21

METHODOLOGY

. 23

ANALYSIS & FINDINGS

. 26

CONCLUSIONS . 100



Basic Definitions, in Lay Terms

1. Descriptive Statistics analyses that attempt to describe data through commonly accepted methods, such as those associated with measures of central tendency and the like. As such, descriptive statistics do not rely of mathematical probability theory as a means of explaining data or events.

2. Inferential Statistics analyses that use inferences, or generalizability, such that future events may be explained or forecasted. Inferential statistics rely on mathematical probability theory.

3. Correlation a measure expressing the relationship between variables. Correlation ranges between -1.0 and +1.0, with zero demonstrating that there exists no relationship between variables.

4. Standard Deviation a measure noting distances from the mean. Under a normal curve, +/-1SD encompasses approximately 68.2% of the population under study, +/-2SD encompasses 95.4%, and +/-3SD encompasses 99.7%.

5. Standardization the process of norming data or scores; researchers often use z-scores to standardize data.

6. Significance an expression attempting to describe whether a relationship or phenomenon is due to chance, most often expressed using alpha levels, such as .1, .05, or .01. An alpha level of .01 means that there exists a 1% probability that an effect, or difference, is due to chance.

7. Statistical Effect a measure of the differences between two or more variables. Effect can be direct or indirect.

8. Effect Size a measure of the strength of a relationship or phenomenon; most often expressed as a coefficient thorough Hedgess g, Cohens d, and many other techniques.

9. Practical Effect a statistic to measure the statistical effect of a relationship of phenomenon against practical application or importance of said statistical effect.

10. Coefficient of Determination a means of describing mathematically how well data fit a specific curve. 11. Explained Variance a statistic describing the variance in a dependent variable explained by an

independent variable. Explained variance can run parallel with coefficient of determination. 12. Analysis of Variance (ANOVA) a statistic used to analyze differences in means between variables,

compared against levels of significance, e.g., p-values. 13. Linear Regression a method for describing and forecasting data associated with variables through

mathematical models. There are several types of regression, such as simple regression, quadratic regression, multiple regression, and logistic regression.

14. Time Series data sets having seen or unseen tendencies of seasonal, trend, and irregular characteristics.

15. Time Series Forecasting a statistical method for projecting series variables having seasonal, trend, and irregular characteristics by coupling smoothing techniques, such as exponential smoothing or moving average smoothing, with various forms of regression modeling (No universally accepted test for significance has been established in the literature).

16. Causality an occurrence between two of more variables that allows a variable to be explained by another variable. In lay terms, causality is considered to exist during cause-effect occurrences.

17. Structural Equation Modeling a multivariate analysis technique for testing and analyzing causal relationships.

18. Granger Causality a method of determining whether a time series model can forecast another time series model.

19. Econometrics the branch of economics that applies advanced mathematics and statistics to phenomenon in economics such that empirical analyses can be rendered.

20. Internal Consistency a measure of scale reliability. 21. Cronbachs Alpha a measure of internal consistency within an instrument. 22. Deterministic Modelling mathematical techniques containing no elements of randomness. 23. Probabilistic Modelling mathematical techniques containing elements of randomness.



24. Generalizability the ability of variables within a sample to mathematically describe, or infer, phenomenon or relationships across a population.

25. Validity the extent to which a construct, or set of constructs, is operationalized. 26. Reliability the mathematical extent to which a measure captures its intended data. 27. Real Gross Domestic Product macroeconomic measure of economic output, adjusted for inflation. 28. Nominal Gross Domestic Product macroeconomic measure of economic output, without adjustments

for inflation. 29. F-statistic a test for a null hypothesis, often used for determining whether models have been fitted

to data correctly. 30. F-value interpreted differently, but generally represents the ratio of between-groups variance and

within-groups variance. 31. Latent Variables those operationalized constructs existing but hidden, or not readily observed, in

data that often are measured through observed variables.



Executive Summary

his study reflects the analyses and subsequent findings of Xicon Economics as it related to three objectives associated with deepening of the St. Johns River in north Florida as a means of increasing

economic output across the geographic region, and the United States at large. These three objectives included the following:

1. Review the economic impact model developed by Martin Associates; provide an evaluation regarding the validity of the methodology of the impact model.

2. Provide an independent evaluation of the business growth potential for JAXPORT, given the ports current water depth and water depth under the proposed harbor deepening project.

3. Provide a cost-benefit analysis, and economic benefits, of the harbor deepening project. The study, Evaluation of the Market and Business Environment Analysis, was conducted for the City of Jacksonville on behalf of the Port Task Force. All work noted herein was generated by Xicon Economics, unless noted otherwise. The principal researcher for this study was Dr. Dr. Herbert Barber, the chief executive officer of Xicon Economics, Savannah, Georgia. Xicon Economics used the basic scientific method commonly associated with investigations such as this. In so doing, the study consists of a brief introduction, followed by a discussion regarding the methodology employed during execution of the study. Next, a section describing the analyses employed during this study was presented, along with associated findings. Finally, conclusions were noted, coupled with a few recommendations. Given the controversy associated with the proposed harbor deepening project and most large public infrastructure projects, Xicon Economics sought in every regard to ensure that transparency existed in the analyses and subsequent narrative. Such endeavors allowed stakeholders and taxpayers to follow the researchers thought patterns when conducting this study. In so doing, Xicon Economics opened its assumptions, arguments, analyses, findings, conclusions, and recommendations to critique by other professionals. While Xicon Economics has yet to develop a comprehensive study completely without error or oversight, Xicon Economics respectfully requests that any such critiques be fully substantiated with sound statistical and econometric analyses, those analyses similar to that noted herein, or more advanced, as enough baseless opinions without serious analyses have been rendered and read, in full, by the principal researcher. More specifically, opinions coupled with no advanced analyses only lead to unfounded opinions. Further, the objectives set forth by the RFP associated with this study, largely, were over-reaching, and thus, thus stretched the boundaries of one developing a seamless narrative. Notwithstanding, every objective was warranted and addressed. Thus, in fulfilling the requirements established for this study, the analyses and accommodating narratives will be complex, and complicated, to the average reader. To fully understand the analyses, and fully appreciate the subsequent findings, it is the opinion of Xicon Economics that one needs a basic understanding of graduate level mathematics, statistics, probability, measurement, and econometrics, coupled with an understanding of economics, research, and the scientific method. Therefore, Xicon Economics recommends every stakeholder, proponent, opponent, and/or critic of 1) harbor deepening, 2) Xicon Economics, and/or 3) the principal researcher,

T



read this study beginning with the first page of this document and continuing to the end without skipping narrative or analyses not less than 3 times, taking written notes with each reading, before rendering an opinion regarding this study, and more importantly, harbor deepening. Likewise, it is recommended that every footnote be read and fully understood before rendering an opinion regarding harbor deepening. Any attempts otherwise to render a sound decision regarding this study and harbor deepening will, in all probability, lead to erroneous decisions. To this end, the basic methodology used to conduct this study included the following, in general:

1. An independent review regarding the validity and reliability of the methodology employed by Martin Associates during the data collection phase, data analyses, and findings for the previously conducted economic impact study: Xicon Economics evaluated the previously conducted economic impact study by examining the extent to which content validity, construct validity, and criterion validity existed; and the extent to which reliability existed.

2. An independent determination of the business growth potential for JAXPORT with, and without, harbor deepening: Xicon Economics used descriptive and inferential statistical techniques for analyzing and forecasting the business growth potential of JAXPORT with, and without, harbor deepening. Along with basic descriptive statistics, time series forecasting was used, coupled with regression and analysis of variance to render analyses and forecasting as it related to the current position of JAXPORT, by way of commodities, and potential position, also by commodities. Ultimately, TEU and tonnage data were translated into revenues. Additionally, comparisons were made to work previously conducted by Martin Associates and Vickerman and Associates, when applicable.

3. A cost-benefit model of the harbor deepening project: The technique used by Xicon Economics mandated that the cost-benefit analyses be based upon a financial perspective and econometric perspective, rather than a financial perspective, alone, with both financial and economic data considered holistically under the overall cost-benefit model. Coupling estimated and projected construction costs with forecasted financial and economic output, an anticipated flow of financial and economic output was presented, appropriate benefit-cost ratios (BC) were developed, present values were calculated, net present values were estimated, and statistical effect was calculated through CY 2030.

General findings of Xicon Economics included, but were not limited to, the following:

1. The methodologies employed by Martin Associates offered evidence that scientific validity existed in terms of data collection. No references were made as to reliability, or reliability coefficients, in the work conducted by Martin Associates. Further, Xicon Economics could not calculate reliability coefficients associated with the survey instruments developed and employed by Martin Associates to collect data, as Xicon Economics was not privy to any data collected or analyses. However, the techniques employed by Martin Associates for collecting data were considered more robust than the traditional input-output method commonly used today in traditional economic impact studies, as many economic impact studies using BEA multipliers and associated data are grounded with what appears to contain no scientifically valid measure for rendering impact. Thus, it remains the opinion of Xicon Economics that the methodologies employed by Martin Associates to collect data, notwithstanding questions associated with reliability, were in keeping with accepted practices in the scientific research community.

2. To further evaluate validity, Xicon Economics compared findings between Martin Associates, Vickerman and Associates, and itself when applicable. For example, differences were found to exist between container tonnage forecasts across all three firms, under moderate penetration scenarios and aggressive penetration scenarios, through 2030 (and 2035 in some cases); in some cases, container tonnage projections developed by Martin Associates were highest, and in other cases, container tonnage projections developed by Vickerman and Associates were highest. In all cases, under both scenarios, tonnage projections developed by Xicon Economics were lower. However, projections generated by Vickerman and Associates appeared to have no statistical merit, and as such, were discounted altogether. Differences were attributed to varying



techniques used in rendering such projections between Xicon Economics and Martin Associates. However, in terms of actual data analyses, it is the opinion of Xicon Economics that projections rendered by Xicon Economics were more statistically robust than those rendered by Martin Associates, and accordingly, Xicon Economics used its own projections throughout this study. However, as it relates to the analyses and/or findings of work conducted by Martin Associates, it appeared that a reasonable approach was used, but no definitive determinations could be made as to overall validity without reviewing the raw data and subsequent analyses and modeling techniques.

3. Numerous determinations were made regarding the potential business growth of JAXPORT. However, in general, Xicon Economics did not attempt to understand why its analyses yielded findings positive or negative in terms of TEU or tonnage by commodity, or similar. Nonetheless, several of the findings should be investigated further by JAXPORT to determine why such determinations were made. For example, while container tonnages were forecasted to increase with, or without, harbor deepening, break bulk tonnages were consistently decreasing. In fact, inbound break bulk tonnages were forecasted to be non-existent altogether by FY 2019/20. Similarly, inbound bulk cargo tonnages were forecasted to be non-existent by FY 2018/19, at the current rate of decline. Perhaps troublesome, reversing these trends appears problematic, as these declines have remained steady over the last several years. However, these tonnages perhaps are being loaded and offloaded at private terminals in the Jacksonville area; again, such determinations were not the intent of this study, but these declines should be addressed.

4. Deepening the harbor under the moderate penetration scenario, container tonnages were projected to

increase more strongly through 2030, over not deepening in those same years. Deepening the harbor under the aggressive penetration scenario container tonnages also were projected to increase more strongly through 2030, over not deepening in those same years. However, these findings did not include impacts associated with harbor deepening, such as delays associated with harbor deepening, nor construction costs.

5. Deepening the harbor under the moderate penetration scenario, container gross revenue was projected to increase more strongly from FY 2014/15 through FY 2029/30, over not deepening in those same years. Likewise, deepening the harbor under the aggressive penetration scenario, container gross revenue was projected to increase more strongly from FY 2014/15 through FY 2029/30, over not deepening over those same years. Again, however, construction impacts were not included in these analyses.

6. Without incorporating negative impacts associated the construction phase of harbor deepening into the analytical mix, gross revenues from container tonnage increases was projected to have a statistically significant effect on economic output in Jacksonville MSA as expressed via GDP, using projections through FY 2029/30, under the moderate penetration scenario. Likewise, gross revenues from container tonnage increases were projected to have a statistically significant effect on economic output in Jacksonville MSA as expressed via GDP, using projections through FY 2029/30, under the aggressive penetration scenario. Further, effects under both moderate and aggressive penetration scenarios were determined to be of practical significance, and large.

7. For the cost-benefit analyses, models were modified to allow for impacts associated with the construction phase of harbor deepening, such as construction delays and construction costs. In so doing, it was determined that a net increase of 1,872 jobs (moderate penetration scenario) would be associated with harbor deepening through CY 2030, excluding jobs directly involved in the construction phase of the project. Further, it was determined that a net increase of 3,743 jobs would be associated with harbor deepening through CY 2030, under an aggressive penetration scenario; again, excluding jobs generated during the construction phase.

8. Direct business revenues associated with harbor deepening were estimated to be USD7.5 billion, at best, and USD3.8 billion at worst, through CY 2030.



9. Coupling net increases generated through container revenues with direct business revenues, two scenarios were developed, including an optimistic scenario and a conservative scenario, using separate parameters, to determine financial feasibility and econometric feasibility. In both scenarios, economic benefits associated with harbor deepening outweighed financial costs associated with deepening; again, from a financial perspective and econometric perspective. More specifically, the BC ratios were estimated to be 9.63 and 4.82 under the optimistic and conservative scenarios, respectively. Further, the effects that harbor deepening was expected to have on Jacksonville MSA GDP was significant at the .001 alpha level under both scenarios. Still further, the practical effect of harbor deepening was considered large under both scenarios (Optimistic: Cohens d=23.883; and Conservative: Cohens d=24.001). Thus, under the assumptions of this study, harbor deepening was determined to be financially feasible and econometrically feasible. Refer below.

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Container Revenue Total Costs Direct Business Revenue

Net Benefits: USD 7.8 Billion

Net Costs: USD 812.6 Million

Optimistic Scenario



Along with the findings of the study, Xicon Economics reached definitive conclusions derived through the analyses that should be considered by stakeholders as equally important in the decision regarding harbor deepening. These conclusions included, but were not limited to, the following:

1. Numerous individuals have rendered opinions regarding harbor deepening at JAXPORT, as often is the case on large infrastructure projects utilizing public monies. The principal researcher for this study received some 300 emails, articles, papers, presentations, studies, and commentary regarding various opinions specifically associated with deepening the St. Johns River. With very few exceptions, these documents offered no definitive analyses to support the noted claims, scientifically or otherwise. In nearly every case, even those made by others in the scientific community, such claims simply were not substantiated with sound analyses; strong arguments were made; no analyses were rendered. Thus, Xicon Economics was left

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Container Revenue Total Costs Direct Business Revenue

Net Costs: USD 812.6 Million

Net Benefits: USD 3.9 Billion

Conservative Scenario



to consider these claims as they appeared on face value good arguments, at best, and disgruntled opponents, at worst. Still further, other claims were disproved altogether through the analyses rendered in this study. To this end, however, several concerns noted by Dr. David Jaffee and other seasoned researchers were considered of merit and warranted. Upon careful inspection of these concerns, it became, and remains, the opinion of Xicon Economics that most, but not all, of these concerns were derivatives of a lack of narrative in the studies produced by Martin Associates that described in detail the analyses, and techniques for those analyses. As a researcher, likely Dr. Jaffee and the other researchers expected the economic impact study, strategic master plan, and other documents generated by Martin Associates to delineate fully the statistical and econometric techniques used in rendering findings and subsequent recommendations. However, doing so would negate sound business sense, as the livelihood of Martin Associates is based upon confidentiality in every regard, including the analytical techniques used. Dr. Herbert Barber worked around such issues through multiple readings of documents generated by Martin Associates, multiple readings of numerous other documents, multiple conversations with Dr. John Martin, multiple conversations with JAXPORT, and more importantly, thorough independent analyses of raw data provided by JAXPORT and other sources.

2. Significant effort has been exerted as it relates to potential environmental impacts, management, and remediation of the St. Johns River, presuming harbor deepening is elected. This fact was substantiated in the meetings held by the Task Force, as most speakers and presenters discussed environmental concerns of harbor deepening at length. Further, nearly every report, study, or presentation generated has focused on environmental concerns. This held true for the work generated by the US Army Corps of Engineers; overwhelmingly, these studies centered on environmental concerns; and certainly, such efforts are warranted. Unfortunately, however, outside of the study herein, relatively no work has been conducted as it relates to the financial and economic issues associated with harbor deepening. While Martin Associates conducted an economic impact study, the noted findings only scratched the surface. Arguably, the same holds true for the findings herein. Subsequently, the current paradigm needs to be shifted from environmental constructs to financial and economic constructs though certainly, environmental issues can eventually become financial and economic issues, as well. While the noted environmental concerns have merit, these concerns must be couched with the greater good of society, and thus, economic concerns must trump environmental concerns after it is established that the latter can be properly managed or mitigated. To this end, it is the recommendation of Xicon Economics that stakeholders concentrate its efforts on the economics of harbor deepening, presuming the environmental issues have been fully addressed. In so doing, it is the recommendation of Xicon Economics that the scope of work herein be extended, or conducted by other PhD-level researchers, to allow for the development of additional economic analyses prior to the Task Force rendering a decision regarding harbor deepening. While there exists many arguments supporting this opinion, let the stakeholder consider the findings of this study holistically, as it relates exclusively to economic output of Jacksonville MSA and the greater region. Subsequently, the stakeholder will realize that, while the noted flow of economic output noted that while the benefits of harbor deepening outweighed the financial costs of harbor deepening; and while the effect of harbor deepening was deemed statistically and practically significant; determinations as to the interdependencies of each industry sector and port output was not investigated. These interdependencies cannot be assumed, as they may or may not exist. To use the example noted in the body of this study, the relationship between manufacturing output and port output is complex. Likely, this relationship is bi-directional to some extent, though the purpose of the work herein was not to determine such. However, these type relationships must be determined prior to considering harbor deepening a sound economic investment. Manufacturing output will not simply increase because the harbor is deepened, nor will economic output in the transportation sector or



wholesale sector increase. To suggest such, which is what many public entities unknowingly suggest, is in serious err. Inbound and outbound cargo exit only at mandates set forth by demand; the port simply is a vein through which these demands travel. Continuing this argument, there is a relationship between manufacturing output and manufacturing employment; and manufacturing employment is steadily decreasing in Jacksonville MSA. In fact, Jacksonville MSA has lost 7,600 manufacturing jobs in recent years. While this is not atypical in the manufacturing sector today, it is problematic and needs to be investigated further if port output is derived through the manufacturing sector at all. Refer to the figure below.

Equally as important, overall economic output generated in the manufacturing sector as a percentage of total Jacksonville MSA GDP has declined for nearly three decades. While these declines may appear small enough to be overlooked, following the 2008 economic collapse in the US, money supply in Jacksonville MSA decreased by approximately USD2.2 billion in a single year. Of that total loss, Jacksonvilles manufacturing sector accounted for nearly one billion dollars (USD989 million). Thus, fully understanding the manufacturing sector, and every other sector, relative to the port sector and their interdependencies becomes vitally important, as the manufacturing sector accounts for a disproportionate percentage of economic output across Jacksonville MSA when compared to other metropolitan areas. Still further, note that the direct business revenue estimated during completion of the third objective ultimately is a derivative of other sectors, not the port sector directly; the same holds true of jobs associated with port activity. Subsequently, Xicon Economics strongly recommends additional work is conducted that investigates the interdependencies associated across port output and output in other industry sectors prior to rendering a decision. To do otherwise is inadvisable by Xicon Economics. Refer to the figure below.

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3. Xicon Economics recommends that additional efforts be exerted toward strengthening the noted models developed herein for projecting economic output at JAXPORT. For example, a portion of one model developed by Xicon Economics only explained 58.6 percent of the variance in the dependent variable, though this finding was statistically significant. Perhaps other techniques could have yielded higher explained variances or stronger model fits. This is not to suggest that this portion of the overall model developed was weaker than would be accepted in the scientific community. However, the development and testing of such models is complex and demands substantial effort, but such complexities and demands are sometimes overshadowed by the decision to spend nearly one billion dollars in the mere hope that harbor deepening is a sound investment. Thus, additional effort needs to be devoted to developing stronger models.

4. Xicon Economics recommends that harbor deepening at JAXPORT be considered more closely as it relates to relatively simultaneous harbor deepening projects in Miami, Savannah, Charleston, and other East Coast ports.

5. Xicon Economics recommends that additional efforts be exerted analyzing the current state of the US and world economies, as well as forecasting the future state of the US and world economies, before rendering a decision regarding harbor deepening. As a point in fact, Xicon Economics accurately predicted the 2008 economic collapse in 2005, though in retrospect, the pending collapse was suggested as early as 2003-2004 in construction data. Xicon Economics maintains the quantified opinion that the US economy is again trending similarly as it did immediately leading up to the 2008 economic collapse, albeit without strong employment. Thus, any near-future recessions and/or collapses is subject to leave the US and Jacksonville MSA economically worse than the 2008 collapse. Moreover, be advised that portions of the models herein were established using US GDP and Jacksonville MSA GDP as independent (predictor) variables of various dependent variables. Refer to the figure below.

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6. Xicon Economics recommends holistically that additional efforts be exerted as it relates to analyzing various political and economic climates around the world outside of only port activities from a risk engineering perspective prior to a decision being rendered by the Task Force. Perhaps more than ever, the world is in a state of perpetual political and economic uncertainty in many regards, albeit perhaps unknown to those persons outside the economics community. In the United States, political unrest and uneasiness can be seen by the most novice observers of national affairs; and internationally, the economic and political climates are struggling across numerous nations, particularly those nations in and around the Middle East. Worse, threats brought about in recent years by numerous terrorist groups have remained unchallenged, largely, threatening the state of economic well-being in the US and abroad in ways never imagined, let alone managed. For example, a Somali terrorist group affiliated with al Qaeda recently announced potential bombings at the Mall of America in Minnesota, one of the nations largest shopping malls. Jacksonville MSA is not immune from such ill-advised intents; and such events must be considered from a risk engineering perspective when dealing with uncertainty as it relates to subsequent impacts.

7. As experts in the field of engineering economics as it relates to economic output, it is the opinion of Xicon Economics that overall political unrest in the US and world will continue to worsen with time and that the rate of that unrest will increase. Such unrest has the ability to create havoc on US and world financial and economic markets. Thus, it remains paramount that stakeholders of this endeavor fully understand the potential repercussions associated with deepening and not deepening, to the Jacksonville MSA and US economies. Subsequently, it remains the opinion of Xicon Economics that additional work be conducted as it relates to the relationship between international political unrest and harbor deepening at JAXPORT, particularly in the area of risk engineering.



Introduction

nfrastructure spending has long been considered necessary catalysts for increasing economic output. Such holds true across most economies, whether developing, developed, or advanced. In fact,

infrastructure spending often reveals direct relationships with economic output, e.g. GDP. As spending increases on infrastructure endeavors, increases in economic output also occur. However, given that the relationship often is direct, as infrastructure spending decreases, so does economic output. Nevertheless, scientific evidence suggests that relationships between infrastructure spending and economic output is a highly complex paradigm demonstrating directional, bi-directional, and non-directional relationships with and without significant lag as both causal and non-causal endogenous and exogenous variables operate simultaneously.

1

Perhaps never before has such relationships been analyzed so closely as in recent years, especially since the world economic collapse of 2008.

2 The Bush and Obama Administrations both pressed to leverage infrastructure spending

as stimuli for the struggling US economy, each with only minimal to moderate success; thus, lending evidence to the argument that the relationship between infrastructure spending and economic output is not only contentious, but a problematic nexus that must not be endeavored haphazardly. Nonetheless, stakeholders remain left to sift through a plethora of complex research with little to no understanding of the same in attempts to render decisions that likely affect economies for generations. The City of Jacksonville and the Jacksonville Port Authority currently face similar ambiguities surrounding its decision to deepen its harbor for the allowance of larger vessels and containers into its port. Subsequently, the Jacksonville Port Authority (JAXPORT) initially contracted with Martin Associates, Lancaster, Pennsylvania, to help remove ambiguities surrounding its pending decision to deepen the St. Johns River in an attempt to not only increase its market position across various maritime entities, but to ultimately increase economic output across the greater region JAXPORT serves. This evaluation serves as an investigation conducted by Xicon Economics, Savannah, Georgia, on behalf of the Office of Economic Development, City of Jacksonville, on behalf of the Jacksonville Port Authority as to, generally, the validity of the findings proffered by Martin Associates. Further, the study addresses potential maritime cargo impacts, and other impacts, associated with harbor deepening. Still further, the study addresses issues associated with harbor deepening costs and benefits from a financial perspective and economic perspective.

1 Barber, H. & El-adaway, I. (under review). Infrastructure engineering: Statistical effect of energy production and consumption

on economic output. Journal of Management in Engineering, ASCE. 2 Under a separate study conducted by Xicon Economics, it was concluded that all but 29 countries were adversely affected

economically by the 2008 world economic collapse (Barber, H. (2011). Global Economic Collapse. Xicon Economics).

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Purpose

he Jacksonville Port Authority, JAXPORT, sought to analyze its market position relative to competing southeast US ports, and subsequently retained Martin Associates, Lancaster, Pennsylvania, to conduct

an evaluation of its market position, resulting in an analyses of the local and regional economic impacts of the Port of Jacksonville (2013). Through the study, Martin Associates was to conduct the following:

1. Evaluate the potential areas of business growth for JAXPORT, given the location, water depth, facilities, intermodal connections, available properties and available capital, as well as JAXPORTs realistic position and potential within the maritime industry, i.e. port industry.

2. Profile the size and structure of existing business by 1) commodity group (Containers, Ro/Ro, 2 Break-bulk, Bulk, Cruise and Non-Maritime) and 2) trade region, e.g. Asia, Latin America, and Europe.

3. Evaluate existing terminal layouts and infrastructure to determine best use of facilities to maximize efficiency and utilization of assets. Evaluate current JAXPORT marketing opportunities to determine the best use of capital and terminal design/planning.

4. Provide analysis and feasibility evaluation of commercial, non-maritime revenue producing opportunities in which the Jacksonville Port Authority could become involved.

5. Recommend strategies to maximize future revenue growth, to include a short-term and long-term marketing and development plan for both maritime and non-maritime business.

6. Assess current trade and the economic environment to determine potential impacts of state and federal legislation, bi-lateral U.S. trade agreements, carrier mergers, acquisitions, and other economic conditions that may impact future trade and investment opportunities relating specifically to JAXPORT.

Following completion of these analyses, Martin Associates findings and recommendations were questioned by other professionals, professionals largely outside the maritime industry and economics profession but nonetheless respected within their respective fields of expertise. More specifically, concerns were raised regarding the validity of findings rendered in the study; particularly those findings associated with job growth across the north Florida area. Additionally, the not-for-profit firm, Public Law Trust, raised concerns regarding the nondisclosure of the raw data upon which the Martin findings and recommendations were rendered. Prior to the evaluation herein, questions regarding the validity of the methodology used in rendering findings and recommendations, along with the raw data used, remained in question, at least to some in the community. The purpose of this investigation was to evaluate the market and business environment analysis previously conducted by Martin Associates, with a holistic intent of resolving the aforementioned concerns, doubts, and ambiguities to the extent realistically possible. In so doing, the position of Xicon Economics was grounded in the fact that it was neither in favor of, nor against, the techniques employed by Martin Associates during their investigation for JAXPORT. Likewise, Xicon Economics was neither in favor of, nor against, harbor deepening at JAXPORT. Thus, any findings and recommendations rendered by Xicon Economics were offered through objective professional judgment using statistical and econometric techniques accepted in the scientific community.

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To this end, the objectives of this evaluation required Xicon Economics to do the following:

1. Review the economic impact model developed by Martin Associates; provide an evaluation regarding the validity of the methodology of the impact model.

2. Provide an independent evaluation of the business growth potential for JAXPORT, given the ports current water depth and water depth under the proposed harbor deepening project.

3. Provide a cost-benefit analysis, and economic benefits, of the harbor deepening project.



Methodology

or the harbor deepening project for the Jacksonville Port Authority, the primary economic impact models used to investigate the local and regional economic impacts of port authorities were developed

by Martin Associates using data they have collected over the last several years from port authorities and associated firms around the world, and more importantly, data collected from companies JAXPORT serves. On face value, this method has the opportunity to generate robust findings, substantially more robust than those analyses derived through modern input-output methods. Conversely, however, this method has the opportunity to generate findings that are equally as weak as they are robust if appropriate research design methodologies and strategies were not developed and employed. In lay terms, from initial conceptualization of the economic impact study completed by Martin Associates, to the summary and conclusions associated with the same, research design and methodology were paramount to the delivery of robust findings. Subsequently, the guiding principle within the dilemma of reviewing, critiquing, and or analyzing work conducted by Martin Associates as it relates to the purpose noted herein resided in research design and methodology. As such, Xicon Economics initially investigated the methodologies Martin Associates employed when collecting data, port-specific, economic, and otherwise. When collecting data such as these, it is appropriate to utilize some form of instrument that should offer evidence of validity and reliability. Subsequently, one of the first mandates associated with the review was to determine whether the research design methodologies employed by Martin Associates offered evidence that scientific validity and reliability existed, and if so, to what extent. As a matter of explanation to stakeholders, attempting to establish validity and reliability is an arduous undertaking. Thus, offered below is a brief overview of validity and reliability below in lay terms:

Validity is the extent to which a measure captures a specific variable, or set of variables, i.e. the extent to which a construct, or set of constructs, is operationalized. For example, in economics one is concerned with economic output; however, one must first define economic output; this is validity. Reliability is the extent to which a measure consistently captures its intended data. In risk engineering, for example, reliability is the ability of a system to perform consistently its required functions under stated conditions for a specified period. As another example, in psychometrics, reliability is the ability of an instrument, or test, to consistently collect the same data repeatedly. However, it is possible to have reliability without validity; but technically, it is not possible to have validity without reliability. As an example, a watch that consistently runs 30 minutes later than the correct time offers no evidence that its measure holds validity as a measure of time; however, the watch is consistent and therefore, reliable. In fact, while the time the watch keeps is not valid, to use the term loosely, its reliability coefficient is 1.0 perfect. In brief, there are three broad types of validity as it relates to instrument development and usage, including content validity, criterion validity, and construct validity. Of these three types of validity, content validity is the easiest to address; content validity often is equated with face validity and asks the researcher to subjectively address two basic questions: 1) Does the instrument appear to

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measure the constructs, or variables, of the study? 2) Is the sample being measured adequate to be representative of the construct to be measured?

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Criterion validity allows researchers to approximate how well constructs within their study were operationalized. A simple example may involve a researcher comparing data collected through one instrument to data collected through a different, yet similar, instrument; or an estimation of criterion validity may involve the degree to which an instrument predicts the outcome of a variable, e.g. economic output of JAXPORT, using a particular instrument, scale, or other measure. Similar to criterion validity, construct validity is the degree to which an instrument measures a specific variable. Evidence of construct validity is most often considered the most difficult type of validity to address; however, it is none less important. Construct validity addresses whether an instrument accurately measures the constructs it was designed to measure. For example, human intelligence is often measured in terms of an intelligent quotient (IQ), using 100 as the mean across the population and 10 or 15 as the standard deviation. However, who is to define intelligence, and moreover, who is to say that this represents intelligence and this does not? Until intelligence is operationalized into a measurable variable, it remains merely an abstract construct of relatively little value.

Upon commencement of this investigation, Xicon Economics reviewed, critiqued, and/or analyzed data and findings associated with the following documents:

1. The Local and Regional Economic Impacts of the Port of Jacksonville, 2013, dated August 4, 2013, by Martin Associates

2. Presentation, The Economic Impact of the Port of Jacksonville, 2013, dated August 7, 2014, presented by Dr. John Martin, Martin Associates

3. Jacksonville Port Authority: Strategic Master Plan, dated December 5, 2013, prepared by Martin Associates 4. Survey Instruments (7 total), Economic Impact Study of the Port of Jacksonville, (n.d.) 5. Email, Jacksonville Port Task Force, dated May 12, 2014, by Brian Taylor, JAXPORT 6. Historical Data, 1980/81-2013/14, Jacksonville Port Authority 7. Final Integrated General Reevaluation Report and Supplemental Environmental Impact States, dated

February 2014, by U.S. Army Corps of Engineers, Jacksonville District 8. Total Vessel Calls, 2002-2012, USDOT, Maritime Administration 9. Global Cities Initiative, dated December 2014, a joint venture by Brookings and JP Morgan Chase & Co. 10. Jacksonville Harbor Deepening, Mayors Task Force, dated August 7, 2014, by Col. Alan Dodd 11. Memo, Florida Logistics Center Market Analysis Update, dated May 1, 2014, by Brian Taylor, JAXPORT 12. Seven Questions to Ask about $1 Billion Spending of Public Funds for St. Johns Dredging/Deepening, (n.d.)

by Dr. David Jaffee, Northeast Florida Center for Community Initiatives, University of North Florida 13. Critical Considerations on St. Johns River Dredging/Deepening Project, (n.d.) by Dr. David Jaffee, Northeast

Florida Center for Community Initiatives, University of North Florida 14. The Port of Savannah Logistics Cluster, (n.d.) by Dr. Jean-Paul Rodriguez 15. Jacksonville Port Task Force Briefing, North Florida TPO, Path Forward, 2040 Port & Intermodal Cargo

Forecast, dated November 12, 2014, by John Vickerman, Vickerman & Associates 16. A Peer Review of the Impact Modeling by Martin Associates for JAXPORT regarding Dredging to 47 Feet,

(n.d.) by Dr. Paul Mason 17. Transcript, Port Task Force Meeting, dated August 7, 2014, by Ananth Prasad, (formerly) Florida

Department of Transportation 18. Numerous other papers, articles, and emails regarding harbor deepening at JAXPORT, both for and against

Further, Xicon Economics had multiple communications with numerous individuals associated with the economic impact of harbor deepening of the Port of Jacksonville, including the following individuals:

3 Evidence of content validity is often offered through content experts.



1. Dr. John Martin, CEO, Martin Associates 2. John Baker, Co-Chair, Port Task Force, Jacksonville Port Authority 3. David Kaufman, Senior Director, Planning & Commercial Development, Jacksonville Port Authority 4. Theodore Carter, Executive Director, Office of Economic Development, City of Jacksonville 5. Ed Randolph, Business Development Manager, Office of Economic Development, City of Jacksonville 6. Linda Williams, Director, Corporate Performance & Compliance, Jacksonville Port Authority 7. Jason Harrah, Project Manager, US Army Corps of Engineers, Jacksonville District

Initially, all documents were reviewed in terms of their relevance to each of the three objectives as it related to the purpose of this investigation, followed by a selected internal critique and analysis of data and findings noted within each document, relative to the objectives. After such, Xicon Economics evaluated the extent to which validity existed within the research design methodology Martin Associates used when developing the economic impact model. To do so, the principal researcher of this study, Dr. Herbert Barber, spent approximately four hours in discussions with Dr. John Martin, the developer of the economic impact model. Such discussions were necessary as Martin Associates could not release the actual economic impact model, itself, nor the data associated with the model, without nullifying confidentiality agreements held with its clients. First, the seven (7) survey instruments Martin Associates used to collect data were reviewed and critiqued. In so doing, the extent to which content, construct, and criterion validity existed within the data collection process was evaluated as it related to each instrument. Next, a review was conducted to determine the reliability of each survey instrument; again, to the extent possible. Finally, the items noted in each instrument were compared to the analyses Martin Associates provided in the economic impact study, i.e. The Local and Regional Economic Impacts of the Port of Jacksonville, 2013, dated August 4, 2013, to ensure that the data captured was congruent with the items found within each instrument. Following, the second objective was fulfilled by providing an independent evaluation of the business growth potential of JAXPORT given the ports current water depth and water depth under the proposed harbor deepening project. In so doing, it was not considered realistically feasible under the RFP, nor desired by the Office of Economic Development or Port Task Force, that an exhaustive comprehensive investigation of every variable associated with and without harbor deepening be examined. Subsequently, specific variables, or commodities, were selected to serve as comparable variables such that an independent analysis of these variables could be conducted by Xicon Economics and compared with findings noted by Martin Associates. In so doing, validity, as it related to findings tendered by Martin Associates, was investigated further. Upon completion of the first and second objectives, a cost-benefit analysis was conducted. In so doing, project costs were levied against economic benefits. Cost and benefits were initially compared financially, then econometrically.



Analysis & Findings

he analyses Xicon Economics used in conducting this study, along with the respective findings, were divided into three overlapping sections, as they related to the three objectives established in the RFP.

In the first section, a review and evaluation of the economic impact model developed by Martin Associates was conducted with accommodating arguments for and against the employed methodologies. Following, the potential business growth potential benefits associated with and without harbor deepening of the St. Johns River were investigated. Thirdly, harbor deepening was examined from a financial perspective and econometric perspective through a cost-benefit analysis.

Objective 1: Review and Evaluation of the Economic Impact Model Xicon Economics reviewed and evaluated the economic impact model developed by Martin Associates, specifically as it related to validity of the methodology used during model development. In so doing, a review and critique of the seven survey instruments Martin Associates developed to collect data was conducted. Each of the seven instruments collected quantitative data, with no demonstration of any attempt to collect qualitative data, from 472 firms providing cargo and vessel services at the Jacksonville Port Authoritys maritime terminals. Each of the seven instruments were developed individually to collect participant-specific data from seven types of entities, including entities associated with government, ocean carriers, maritime services, marine cargo, tugs and barges, and warehouses. Of the seven instruments developed, 65 closed-end items were constructed, with most allowing for multiple-choice responses within each item. No items were found to be ambiguous, leading, or erroneous; the scales were appropriate for the data collected; and all data collected could be traced to a variable within the economic impact study. The seven instruments consisted of the following:

Inst. # Participant Group Participants Identified Items Data Relevant Ambiguities & Errors

1 Government Yes 6 Yes None 2 Ocean Carriers A Yes 8 Yes None 3 Maritime Services Yes 7 Yes None 4 Ocean Carriers B Yes 8 Yes None 5 Marine Cargo Yes 9 Yes None 6 Tugs & Barges Yes 14 Yes None 7 Warehouse Yes 13 Yes None

Data were collected over the telephone and in-person by professionals employed by Martin Associates, with roughly five conversations being necessary per respondent. No form of random sampling was necessary as the 472 firms

surveyed represented the population (Response Rate100%); thus, generalizability of a sample across a population was not of concern. As noted in the economic impact study (p. 15), data collected through the instruments were considered baseline data. These data allowed for the development of operational models, that when coupled with appropriate BEA multipliers, further allowed Martin Associates to update the economic impacts JAXPORT marine terminals and private terminals had annually on the following as each related to direct jobs, revenue and income impacts, and similar variables:

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Marine cargo tonnage, by commodity

Seaport labor productivity and work rules

Modal distribution of seaport cargo

Vessel calls and vessel size

New carrier services

To this end, Xicon Economics reviewed the instruments and overall methodology employed during the collection of data from a scientific perspective, as well. In general, Xicon Economics attempted to find evidence that validity existed, as in cases of critique, such as the investigation herein, it arguably is more important to offer evidence that validity exists and allow the sophisticated reviewer to render independent conclusions, rather than becoming overly critical of the methodologies employed during data collection. However, validity is the extent to which a construct is operationalized, and such could not be precluded from investigation. In scientific research, constructs are precursors to variables. In this case, specifically, for example, economic impact must be operationalized into a variable such that it can be quantitatively measured; in lay terms, economic impact must be defined, e.g. GDP, jobs, income, taxes. While operationalization of a construct is an arduous undertaking in scientific research, such is relatively straightforward in applied research, such as the economic impact study discussed herein. Of the three broad types of validity that exist, including content validity, construct validity, and criterion validity, only content validity and construct validity were considered relevant to the Martin economic impact study. Content validity is analogous to face validity. Investigating content validity is less rigorous than construct validity and criterion validity, as it merely mandates that measures appear to measure intended constructs. Through construct validity, researchers determine the extent to which constructs are operationalized. Most often construct validity is assessed through subject matter experts coupled with experts well versed in scientific measurement. Unlike criterion validity, both content validity and construct validity rely on the experiences of seasoned experts to assess validity, as opposed to manipulating quantitative data to develop coefficients or similar measures. Subsequently, Xicon Economics found evidence to support both content and construct validity as it related to the survey instrument and data collection methodologies employed by Martin Associates. Further, Xicon Economics found evidence that validity existed within the various graphical economic impact models. However, a component to validity is reliability, but given that Xicon Economics was not allowed access the data collected through the seven survey instruments by Martin Associates, reliability coefficients could not be calculated. Such could easily be attained through any one of several forms of reliability, such as parallel forms, test-retest, or split halves. Likewise, no evidence was found that suggested that internal consistency was estimated in the instruments, such as that found using Cronbachs alpha. Thus, it is not possible for Xicon Economics to suggest the research methodologies employed during the development and execution of the Martin economic impact model offered evidence of validity further than that previously noted. Nonetheless, in practice, especially as it relates to applied research, it is often not necessary to standardize

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instruments that will collect data, at least to the extent one would in psychometric testing and research or other peer-reviewed scientific research; arguably, such was the case with the Martin economic impact model. Regardless, it remains the opinion of Xicon Economics that reasonable efforts were taken by Martin Associates to ensure validity within their research design methodology and data collection processes, notwithstanding the noted issues associated with reliability.

4 Significantly more effort is required to standardize instruments than that noted herein. However, let the reader be aware that

standardizing an instrument in this case, such as those used by Martin Associates, would be considered atypical and likely unnecessary.



Objective 2: Evaluation of Business Growth Potential of JAXPORT, with and without Deepening In rendering an independent evaluation of the business growth potential of JAXPORT, with and without harbor deepening, the original intent of Xicon Economics, was to evaluate business growth potential from a definitive econometric perspective, in that statistical analyses would be applied to economic measures. Conducting any form of comparative analysis with the analyses and subsequent findings of Martin Associates would only be possible if Xicon Economics had access to data collected and analyzed by Martin Associates. Subsequently, on December 22, 2014, it was agreed between representatives of the Office of Economic Development, Port Task Force, and Xicon Economics that the second objective would be fulfilled through an evaluation of selected variables rather than through the generation of a comprehensive independent growth model for JAXPORT. Subsequently, it was agreed that variables would be selected from within the Martin economic impact study and strategic plan and crosschecked against calculations conducted by Xicon Economics; again, to the extent possible. Further, January 12, 2015, it was readily understood between representatives from the Office of Economic Development, Port Task Force, and Xicon Economics that the approach discussed herein for the second objective was in keeping with the overall intent of the RFP and needs of the Office of Economic Development and Port Task Force. Subsequently, the following variables were analyzed and projected as a means of estimating the business growth potential of JAXPORT, using FY 2004/05 through FY 2013/14, as data were available from JAXPORT:

1. Inbound Containers (TEUs) 2. Outbound Containers (TEUs) 3. Inbound Containers (Short Tons) 4. Outbound Containers (Short Tons) 5. Inbound Break Bulk (Short Tons) 6. Outbound Break Bulk (Short Tons) 7. Inbound Bulk Cargo (Short Tons) 8. Outbound Bulk Cargo (Short Tons) 9. Inbound Auto/Tractor (Short Tons) 10. Outbound Auto/Tractor (Short Tons)

As an explanatory note to the stakeholders, however, data analyzed and subsequent findings of the second objective should not be construed as identical to data analyzed and subsequent findings of the third objective, depicted elsewhere in this study. While the raw data remained the same under every objective, treatment of those data did not, as changes were necessary to accommodate each objective individually. For example, the findings noted under the second objective were established via independent efforts exerted by Xicon Economics. However, for comparative purposes, which relates to the critique of validity mandated under the first objective, similar techniques were employed by Xicon Economics when necessary, presuming such techniques were considered statistically sound. In so doing, the analyses and subsequent findings in the second objective did not allow for delays as it related to the engineering and construction phases of harbor deepening. However, the third objective, involving the cost-benefit analysis, mandated that Xicon Economics consider these delays. Business Growth Potential without Harbor Deepening Descriptive Analysis Container and vessel data were reviewed descriptively using commonly accepted measures associated with central tendency. In so doing, percentage change and correlation coefficients were calculated using TEU data, where appropriate, and tonnage data on a total fiscal year basis. Refer to the figures below to review these data graphically, without explanation.



Inbound YoY %Change Outbound YoY %Change

FY 2005/06 156,145 - 394,359 - FY 2006/07 120,650 -22.7 363,914 -7.7 FY 2007/08 115,798 -4.0 365,743 0.5 FY 2008/09 139,301 20.3 363,066 -0.7 FY 2009/10 159,701 14.6 402,482 10.9 FY 2010/11 173,424 8.6 433,980 7.8 FY 2011/12 192,657 11.1 418,709 -3.5 FY 2012/13 199,957 3.8 413,542 -1.2 FY 2013/14 222,728 11.4 394,160 -4.7

Historical Container, Inbound vs Outbound Units: TEU Notes

1. Correlation coefficient between Inbound and Outbound TEUs: r=.92, N=9, p=.039 (Sig at .05 alpha level).

2. Tonnage is represented monthly in above figure and by fiscal year (total) in the table.

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Container Break Bulk Bulk Cargo Auto/Tractor Total YoY %Change

FY 2004/05 1,014,483 611,918 2,268,448 712,905 4,607,754 - FY 2005/06 1,133,987 953,532 2,077,573 875,960 5,041,053 9.4 FY 2006/07 969,547 974,800 2,105,125 866,518 4,915,989 -2.5 FY 2007/08 913,440 768,695 2,265,260 745,943 4,693,338 -4.5 FY 2008/09 1,070,688 655,180 1,595,842 376,601 3,698,311 -21.2 FY 2009/10 1,231,871 821,469 1,401,732 478,160 3,933,232 6.4 FY 2010/11 1,448,167 709,645 1,107,362 406,928 3,672,102 -6.6 FY 2011/12 1,629,004 684,033 1,082,575 503,084 3,898,696 6.2 FY 2012/13 1,742,474 833,993 918,834 303,273 3,798,574 -2.6 FY 2013/14 1,965,125 714,100 1,084,166 324,786 4,088,177 7.6

Historical Tonnage, Inbound Container and Vessel Units: Short Tons Note: Tonnage is represented monthly in above figure and by fiscal year (total) in the table.

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Container Break Bulk Bulk Cargo Auto/Tractor Total YoY %Change

FY 2004/05 3,152,897 195,033 120,258 372,710 3,840,899 - FY 2005/06 2,945,785 259,386 123,265 326,902 3,655,338 -4.8 FY 2006/07 2,669,168 186,975 147,775 389,294 3,393,212 -7.2 FY 2007/08 2,687,275 183,855 210,607 616,556 3,698,293 9.0 FY 2008/09 2,823,908 119,585 101,238 538,919 3,583,650 -3.1 FY 2009/10 3,187,460 168,883 113,429 640,920 4,110,692 14.7 FY 2010/11 3,416,904 184,721 114,185 740,101 4,455,911 8.4 FY 2011/12 3,276,295 131,994 124,511 805,481 4,338,281 -2.6 FY 2012/13 3,152,533 107,806 126,359 793,129 4,179,827 -3.7 FY 2013/14 3,097,844 78,244 120,669 702,284 3,999,041 -4.3

Historical Tonnage, Outbound Container and Vessel Units: Short Tons Note: Tonnage is represented monthly in above figure and by fiscal year (total) in the table.

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Container Auto/Tractor Break Bulk Bulk Cargo



Relationships between inbound and outbound container and vessel tonnages were also examined as part of the descriptive analysis, using FY 2004/05 to FY 2013/2014. For inbound tonnages, the relationship between bulk cargo tonnage and auto/tractor tonnage was significant at the .001 alpha level (r=.879), as were other relationships, albeit inverse. For example, the relationship between bulk cargo tonnage and container tonnage was inverse but significant (r=-.881, p



Inferential Analysis Following the descriptive analysis, projections were rendered for these same container and vessel data through FY 2019/20, using time series forecasting, for JAXPORT without harbor deepening. Time series forecasting allows one to account for seasonal, trend, and irregular characteristics associated with ordered series data simultaneously. While statistical arguments can be made for and against the use of time series on these specific data, it was the opinion of Xicon Economics that time series was the most appropriate technique for forecasting container and vessel data. As it relates to JAXPORT opting to forego harbor deepening to 47 feet, the following general assumptions applied to all analyses:

1. Data were accurate and reflected true representations of each variable. 2. Data were consistent with what is considered ordered series, with seasonality. 3. Inbound and outbound container and vessel volumes remained relatively stable through FY 2019/20,

including container and/or vessel volumes generated through Asia.

An explanation regarding container and vessel projections is noted below, followed by figures representing each variable via TEU or tonnage, as well as a table reflecting all projections rendered for all variables. Inbound and Outbound Container Projections by TEU without Harbor Deepening The least squares regression (LSR) analysis associated with the time series modeling for projecting inbound container TEUs through FY 2019/20 was determined to be statistically significant, F(1,108)=152.573, p



Inbound and Outbound Container Projections by TEU, without Harbor Deepening Inbound and Outbound Container Projections by Tonnage without Harbor Deepening The overall LSR model fit for inbound container tonnage projections also was significant, F(1,118)=259.057, p



Side Note

Though not part of this study, per se, given that the necessary data were readily available and could easily be manipulated, average projected container efficiencies, or densities, were calculated and noted below:

Inbound and Outbound Container Efficiency Units: Short Tons/TEU

Inbound and Outbound Break Bulk Projections by Tonnage, without Harbor Deepening The model developed to project inbound break bulk tonnage was not statistically significant at the .05 alpha level; and the difference factor coefficient was .492, while the standard deviation was 1.026. Potentially lending themselves to disrupt data stability, several potential outliers were observed in the series. Nonetheless, it became obvious that inbound break bulk tonnage has steadily decreased since FY 2004/05, and as such, it could be inferred that the negative regressive behavior of the series would continue through FY 2019/20. Therefore, projections were rendered, albeit through a time series model not considered statistically significant. Conversely, the time series model developed to project outbound break bulk tonnage was considered strong, with an overall LSR model fit that was significant, F(1, 118)=34.867, p



Inbound and Outbound Break Bulk Projections by Tonnage, without Harbor Deepening Inbound and Outbound Bulk Cargo Projections by Tonnage, without Harbor Deepening Time series was also used to project bulk cargo tonnage through FY 2019/20, using FY 2004/05 to FY 2013/14 tonnage data. In so doing, the LSR analysis yielded a statistically significant fit, F(1, 118)=78.591, p



tonnage was forecasted to be non-existent the end of CY 2018, or sooner, without catalysts to stave these projections. However, outbound auto/tractor tonnage was projected to continue to increase, given the time series model developed from previous data, reaching approximately 1.15 million tons of auto/tractor, and the like, by FY 2019/20. In fact, the 2008 US economic collapse appeared to only moderately impact auto/tractor tonnage departing JAXPORT.

6 The LSR model fit for the time series was significant, F(1, 118)=138.372, p



Total Outbound Projections by Tonnage in FY 2019/20 Note: Percentages may not equal 100% due to rounding.

Container Break Bulk Bulk Cargo Auto/Tractor

Inbound Tonnage

Outbound Tonnage

Projected Changes in Inbound and Outbound Tonnages, FY 2019/20 over 2014/15 Note: Loss of the Asian market is not depicted in container tonnages. Refer elsewhere in this document for these allowances.

Container and vessel variables are represented individually below in TEU and/or tonnage on a monthly and annual basis without incorporation of delays associated with actual harbor deepening, e.g. delays due to construction.

73.2%

0.1% 2.3%

24.4%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

Container Break Bulk Bulk Cargo Auto/Tractor

-100.0%

+30.0%

-100.0%

-8.3%

-6.2%

-94.7%

+28.4%

+6.0%

Inbound Container Projections, without Harbor Deepening Units: TEU

-

5,000

10,000

15,000

20,000

25,000

30,000

1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10

FY2005/06

FY2006/07

FY2007/08

FY2008/09

FY2009/10

FY2010/11

FY2011/12

FY2012/13

FY2013/14

FY2014/15

FY2015/16

FY2016/17

FY2017/18

FY2018/19

FY2019/20

TEU Actual CMA(12) TEU Projected

Projected

Projections, Total FY TEU 2014/15 198,135 2015/16 234,335 2016/17 266,588 2017/18 257,512 2018/19 269,100 2019/20 280,689

Notes 1. LSR projected intercept is significant at .001 alpha level. 2. LSR projected slope coefficient is significant at .001 alpha level. 3 LSR model fit is significant, F(1, 108)=152.573; p



Outbound Container Projections, without Harbor Deepening Units: TEU

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10

FY2005/06

FY2006/07

FY2007/08

FY2008/09

FY2009/10

FY2010/11

FY2011/12

FY2012/13

FY2013/14

FY2014/15

FY2015/16

FY2016/17

FY2017/18

FY2018/19

FY2019/20

TEU Actual CMA(12) TEU Projected

Projected

Projections, Total FY TEU 2014/15 410,007 2015/16 422,845 2016/17 465,824 2017/18 432,468 2018/19 437,280 2019/20 442,092

Notes 1. LSR projected intercept is significant at .001 alpha level. 2. LSR projected slope coefficient is significant at .001 alpha level. 3 LSR model fit is significant, F(1, 108)=10.365; p



Relationship between Inbound and Outbound Container Projections, without Harbor Deepening Units: TEU

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10

FY2005/06

FY2006/07

FY2007/08

FY2008/09

FY2009/10

FY2010/11

FY2011/12

FY2012/13

FY2013/14

FY2014/15

FY2015/16

FY2016/17

FY2017/18

FY2018/19

FY2019/20

TEU Actual - Inbound CMA(12) - Inbound TEU Projected - Inbound

TEU Actual - Outbound CMA(12) - Outbound TEU Projected - Outbound

Relationship, Inbound A

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