How Connecticut shut down a business and road salt competition
When the Connecticut Port Authority issued a request for proposals in 2018 to find a new operator for State Pier in New London, Steven Farrelly, whose road salt company, DRVN Enterprises, operates from the port, felt some reassurance from what he saw in the paperwork.
One of the goals listed in the RFP was to preserve existing port businesses like his.
The port authority chairman, Farrelly says, assured a representative of his company that they "had his back" in choosing a new port operator, essentially the road salt company's new landlord.
More than two years later, Farrelly's life is consumed by what has become the destruction of his company by the actions of the port authority, which by my reckoning put a knife in his back in turning the operation of the port over to his competitor, which shut the piers down.
Farrelly has had to let go some of the 15 full-timers on his payroll drawing salaries and medical benefits. The 50 or so independent trucking contractors who he uses as subcontractors, at a cost he estimates at about $3 million a year, are also now in various stages of their own business tailspins, he says.
And the 95,000 tons of salt stored at the pier, worth about $5 million, has to be moved before the port authority's latest deadline: the end of the year. Farrelly has searched widely but can't find a community in eastern Connecticut that would accept the salt and its accompanying truck traffic.
He says he can't bear the thought of letting his lenders, subcontractors and employees down, but bankruptcy is one of the options he has considered, with substantial bank loans to be satisfied.
Worse for the taxpayers of Connecticut, the closing of the port of New London to DRVN's salt shipments has returned the concentration of the Connecticut salt business to New Haven, where it was centered before Farrelly started offering competition in 2014.
Farrelly says the price of road salt dropped from $90 to $65 a ton once he joined the marketplace, bringing salt through New London in competition to the control of salt importing and handling enjoyed in New Haven, the state's only other deepwater port.
That price differential amounts to typical annual savings for all the state's big salt users, including the state Department of Transportation, municipalities, hospitals and universities, of about $5 million, Farrelly estimates.
I spoke to Farrelly for the first time this week. He has declined to talk publicly about the situation until now, fearing he would anger the decision-makers who might give him a little more time to sell off his $5 million investment stranded at the pier.
Apparently, with the clock ticking, he is losing hope of getting any such mercy.
The roots of Farrelly's predicament go back to the decision by the port authority to ignore the requirements it set out in its own 2018 RFP for the management of the port, saying then the successful applicant should operate a dual-use port, accommodating traditional cargo like salt as well as wind turbine assembly.
Logistec, the large North American port operator that was running State Pier and encouraged Farrelly's salt business, submitted an RFP response for the requested dual-use port.
The authority chairman and director never interviewed Logistec about its application, though, and the management contract was issued to the politically connected Gateway Terminal, which owns the competing port terminal in New Haven and runs its own salt business there.
Gateway ignored the dual-port proposal requirement of the RFP and since winning the contract has closed down the port of New London to traditional shipping. It diverted ships from New London to New Haven even though there aren't even permits yet for planned work to build a wind terminal here.
In addition to its own salt business, Farrelly says, Gateway also manages the ground distribution and product handling for other salt businesses that import through its terminal, making Gateway the gorilla of the Connecticut salt business.
Farrelly says the port authority made his competitor his landlord, a relationship he says has been fraught from the beginning in regards to rent payments, shipments and, most important, the storage of the remaining salt supply.
Farrelly hired attorney Robert Langer of the statewide law firm Wiggin & Dana, who was a Connecticut assistant general for antitrust matters for two decades. Langer in July filed a lengthy antitrust complaint about DRVN with Attorney General William Tong, whose office declined to investigate.
"The (port authority) cannot, I suggest, disavow its responsibility in placing Gateway in a position to fundamentally alter the overall competitive conditions in the road salt business," Langer wrote to Tong.
Like the employees he had to lay off, Farrelly has had to let Langer go, no longer able to keep up with the significant legal bills.
After I criticized the decision not to investigate, Elizabeth Benton, a Tong spokesperson, said by email that the attorney general himself was not personally involved.
I am not sure what is worse, the attorney general himself deciding not to investigate or the idea that no one in his office told him that the lawyer who prosecuted antitrust matters for the state for two decades had filed a credible complaint, citing legal justification, about unfair trade practices concerning road salt import and distribution in the state that impacts the budget of every municipality.
I guess I shouldn't expect more from an attorney general who recently defended before the state Freedom of Information Commission his decision to withhold from the public a whistleblower complaint about corruption at the port authority, run by prominent Connecticut Democrats.
After all, it wasn't long after the authority granted the contract to manage State Pier to the operator of the competing port, in violation of its own RFP rules, that the quasi-public agency melted into scandal, involving, among other things, the awarding of contracts to insiders.
This is the opinion of David Collins.