A cruise ship sailed out of the Port of Philadelphia this springfor the first time in 15 years, as state and local officials celebrated a new economic driver for the region.
Officials have projected that the new cruise business — anchored by Norwegian Cruise Line at a Hog Island terminal near Philadelphia International Airport — will create more than 2,100 jobs and generate $300 million in annual economic activity.
What they did not anticipate before breaking ground in December was that several obstacles — including several weeks of subfreezing temperatures and icy conditions on the Delaware River — would send the construction project millions of dollars over budget.
The cost of building the terminal has increased 50% to more than $60 million, according to the Philadelphia Regional Port Authority (PhilaPort), an independent state agency that owns seaport facilities along the Delaware. The port authority is funding the project.
PhilaPort is considering obtaining financing to help cover the $20.1 million in cost overruns. The authority’s board this month authorizing staff to borrow up to $15 million. PhilaPort spokesperson Marty O’Rourke said loan terms remain under negotiation.
In addition to the potential financing, the port authority is funding the project from operating revenues, O’Rourke said. PhilaPort generates revenue from its leases with tenants that operate facilities such as marine terminals and warehouses.
PhilaPort’s budget for the fiscal year that began July 1 includes $34.5 million in revenue.
Despite the delays, Norwegian Cruise Line’s ships have continued to dock at PhilaPort’s under-construction terminal since April. Mayor Cherelle L. Parker and Gov. Josh Shapiro, both Democrats, attended an onboard ceremony for the Norwegian Jewel’s inaugural call that month.
Shapiro — whose appointee chairs PhilaPort’s board — touted the cruise business “as the newest addition to our commonwealth’s fast-growing tourism industry.”
There had been 13 voyages as of mid-July.
PhilaPort remains upbeat about its new revenue stream. Under a seven-year agreement, Norwegian Cruise Line has committed to 41 voyages annually to locations like Bermuda, and PhilaPort says it will receive $59 million in rent from the company over that period of time.
“The key point to remember moving forward is that all infrastructure is now in place for additional cruise lines to start using the PhilaPort Cruise Terminal,” O’Rourke said. Each new line has the potential to generate an additional $8.5 million in annual rent, he said.
Construction began in December after PhilaPort acquired the Hog Island terminal facility in Tinicum from Energy Transfer Marketing & Terminals L.P. for $10. Under the deal, ownership of the 15.5-acre property reverts back to Energy Transfer in seven years.
PhilaPort’s board in November the agency to bypass competitive bidding “due to the urgency of need to ensure that the cruise terminal is operational and ready to receive passengers by the first scheduled sailing in April 2026.”
The port authority hired Bridgeport, N.J.-based Commerce Construction Corp. to handle waterside construction, based on their past maritime experience, O’Rourke said.
Norwegian Cruise Line tapped Philadelphia-based A.P. Construction to lead landside construction.
O’Rourke said PhilaPort “had a very narrow four-month window to complete construction in time for the first ship berthing.”
“This tight construction window was compounded by severe weather-related obstacles and delays caused by several weeks of subfreezing temperatures, resulting in higher-than-anticipated costs for labor overtime and added acceleration fees for materials acquisition,” he said in an email.
Also contributing to added costs were regulatory requirements, environmental remediation, additional landside mooring work, and temporary facilities needed to support vessel operations, O’Rourke said.
The landside construction was originally scheduled for completion by the end of June. The port authority now anticipates the terminal will be complete by its grand opening Aug. 27.
Commerce Construction didn’t respond to a request for comment, but the contractor posted on LinkedIn earlier this summer that it had made progress despite “extreme cold, icy conditions, and a relentless deadline.”
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