GALVESTON — The port and city of Galveston on Friday asked state Rep. Craig Eiland D-Galveston to withdraw a bill that would have allowed private investors to set rates and tariffs and establish and enforce rules at public ports.

Port managers had said provisions in House Bill 3456 were necessary to a proposed agreement that would turn over management of the public docks to a joint venture formed by a major investment group and one of the world’s largest maritime shipping terminal operators.

But a joint statement issued Friday by the port and city said HB 3456 was not needed to consummate a deal with the private operators.

Confusion about the bill had generated controversy and fed conspiracy theories about the port’s intent among people opposed to a master-lease deal with investors The Carlyle Group and terminal operators Hutchison Port Holdings.

”House Bill 3456 was initiated with the good intent to clarify tariff rate setting” the statement read. ”However after discussions with the city of Galveston on alternative wording to the bill it became clear that the intentions of this legislation and the public perception could not be reconciled.

”The Port of Galveston will continue to operate in the same manner that it has in the past. Passage of this proposed legislation was not a condition of the negotiation between Bank of Montreal The Carlyle Group Hutchison Port Holdings and the Port of Galveston.”

The port for years has found ways to accommodate lease holders who needed adjustments in rates and tariff as their business costs changed Port Director Steve Cernak said.

Reaction to the bill had been disappointing he said.

”I do feel a little disappointed at the level of trust” Cernak said. ”It seems like everyone had his own agenda going forward.”

The port’s handling of the bill which was filed late in the session and without consultation with the city was partly responsible for the mistrust Mayor Joe Jaworski said.

”That drove a wedge between the city and the port” he said.

Jaworski said he hoped withdrawing HB 3456 would allow the port to move ahead with its negotiations without the ”cloud of suspicion” the bill had caused.

Port attorneys sought the bill for fear a decades-old legal opinion would be an obstacle to striking a deal with the joint venture.

In 1975 Texas Attorney General John L. Hill refused to certify bonds to finance a $26 million grain elevator asserting the Wharves Board of Trustees which governs the port improperly delegated its authority in a lease agreement by giving a third party unrestricted power to set rates and determine rules and regulations. The Supreme Court of Texas sided with Hill. The Cook Industries grain elevator now operated by ADM was built in 1976 but operators could not set rates.

In the 35 years since elevator operators have gone to the wharves board for rate and tariff adjustments Cernak said. The port simply would continue doing that and revisit a legislative change in two years if the Hill opinion proved to be a problem Cernak said.

In February the wharves board voted to pursue an offer from the joint venture the broad terms of which include a 75-year master lease that would give the private operators control of existing leased assets; a 100-acre terminal to be developed on the west end of the port’s island property; a 20-acre terminal for roll-on roll-off cargo such as farm and industrial vehicles to be developed on the east end of port property; the port’s two cruise ship terminals; and associated assets and port land on Pelican Island.

In turn the joint venture would pay off the port’s $60 million debt accumulated mostly from development and renovations of cruise ship terminals. The joint venture also would give the port upfront cash annual payments and a share of profits from both cruise and freight revenues.

Any agreement would have to be approved by the wharves board.

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