Drums roared as two dancers in a lion costume leapt about a small stage, surrounded in the distance by hulking cargo cranes. With the Chinese lion...
Drums roared as two dancers in a lion costume leapt about a small stage, surrounded in the distance by hulking cargo cranes.
With the Chinese lion dance and the mayor looking on, Tacoma recently opened a new shipping container dock — the third renovated cargo hub the port has opened this year.
The Olympic Container Terminal is leased to Yang Ming Lines of Taiwan, whose only other exclusive foreign terminal is in Los Angeles.
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The dance, in which the lion spreads prosperity and blessings to the community, was no mere frill. Tacoma’s three new terminals — its largest expansion ever — echo booming Asian trade that is bringing jobs to Tacoma. The port says more than 43,000 “family-wage” jobs in Pierce County are connected with its activity, up from 28,000 five years ago.
With the surge in cargo forecast to continue, Tacoma’s “terminal shuffle” over the last two years has vastly expanded its docks — and set the stage for further growth.
Tacoma nearly doubled, to 525 acres, its land for unloading the giant container ships that now carry most of the world’s goods.
The expansion was larger and less costly than Seattle’s.
Even so, Tacoma is only just keeping up with demand.
All six of Tacoma’s container terminals have expansion options that would add an additional 100 acres if fully developed. “We could probably expand all of our existing terminals in the next five years” to meet the needs of cargo handlers, said Timothy Farrell, executive director of the Port of Tacoma. “And on top of that, we have interest from new customers.”
Tacoma’s approach to development centered on two goals: giving terminal operators what they want but also ensuring its own bottom line stays in the black.
Farrell said Tacoma first designs the terminal with the operator, including the features it wants and what it would cost. Then it requires the operator to sign a lease that would pay for the facility.
“We don’t do the construction until the deal is signed, so we know how much money we have to work with,” Farrell said.
While Tacoma’s leases with terminal operators are all different, “they all have minimum commitments to cover debt service and construction costs” within 14 to 30 years, he said.
The efficiency of this approach has attracted customers, and encouraged expansion.
“The industry saw that Tacoma can build a 171-acre container terminal expandable to 237 acres and that sort of perked up their ears,” he said, referring to the Pierce County Terminal opened in January.
But Farrell wants to innovate even more.
As West Coast ports grow, space is getting tighter — and more valuable. So Tacoma is considering charging terminal operators fees based on the value of the land.
“We’re looking at how much this location is worth to the customer,” Farrell said. “What would they be willing to pay to be here?”
Getting cargo inland
To really give the locations value, however, Tacoma needs to ensure that docks, rail lines and highways work seamlessly to speed cargo inland. (More than half of the cargo unloaded at Tacoma and Seattle makes its way east.)
Tacoma cargo sometimes hits a bottleneck. Known as “Bullfrog Junction,” it is the spot where five railroad tracks converge. So the port has taken a role in coordinating traffic through the junction, by communicating with container terminals and the Union Pacific Railroad and BNSF Railway lines.
“We keep the information ahead of the cargo, so the cargo doesn’t have to stop,” Farrell said.
Tacoma’s emphasis on service has paid off with new customers. Four cargo handlers have moved from Seattle over the years. And Tacoma claims to handle more cargo per acre of land — typically 5,000 containers a year, and as many as 8,500 in some terminals — than Seattle, which says it handles 3,500 to 4,000 containers.
“That’s the kind of value we have to deliver to sustain the pricing model we’re after,” Farrell said.
Tacoma’s latest expansion began in 2001. Evergreen Marine, which decamped from the Port of Seattle in 1991, was celebrating 10 years in Tacoma. It had just doubled the size of its Tacoma container terminal. It wanted to double again — quickly.
Tacoma first built a car-import lot, allowing Pierce County Terminal to convert from autos to containers for Evergreen.
Evergreen left Husky Terminal, allowing K Line to move into that larger, renovated space. Then K Line’s piers were expanded for Yang Ming Lines, which begin serving the port this month.
Larger than Seattle’s
Tacoma’s expansion was larger and less costly than Seattle’s, which also has been building cargo facilities.
Tacoma developed 210 acres for containers, compared with 101 acres Seattle has added since 1998. Tacoma spent $251 million, compared with $391 million in Seattle.
Part of the difference stems from cheaper land in Tacoma. But Tacoma also has more profit to work with. Over the last six years, Tacoma made a cumulative operating profit of $86 million, after deducting depreciation of its facilities. By contrast, Seattle’s seaport lost $40.8 million over the same period, and made a profit in only one of the last six years.
As well, taxpayers bore less of Tacoma’s expansion cost. The Port of Tacoma levies 19 cents per $1,000 of assessed property value, compared with 25 cents in Seattle. Because of Pierce County’s smaller tax base, the Port of Tacoma collects about $1 for every $6 levied in King County for the Port of Seattle.
Seattle also built facilities that aren’t being used. Railroad tracks next to ship berths that were added as part of the $300 million renovation of Terminal 18 are supposed to allow containers to be moved more quickly from ships to trains.
But the terminal operator, SSA Marine, prefers not to use them. Patricia Davis, Seattle’s longest-serving Port commissioner, says the industry no longer finds on-dock rail to be most efficient. “Things change,” she said.
Tacoma has on dock-rail on four of its six container terminals, and it is heavily used, says port spokesman Michael Wasem. The alternative to on-dock rail is trucking containers out to separate rail yards.
“That means interacting with soccer moms on the highway,” Wasem said. “We try to avoid that.”
Another difference: Tacoma earns money by operating its own rail yards. It also requires terminal operators to pay more if they handle more cargo. Seattle doesn’t operate its facilities, and its tenants don’t pay extra for moving more freight.
“Our revenue is based on straight land leases and on crane rental, which has no relationship to tonnage,” Port of Seattle spokesman Mick Shultz said.
Davis said Seattle’s land-rental rate is higher than Tacoma’s, and is due to go up in coming years, helping Seattle recoup its investment.
Tacoma’s expansion and the addition of Yang Ming will help it handle a record 2.2 million containers this year and 2.4 million next year, according to port forecasts.
The port figures it has capacity to handle 3.3 million containers in 2007, without buying additional land. In five years, the port expects to be actually handling that many containers a year.
Farrell worries road and rail lines across the state will choke that growth. “We’re heavily reliant on voters and the railroads. Are there going to be facilities to get the stuff out?”
But even so, Tacoma isn’t stopping.
Spokesman Wasem stands on a broad section of land east of the Blair Waterway and points to a vast open space, much of it bordered by deep water. That’s where Tacoma aims to develop 300 more acres of terminal space, in partnership with the Puyallup tribe.
“That’s the future,” he said.
Alwyn Scott 206-464-3329 or email@example.com