The Larger Forces At Work (Murky Port Part 3)

You have a pretty good idea by now of the amount of money the Port collects and from whom as well as how they spend it (salaries, benefits, and debt service being the majority).

What about their competition? What about that great big port to the north, the Ports of Tacoma, Oakland, and Los Angeles/Long Beach? Oh and what about those new ports in Singapore and Malaysia and oh no, the widening of the Panama Canal and those big giant container ships?

Locally, how about all those businesses located in the Greater Duwamish Manufacturing Industrial Center and SoDo, especially those that rely on the Seaport operations of the Port? What will happen to them if the Port of Seattle's Seaport operations run into issues with the arena or loses business because of it? (Answer: when you read below what the Port has been gradually doing over the past three years, you'll see the Port's bigger plans.)

TEUs

Twenty-equivalent units, or TEUs, is the measurement most seaport operations use when they talk about their capacity with container ships. Here's a good definition from Wikipedia:

The twenty-foot equivalent unit (often TEU or teu) is an inexact unit of cargo capacity often used to describe the capacity of container ships and container terminals. It is based on the volume of a 20-foot-long (6.1 m) intermodal container, a standard-sized metal box which can be easily transferred between different modes of transportation, such as ships, trains and trucks.

The container is defined by its length though there is a lack of standardisation in regard to height, ranging between 4 feet 3 inches (1.30 m) and 9 feet 6 inches (2.90 m), with the most common height being 8 feet 6 inches (2.59 m). Also, it is common to designate 45-foot (13.7 m) containers as 2 TEU, rather than 2.25 TEU.

It's essentially how many of those big colorful containers you see on ships and trains can be processed through ports. The rationale behind using TEUs to measure productivity and capacity is the assumption that the more TEUs, the more trade, the more activity and commerce to the local and regional economies. Hence the Port's target 3.5 million capacity TEUs by modernizing Terminal 5 (hoping to more than double capacity).

The bigger assumption being if you dredge and spend millions and millions to modernize terminals in order to bring this new era of the gigantic container ship to your local port, more money, commerce and jobs will surely follow for the local and regional economy.

Not so fast

The Port currently has 4 container terminals: T-46, T-18, T-30, and T-5.

These container terminals rest on 539 acres, total acreage owned by the Port of Seattle along the Seattle/King County waterfront is 1,338, according to the Northwest Seaport Alliance's strategic business plan, optimum terminal acreage is 850. Which means the Port of Seattle's Seaport operations is sitting on excess acreage of 230. Five acres of T-46 is currently leased to WSDOT as a staging area for their work on the Alaska Way Viaduct project.

Remember this as you read the below.

It's not all about the TEUs, it's about where the goods are going and coming from

The work done by the Brookings Institute (published in June 2015) in tracking freight tells a different story when it comes to where and how the goods originate.

Ports have always posed a bit of a problem for local and regional governments. They operate independently and yet their actions can have profound impacts on the metropolitan areas they reside. Since technology has made it easier to assess data and scrutinize results more quickly and immediately, ports have found the light shining on their actions and the corresponding cause and effect.

Murkiness was the word used by Joseph Kane at the Brookings Institute when I first contacted him to learn more about the Port of Seattle. This wasn't directed only to the Port of Seattle, it was directed to all domestic and international ports. Each feels it is in direct competition with all other ports, and so statistics and data are many times presented to either hide information or present data differently making it difficult to compare results. If all the ports are competing against each other for the same pile of goods to flow through their jurisdiction, how can that benefit the local and regional economies and domestic transportation and traffic flows? (for further reading, check out their great article The Great Port Mismatch).

International trade doesn't occur only through the seaports, either. It occurs at the airports as well and continues through the rail yards and trucks.

What the Brookings Institute did was look at WHERE the goods came from and where they were going to as well as WHAT goods were imported and exported.

The total volume of port trade for Seattle-Tacoma-Bellevue is $116.9 billion. About 62% of this trade occurred via water, 24% using multiple modes (rail, air, water, truck), 12% through air, and the remaining was pipeline.

What's interesting is that of this $116.9 billion, only 8.2% started or ended in the Seattle area.

This means that 91.8% of the commodities left the Seattle metropolitan area or passed through the Seattle metropolitan area on its way to it's final destination (read: created or manufactured outside of the local and regional area).

Why does this matter? Because it shows that the Port's assertion that if terminals are retrofitted with bigger capacities that it will have some sort of ripple job effect for Seattle, King County, and the State of Washington (more goods brought in or out through the ports must mean the goods are made or being consumed in Seattle and the State of Washington).

On the contrary, much less is the answer. When the Port says "more TEUs and bigger capacity means more commerce and growth of new jobs," it's not looking at where the goods are coming from or going to. It's hard to see how moving almost 92% of goods on Seattle and Washington State roads just to go out of region is going to benefit the greater metropolitan area of Seattle and the State of Washington.

With the current traffic issues, it's important that the City of Seattle, King County, and the State of Washington look at the operations of the Port to see the impact of the 92% of volume traveling across state lines. The Federal government recognizes this, hence the recent passing of the FAST Act at the end of 2015.

Is the Port a net taker when it comes to the economy of the City of Seattle, King County, and the State of Washington? They seem to be if the measure of their value is based on the TEUs of the container ships and where those goods start and end.

A few other objective facts

It's nice that this information was listed by the Brookings Institute, as it's nowhere on the Port's promotional or financial data. Here are the top five commodities that travel through the Ports of Seattle and Tacoma (remember, this includes SeaTac as well):

1. Transportation Equipment ($40 billion) (primarily through the Port of Tacoma because they have the land to park the small trucks, Caterpillars, etc.)
2. Electronics ($12.8 billion)
3. Machinery ($12.0 billion)
4. Textiles ($10.2 billion)
5. Ag Products ($10 billion)

Our largest domestic trading partner is Portland (most likely by truck and rail), and our largest international trading partner (based on the goods that go through SeaTac or the Ports of Seattle and Tacoma) is China.

Remember though, only 8.2% of these goods are originated (created) or purchased in the Seattle-Tacoma-Bellevue region. Compare this to the major commodity that flows through the Port of Vancouver --  Household Goods. This is where the Brookings research can be helpful to metropolitan areas: know what you're exporting and importing and where it's going. Seattle-Tacoma receive the heavier, more expensive goods, the cheaper, lighter goods go through Canada. Canada doesn't create all those Household Goods, it's just facilitating their movement to their final destination more than likely the US).

Those 'Larger Forces'

No one is going to deny the amount of commerce and trade that takes places on the oceans of the world. Anywhere from 75% to 90% (depending on the what you read) is the amount of good/commodities carried on those big container ships around the world. It's definitely an efficient way to move heavy amounts of commodities around the world. Air, rail, and truck follow fairly equally in that remaining 25% depending on the location of the metropolitan area..

But if the larger forces are sending their ships to the Ports of Seattle and Tacoma where those TEUs will be offloaded to trucks and rail and moved out of state to Portland, Phoenix, and Los Angeles, or comes through Seattle heading to China from Phoenix, Portland, and Los Angeles, how is that commodity creating more Seattle and regional jobs when it's in a crate waiting to go aboard a ship to China?

The question then becomes, does the Port of Seattle (Seaport) continue to build their mega terminals to benefit itself, or does it consider the impact of their operations on the people and businesses of the City of Seattle and King County.

The Northwest Seaport Alliance

As you know, the Ports of the Seattle and Tacoma formed an alliance, something that was unheard of back in 2013.

Now, I'm going to share with you a chronological "reading bites" of how this came about, and the unfolding story of the Seaport operations of the Port of Seattle which I believe (and probably many others) shows their true intentions towards Seaport operations.

February 2013

Shipping lines are hard pressed by the recession in global trade, so they are driving concessionary leases with weakened Ports. (The new Hanjin lease with Seattle is a vivid example of how much subsidy we now have to give.) [via Crosscut]

March 2013

And it points to one of the big advantages Tacoma's port has over Seattle is land. Tacoma has more than 5,000 acres with about half still undeveloped. There is also adjacent land that could be used for additional warehouses, providing nearby operations for customers. Rail is another advantage. Tacoma was one of the pioneers in intermodal operations, adding rail lines on the docks. Wolfe, the port CEO, said the port now is able to put together trains that are as long as 7,000 to 8,000 feet — more than a mile. It will soon have the capacity to meet new demands that will require trains as long as 10,000 feet. [via Crosscut]

August 2013

Over time some terminals are likely to close and the Port will be left to rationalize what remains... Nonetheless, the poor terminal utilization coupled with the absolute need for the Port to upgrade its most "on-dock rail capable (T-18 & T-5) facility present a unique opportunity to strengthen the Port of Seattle if a decision is made to immediately stop spending on T-46, rehabilitate T-5 and rationalize operations. [via Container Terminal Strategy for the Port of Seattle]

October 2013

With Port just at half capacity, terminal operators want talks [via Seattle Times]

November 2013

Merger is a non-starter on several levels," said commission president Albro. "But we need to engage our colleagues in Tacoma to rationalize operations and not undercut each other." Albro said both ports must begin to realize that they serve the state's interest and "if we worked together we could do a much better job [via Crosscut]

May 2014

The FMC recently approved a deal allowing the ports of Seattle and Tacoma to share information on their operations, facilities and rates, spurring talk of a possible consolidation. The two ports together have nine container terminals handling international cargo, translating to marine terminal utilization of less than 50 percent of total capacity, and just 38 percent at Seattle, Port of Seattle's CEO Tay Yoshitani told local radio station WNCN in April. Some terminal operators support consolidation, seeing it as a way to end the cycle of rate-cutting to attract business from the powerful carrier alliances. [via joc.com]

September 2014

Port of Seattle CEO takes reins amid dropping volumes and market share [via joc.com]

April 2015

The two ports have too many acres of land devoted to container shipping, 1,082 acres, leading to low utilization rates and efficiencies at existing terminals . . . Accelerating growth at Puget Sound's two largest ports may require shrinking the number of container terminals and remaking them for larger vessel [via The News Tribune]

The two ports combined have nine international container terminals. When the Seaport Alliance has completed its rationalization process, there will probably be no more than four large, modern terminals built to handle mega-ships, said John Wolfe, Port of Tacoma CEO. This should bring capacity and demand into better balance, he said [via joc.com]

August 2015

China's two biggest ocean carriers may merge into a new industry goliath, and that may not be good news for container terminals in Seattle . . . . If the two companies merge, the question will be whether the new larger ocean carrier will stay in Seattle, or if it will go to Tacoma.

Tacoma has more space for terminal expansion, and arguably has more potential to provide space for a new super-sized merged carrier. Seattle is far more space constrained, although it is expanding Terminal 5 for larger ships. [via www.bizjournals.com]

March 2016

The port complex is developing plans for terminal consolidation into fewer but larger terminals to handle the big ships, John Wolfe, CEO of the Northwest Seaport Alliance, told the JOC's 16th Annual TPM Conference Wednesday in Long Beach. [via joc.com]

New, highly automated terminals planned for Harbor Island, Fick observes, will likely be able to handle virtually all of Seattle's container traffic volume and could lead the alliance to shut down Terminal 46, near the SoDo-Stadium district, when Hanjin Shipping Co.'s lease ends in 2025. But Fick and the Port may have other plans for the area. Asked about Terminal 46, Fick says cautiously that he would more likely be a buyer than a seller.

The shrinking footprint of the seaport -- Terminal 46 itself covers 82 acres -- could open up more of the Port's 4,024 acres. It's the second-largest landholder in Seattle after the University of Washington. "What I've learned since I've been here is that my job is not just about running a financially successful port, but it's about the economic development component," says Fick. "It's the job creation, workforce development and environmental stewardship."

Studies are underway on how best to use about 60 open acres at Interbay and the 82 acres that could become available at Pier 46. [via Seattle Business Mag]

The Port of Seattle is taking a hard look at its real estate portfolio. This week, commissioners announced a widespread survey which may result in the sale or repurposing of existing port property. [via King 5]

April 2016

The Northwest Seaport Alliance of Seattle and Tacoma on Thursday approved a berth realignment project at the Husky Terminal that will allow the facility to work two mega-ships simultaneously.

This decision is significant because it will be the first major capital project under the long-term strategic plan the alliance developed last year after the alliance of the two ports took effect. The $141 million project could be followed by a modernization program at the now vacant Terminal 5 in Seattle, which would further enhance the position of Seattle and Tacoma as a gateway in this era of mega-ships operated by powerful carrier alliances. [via joc.com]

See the trail?

T-46 will more than likely NOT be a container terminal in the next 10 years. So what is the Port of Seattle's real agenda here? Their own development:

...my job is not just about running a financially successful port, but it's about the economic development component," says Fick. "It's the job creation, workforce development and environmental stewardship.

I'm sorry, but is this anywhere in the statute that governs the creation of the Port of Seattle and its primary purpose?

I thought they were just supposed to run SeaTac and the Seaport operations, but apparently they feel their responsibility is even more than that (do we really need a city within a city in King County?).

It's time for the Port to stop the charade about their concerns about traffic and job loss because of the Stadium District arena. The Port will not be using T-46 for container shipping.

I'm shaking my head at Fick's comment that he thinks he's responsible for more than just running a financially successful port.

The Port is jumping into unrelated business activities, perhaps they will eventually become a taxpayer after all.

Please contact the Seattle City Council today and urge them to APPROVE the street vacation.