Autumn’s rains are sweeping across Tacoma Tideflats fields along the Blair Waterway, where the Port of Tacoma once envisioned a billion-dollar container terminal.
If the economy had cooperated, those now-empty sites the port purchased from a score of owners in 2007 and 2008 would be in the final stages of construction before Japanese containership line NYK moved there from Seattle’s Terminal 18.
But the majority of that land, 122 acres, sits either awaiting environmental cleanup or in need of a business to put it back into productive use.
Both NYK and the port retreated from that ambitious project two years ago, blaming the downturn in imports and a miscalculation of the complexity of transforming the industrial brownfields into a state-of-the-art container terminal. For the Port of Tacoma, the NYK project represented the next step in what had been a 30-year transformation of the Tideflats from a center for heavy industry into a bustling nexus of international commerce.
Now that transformation has stalled, and the port and the Tideflats are wondering what’s next.
The answer will be important to Pierce County because the Tideflats has been a big job creator and for its historic importance to the community.
“The Tideflats were the essence of Tacoma,” said local historian Ron Magdan. “It was there the city grew up. There was never any doubt when Tacoma was founded it would be a port city. It had a naturally deep harbor, and that was one of its greatest assets.”
The arrested development of the container business is of particular concern because containers for three decades filled the gap left by retreating heavy industry.
THE RISE AND FALL
The Tideflats, the flat alluvial plan between the bluffs of downtown Tacoma and the hills of Northeast Tacoma, had evolved from a muddy marsh into Tacoma’s export connection to the world in the early part of the 20th century. The Tideflats transformed again in mid-century as it became a center of heavy industry populated with sawmills, shipyards, grain elevators, smelters, pulp mills, chemical plants and packing houses.
The Tideflats then was industrial America with all the good and bad that came with it. Heavy industry wasn’t pretty. Sometimes it smelled bad. Many of the industries despoiled the land. But for Tacoma, the Tideflats represented the blue-collar heart of a big-muscled city, a city that made its money the old-fashioned way – through hard, physical labor.
But as those big industries closed or packed up and moved away, the container business took their place.
That container revolution that began with the move of Alaska containership operator Totem Ocean Trailer Express to Tacoma from Seattle in the ’70s was cleaner, and the jobs paid well.
The port went from being a bit player in the container transportation business in the mid-’70s to the sixth-largest container port in the nation. In 2006, the peak year for container business in Tacoma, some 2.1 million container units crossed the port’s docks. Tacoma even surpassed Seattle as a container port for three years.
The container trade numbers have fallen by 30 percent from their peak, according to statistics from the Port of Tacoma. Longshore labor growth is diminished. Expansion projects have stalled in mid-build.
Meanwhile, on the flats’ western margins close to downtown, development activity along the reborn Foss Waterway lurched ungracefully to a full stop. The waterway’s biggest new building, the 162-condominium Esplanade, fell into foreclosure. It still struggles to sell units even at substantially reduced prices.
A planned office project near the South 21st Street Bridge never reached groundbreaking, and a two-hotel project on Dock Street is stalled in the planning stage despite eight years of effort to make it happen.
And a big tract of choice waterfront land owned by the Puyallup Tribe along the Tideflats’ spine, the Blair Waterway, remains undeveloped.
The tribe is allied with the nation’s largest terminal operator, Seattle’s SSA, in developing that land, but neither say they have any live prospects to replace the now-abandoned casino the tribe operated on the tract.
The downturn caught nearly everyone by surprise.
“We were all caught up in the economic decline,” said Port of Tacoma commission Chairwoman Connie Bacon. “Who could have predicted we would be in such a situation?”
Port commissioners and Tideflats business people say there’s no clear path forward in the uncertain economy. Do they stay the course waiting for the import trade to revive? Do they seek more export business?
LIVING WITH LESS
For the Port of Tacoma, the Tideflats’ biggest landowner with about 2,400 acres under its control, the decline is old news. The port has spent the last three years learning to live with less. It laid off or retired nearly 50 employees, some 18 percent of its staff in 2009, cut or eliminated raises, negotiated a settlement on a failed expansion deal with NYK and sold at a loss a 745-acre tract in Thurston County where it had planned a new rail yard. It hired a new chief executive.
It has turned its focus from mass expansion to optimizing the assets it has, catching up on deferred maintenance and devoting more time to existing customers.
Now the port is turning its gaze to the future, hoping to find a new path as it has several other times in its 83-year history.
The port has embarked on the yearlong task of creating a new strategic plan, one that it hopes is as successful in creating jobs and opportunity as the master plan created after World War II. It is asking its constituents, the taxpayers who provide a small portion of its revenues through property taxes, and its neighbors how best to proceed.
So, what are the choices to restart the Tideflats job engine?
For some of those looking into the Tacoma Tideflats’ future, the answer is simple: more containers.
The Port of Tacoma’s principal business, importing containers of goods from Asia, is off about 30 percent since 2006. Some Tideflats observers think the port’s container imports will rise again when the economy returns to normal.
Former Port of Tacoma Commission President Don Johnson said Tacoma still retains the advantage that made it the Northern Pacific Railroad’s choice for a Pacific terminus over Seattle in 1873 – a naturally deep harbor.
Ports such as Savannah, Ga., and Charleston, S.C., in the South, for instance, must regularly dredge as the rivers on which they’re located silt up the channels. Portland on the Columbia and Willamette rivers faces the same challenge. Commencement Bay drops away steeply from the shoreline.
In the center, it’s more than 900 feet deep.
Johnson sees the container business, which still is the port’s major revenue producer, as the priority.
“It’s just as important to focus on keeping what you have rather than trying to go after something that you don’t,” he said.
Not only does the port have unutilized capacity at its existing container terminals, it and the Puyallup Tribe have rare waterfront acreage ready for terminal development.
The port’s vacant acreage was acquired four years ago as the port was buying up land for the NYK terminal between the Blair and Hylebos waterways. Of the 193 acres the port bought then, 71 are leased. Twenty-one acres are ready for customers, and 101 acres still need environmental cleanup before they can be developed.
And other terminals, operated by private companies, have significant extra capacity. APM Terminals on the Sitcum Waterway, for instance, lost its biggest customer when Maersk Line moved to Seattle in 2009. Washington United Terminals, its pier recently improved, could handle more traffic.
That gives the port a significant head start over rival ports if a customer is looking for a new container terminal site, say port commissioners.
Developing the port’s land will require a huge capital investment, money that the port now can’t readily find. The aborted NYK Terminal, for instance, could have cost as much as $1 billion if it had been completed by next summer as originally scheduled. The port spent about $190 million buying land and doing planning for that terminal before the deal was called off. Now, it has no big tenant to help pay those bills.
The port’s financial projections, however, now predict its financing capacity may be considerably diminished as a side effect of the recession.
Port Chief Executive John Wolfe says any major new terminal development will likely require a major capital partnership with the private sector. Until that opportunity happens, says Wolfe, the port is focusing on getting more traffic over existing facilities.
THE COMPETITION
But just because the port has plenty of capacity, don’t expect shipping lines to rush in to fill it.
Three years after the recession began, shipping lines are still struggling to regain their lost traffic. Container volume this year at the port is up just 2 percent.
Some economists believe the import era is ending. In China, an increasingly prosperous work force is seeking and in some cases getting higher wages. The exchange rate has changed to make Chinese goods more expensive. And the extra disposable income that Americans spent before the housing bubble burst has gone away.
The port also faces considerable competition from other ports with unused or new capacity.
On the East Coast, railroads are building new tracks and enlarging tunnels to allow swifter transport of containers from Atlantic ports to the Midwest and South. And foreign competition is growing.
Prince Rupert in British Columbia has developed a new container port with direct connections to the American Midwest. That port has grown despite the recession, and Canadian ports enjoy a tax advantage over American ports. The federal government levies a harbor maintenance tax on containers passing through American ports. Canada does not. That tax can add $50 to $200 per container to the cost of shipping through U.S. ports. Little if any of that tax money raised here returns here. The funds go mainly to dredge East and Gulf Coast ports.
The port has lobbied for the U.S. to impose a similar tax on containers entering the U.S. from overseas via Canadian and Mexican ports, but so far they’ve gotten no concurrence from Congress.
The second foreign factor to consider is the opening of a larger capacity Panama Canal, now set for 2014. That new canal will allow larger container ships to transit to the East and Gulf coasts.
Already, considerable cargo has shifted from West Coast ports to ports such as Savannah, Ga., and Norfolk, Va., during the recession because the all-water route to the East is cheaper than a combination route of water from Asia to the West Coast and then rail to the East.
Tacoma Tideflats’ past growth has drawn energy from innovations.
Historian Magden says local longshoremen’s ability to swiftly and safely load logs and lumber aboard ships in the early days of the Tideflats made Tacoma a center for forest product exports. Those methods, not shared with other ports, meant less time in port for ship owners.
That same willingness to work smarter was a key reason TOTE moved its Alaska trailerships, which are ships that carry highway trailers, from Seattle to Tacoma in the late ’70s. Workers here promised higher productivity and less damage to the trailers loaded on the ships, and they delivered.
When Sea-Land Service gave Tacoma its jump-start into the container era in 1985, it was another innovation, the on-dock rail yard, that gave Tacoma an advantage over Seattle where Sea-Land had previously called. The port built rail yards directly on the docks, allowing straddle carriers or other machines to move containers straight from the dockside to a train car. At other ports, the containers first were loaded on trucks and driven to distant rail yards where they were loaded aboard trains. All of the port’s major container terminals now have on-dock rail yards. And many other ports have copied the innovations.
No new process or innovation has yet emerged, but such a development could well give Tacoma a leg up again on its competitors.
ANOTHER OPTION: SCIENCE AND THE SEA
Less conventional thinking calls for the Tideflats’ western edge to be redeveloped into a hub for water-related businesses and research facilities.
The port and other local entities have funded an advertising campaign, “Water Works Here” to build on the expertise of new the Center for Urban Waters, a venture between the City of Tacoma and the University of Washington Tacoma.
The campaign grew out of a cocktail party discussion Port Commission President Connie Bacon had with other Tacoma leaders about how to take advantage of the research and practical science going on at the Center for Urban Waters on the Thea Foss Waterway on the Tideflats west edge.
The notion is to make Tacoma and the Tideflats a center of expertise in waterborne pollution control and abatement, fisheries, waterfront land uses, and other related topics. The port is proposing that land it owns along the Wheeler Osgood Waterway, a branch of the Foss, be redeveloped into a kind of research and business park for water-related business.
Such a development strategy would turn one of Tacoma’s problems into an asset.
Because much of the Tideflats was polluted by big industry, Puget Sound researchers and scientists have considerable experience dealing with toxic industrial leftovers. They could make money for themselves and the area by sharing that knowledge with others.
The port, the city and the university are also hoping that research will attract conferences and businesses whose focus is water-related.
DIVERSIFIED CARGO
Even if the container trade languishes, the port could diversify its mix of cargo.
Logs: Already, because of market demand and the port’s availability of old, unused facilities, the port has re-entered the log export market. That business, which had disappeared until two years ago, is up 106.7 percent through July at the port.
The log market is being driven by Chinese demand. That country is expected to import about $1 billion worth of logs from Washington and Oregon this year, more than the previous five years combined.
Autos: The auto trade is also reviving. Thanks in part to a brisk sales increase at Kia, one of the port’s auto import customers, the number of autos passing across the port docks through July is up 45.4 percent. After Americans throttled back their appetite for new vehicles during the initial stages of the recession, sheer mileage and age is sending many of them back into the market for new cars. The average age of Americans’ vehicles has risen from 8.6 years before the recession to more than 10 years now. Many of those car owners are visiting showrooms. New auto sales this year nationwide are up by a million vehicles.
Domestic cargo: The port has repurposed some of its facilities originally built to handle imported containers to handle domestic cargoes.
The Union Pacific Railway has leased container facilities in its underused South Intermodal Yard. That railroad uses those facilities to load and unload domestic container cargoes destined to and from the Northwest.
Other exports beckon. Again, the growing economies in China and Korea are driving demand.
Coal: One politically sensitive export in increasing demand is coal. Massive unit trains now pass by the Port of Tacoma to reach coal docks in British Columbia. Export companies are exploring building coal export facilities along the Columbia River and in Anacortes.
The Port of Tacoma has been approached to build a coal export terminal, but the port said “no thanks.” Coal terminal proposals elsewhere have stirred protests and lawsuits from environmentalists who believe the fuel burned in Chinese power plants will raise pollution levels even in the U.S.
Coal isn’t the only bulk commodity in demand in Asia. Wolfe hinted in a recent interview the port is looking at other bulk export opportunities.
Grain: Grain export demand is growing, and the port’s only grain export terminal along Schuster Parkway is the biggest generator for longshore jobs in the port, said Scott Mason, president of Tacoma Longshore Union Local 23.
Wolfe said he hopes he can convince shipping lines, shippers and the railroads to handle more container transloading on the Tideflats or nearby.
If the shipping lines emptied more containers here, reloading and resorting the goods inside to larger domestic containers, the shipping line’s own containers would be freed up faster to return to Asia to bring more goods to the U.S.
If the Tideflats is to keep its place as a job generator for Pierce County, then it will have to be remade to suit the needs of the 21st century just as it did after World War II when the flats was reborn after the war-related industry shut down.
“We ‘re looking for a renaissance,” said Port of Tacoma Commission President Bacon. “Tacoma has created one before. I’m confident we’ll do it again.”
John Gillie: 253-597-8663
john.gillie@thenewstribune.com
blog.thenewstribune.com/business
