The Port of Tacoma plans layoffs as the organization attempts to recalibrate its staff to match its shrinking business.
Port Executive Director Tim Farrell said Monday he didn’t have a timeline for the staff cuts or a number of positions the port would eliminate. He did say that the cuts would be done in the second quarter.
The port employs 255 people. Before the port cuts job, it will offer employees the option of leaving voluntarily, according to a memo Farrell sent to port staff Friday.
The port earns money leasing its property to shipping terminal operators and providing services such as transferring containers from ships to trains and renting equipment.
Revenue from port services has taken quite a hit with the port’s declining cargo volume.
The number of containers coming through the port was down 15 percent for the year as of the end of March when compared to last year. All other cargo categories – from automobiles to grain – were down as well.
Container numbers have been falling since they peaked in 2006, when the port handled almost 2.1 million boxes.
Farrell estimates that port revenue for 2009 will be about $10 million less than the $103.2 million the port originally budgeted.
While cargo volume is declining, capacity at West Coast ports is increasing – from the relatively new port in Prince Rupert, B.C., to expansion projects in Southern California.
“The competitive environment is just going to get more difficult,” Farrell said. “We need to find a way to deliver superior service at a lower cost.”
The port has been cutting expenses for months – freezing hiring, delaying staff pay raises and cutting down on benefits and travel.
The port aims for at least a 15 percent return on revenue. So far, expense reductions have put that return closer to 18 percent.
But more dramatic measures are needed to keep the organization on stable financial footing.
“If we do not act, then we cut into our ability to repay bondholders and put the port at significant financial risk,” Farrell wrote in his memo to staff.
The port’s leadership is examining where the organization can cut positions and what work can be delayed or dumped. The port has already canceled or delayed several capital projects.
The economic picture looking forward isn’t much better.
Maersk – one of the port’s longtime shipping line customers – plans to have its ships call in Seattle beginning next month. The change means the Tacoma port will lose about 1 percent of its annual revenues or about $1 million.
The port’s remaining customers are also feeling the pain of a global recession. It’s likely that none of them will meet the annual minimum cargo volume guarantees specified in their contracts with the port.
For example: Such agreements specify a minimum number of hours that the customer will use the port’s container cranes.
Customers guarantee they’ll meet the minimums – or pay for the services anyway.
“We will hold them to our contracts, though it will be exceedingly difficult to collect on these obligations,” Farrell wrote in the memo.
Kelly Kearsley: 253-597-8573
kelly.kearsley@thenewstribune.com
blogs.thenewstribune.com/business
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