Port of Tacoma needs more customers

The Port of Tacoma urgently needs to attract new business lest its finances turn from profits to losses by 2014.

That’s the message the Port of Tacoma commissioners heard Monday at its midyear financial review with port economic analysts and financial planners.

Without finding a significant new customer or seeing existing port customers pump up volumes, the port will see minimal growth over the next five years, even as its interest costs escalate and its grant and tax levy incomes stagnate or decline.

Already the port’s bread-and-butter container import and export business is seeing pressure from lower cost Canadian ports, from rapidly expanding ports on the East Coast and from the big loadcenter ports in Southern California.

Port of Tacoma Chief Executive John Wolfe said those ports are stealing away the elective cargo that formerly moved through Tacoma on its way to the big cities of the Midwest by rail.

At the Port of Tacoma’s pre- recession peak four or five years ago, some 70 percent of the containers unloaded from ships in Tacoma was destined for inland destinations. Now that figure has dropped to 45 percent. Commission Chairwoman Connie Bacon said the drop in the percentage cargo headed inland was distressing to her.

“They used to call us the Port of Chicago,” she said, recalling the volume of containers from here that headed for that Midwest rail hub.

While the port’s net income is on track to be about $19.1 million this year, it will decline to $8 million next year, to just $1 million in 2013 and to a loss of $600,000 in 2014 under present business projections.

“Two thousand thirteen and 2014 will be our challenging years,” the port’s director of financial planning, David Morrison, told the commission. According to the port’s own projections, the container business will rise only minimally from this year’s projected 1.45 million units to just 1.57 million units in 2015 without a major new customer or new business efforts from existing shipping lines. That figure falls far short of the 2.1 million container units the port handled in 2006.

Though container numbers are up 5.9 percent through May, the container business growth curve showed signs of flattening in the last month or so. Wolfe said the federal Harbor Maintenance Tax has helped the Canadian ports of Vancouver and Prince Rupert persuade shipping lines to divert container traffic to their docks. That U.S. tax on the value of imported container goods amounts, on average, to about $150 a container, he said. In a tight economy that’s enough to cause shippers to send containers through Canada where the government doesn’t levy a comparable tax, he said.

Northwest ports have been lobbying – thus far without success – for the elimination or a reduction in the tax. Proceeds from that tax are used to help ports maintain their waterways. Much of that money is raised on the West Coast, where harbors are naturally deep, and spent on the East and Gulf Coasts, where dredging is necessary.

When the widened Panama Canal opens in 2014, more container traffic is expected to move by ship to the East Coast rather than be offloaded on the West Coast and transported by train to the East Coast. The West Coast’s share of Asian imports has fallen over several years from a high of about 83 percent to about 72 percent.

One of the consequences of the economic slowdown is that ports such as Los Angeles and Long Beach now have room to handle more cargo headed inland, cargo that once flowed through Tacoma and Seattle.

While the container business has stagnated, the port’s other businesses have done well. Log exports are up 398 percent. Auto imports have risen 37.1 percent this year. Grain shipments have jumped by 8.6 percent, and the port’s real estate income is up 9.6 percent.

John Gillie: 253-597-8663 john.gillie@thenewstribune.com