San Francisco Bay Area Ports – How Ready for the Future?

 

December 1, 2019

San Francisco, the only Bay Area port with cruise ships, provides a range of services: vessel berthing, stevedoring, plus ancillary services, year-round at two downtown terminals, Pier 27 and Pier 35. Photo courtesy of the Port of San Francisco.

The San Francisco Bay Area's economy is white hot, riding an expansion that has been a constant for nearly 10 years. In the public mind, tech companies get most of the credit, but a closer analysis shows that tech is only one of several critical success factors.

Economic diversity is one hallmark of the region's successful economy. The Bay Area benefits from the fact that it hosts a range of different industries, with world-leading companies sitting atop multiple sectors. One vital element of the region's success story is nearly invisible to the public-at-large: one body of water, The Bay, is host to three vibrant ports.

Each one brings a different maritime business focus: the Port of Oakland is focused on containers; the Port of Richmond handles various types of vessels (bulk liquid, dry bulk, metals, vehicles, and break-bulk cargo), but concentrates on the oil flows; the Port of San Francisco supports a variety of different vessel types, from auto carriers and dry bulkers to passenger cruise ships and ferries, but no longer any containerized cargo.


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What follows is a short rundown of current developments, and future plans, at each of these three ports.

Oakland

Newspaper headlines in California focus on concerns that the new Oakland A's stadium will hurt the Port of Oakland's traffic or hamper the business of its tenants. The concern of longshoremen and maritime businesses is simple: they fear that the proposed stadium will prompt companies to leave.

Despite all of that, The Port of Oakland's executive team is quite happy these days. The port is seeing very solid and steady growth – and the leaders who run the organization are making what they believe are all of the necessary adjustments to cope with such growth. Oakland's cargo volume makes it the eighth busiest container port in the United States, based on Calendar Year 2017 data. This one port loads and discharges more than 99 percent of the containerized goods moving through Northern California.

The San Francisco Bay ranks among the three principal Pacific Coast gateways for US containerized cargoes, along with Los Angeles and Long Beach in southern California and Seattle and Tacoma (Northwest Seaport Alliance) in the Pacific Northwest. In 2018, about 78 percent of Oakland's trade was with Asia. Europe accounted for 11 percent, Australia/New Zealand and Oceania about 2 percent, and other foreign economies about 2 percent. About 7 percent of Oakland's trade is domestic (primarily Hawaii). California's three major container ports carry approximately 50 percent of the nation's total container cargo volume.


The Port of Oakland oversees three businesses: the Oakland Seaport (the Maritime Division); the Oakland International Airport (the Aviation Division); and 20 miles of valuable Oakland waterfront (the Commercial Real Estate Division). Together, these three businesses provide 84,000 jobs across the entire San Francisco Bay Area.

Port-related jobs yield an average annual salary of $45,342. The Port and its tenants contribute $698 million to state and local taxes. Business revenue, consumer spending and value of goods and services create the port's overall economic value of $130 billion.

Jobs supported by the Port of Oakland are up 15 percent since 2010, and 20 percent of all of those jobs are City of Oakland-based. These are jobs created by the Port, and/or by its tenants and customers. There is a direct correlation between job growth and the growth of container volumes, airport passengers, and occupancy rates.

How ready is the port to face a volatile economic environment? The first data point which port officials like to show off is that the Seaport element of the port's business broke cargo volume records in 2017 and 2018.

The Port of Oakland's impacts were assessed in an important economic study, conducted by Martin Associates, that shows the port's overall economic value – from business revenue, consumer spending, and total value of goods and services – tops $130 billion. The port and its tenants also contribute $698 million in California state taxes and/or local taxes.


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"The report confirms the Port of Oakland's role as a jobs generator for the region," said Port of Oakland Director of Social Responsibility, Amy Tharpe. "The port creates business opportunities that provide good, family-wage jobs."

According to the study, jobs supported by the port are up 15 percent since 2010. These are jobs created by the port, its tenants and its customers. According to the study, there is a direct correlation between job growth and the growth of container volumes, airport passengers, and occupancy rates.

In March 2018 Oakland released a new 5-year strategic plan today that pairs business expansion with community benefits. Called "Growth with Care," the plan envisions more jobs and economic stimulus as the port grows.

"We can grow, but we want our neighbors to grow with us," said the port's Executive Director, Chris Lytle, in a preamble to the 21-page strategic document. "We must conduct ourselves in the public interest for the public good."

The port said its plan would serve as a blueprint for expansion into the next decade. Key elements of the plan include:

• Projections for record business volumes over five years in the port's aviation and maritime businesses;

• Large capital investments on major projects; and

• An emphasis on sustainability to minimize the environmental impact of growth.

According to the strategic plan, Oakland cargo volume should reach 2.6 million TEUs by 2022. The port's Oakland International Airport is expected to serve 14-to-15 million passengers annually by then. Both would be all-time highs for Oakland.

Growing business volume should lead to more hiring, the port said, adding that it would prioritize local residents in filling jobs.

A centerpiece of the strategic plan will be curbing diesel emissions, the port said. According to port data, truck emissions are down 98 percent since 2009 while vessel emissions have declined 76 percent. The strategic plan commits the port to an overall reduction of 85 percent by 2020.

The International Marine Terminal is Oakland's largest, and the port will be installing three new ship-to-shore cranes in 2020. At 300-feet-tall, they'd be the tallest in the US Additionally, the port will also open the first building – a distribution center – at its Seaport Logistics Complex in 2020. The facility is being developed by CenterPoint Properties on property the port received from the decommissioned Oakland Army Base. The building would be the first in a planned warehouse/distribution center campus at the port.

The Oakland International Container Terminal raised the height of four ship-to-shore cranes in 2018. This is not the only major improvement completed during the past 18 months. The port also saw the opening of Lineage Cool Port Oakland, a 283,000-square-foot refrigerated distribution center. Cool Port enables train loads of chilled and frozen meat to be transloaded into ocean containers for rapid export to Asia.

In 2018, the port's TraPac marine terminal completed a two-year expansion that doubled the size of its Oakland footprint.

New logistics services, such as transloading, will be a strength of the port in the future. Development of distribution/transload facilities on port property, adjacent to rail lines and docks, is unique in the US It will enable shippers to cut time and cost in their supply chains.

The Port is the only container port in the Bay Area, and plans call for continued record cargo volume growth into the next decade, but agricultural exports will continue to be a key Oakland growth segment for two reasons:

First, Asia's demand for high-quality US farm goods is soaring, even in the face of rising tariffs that have been imposed during the 2019 US-China trade wars.

Second, the Port is adjacent to the fertile California Central Valley farm region. Demand for California-grown produce is rising, both from domestic and international customers – and no one is expecting that to diminish any time soon.


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The Port is preparing for this growth by deepening berths, raising cranes, improving cargo-handling processes, adding night gates, hardening berths for megaships, improving customer service through new digital tools such as online turn-time metrics and introducing a new air quality plan to curb diesel emissions.

Richmond

Although the smallest of the 3 ports, Richmond benefits from very favorable geography – and it certainly uses that as a competitive advantage.

The Port's customers are served by 2 major transcontinental railroads, Burlington Northern Santa Fe and Union Pacific. Wherever the cargo's final destination, routing, or point of origin, that shipment can readily be trucked and/or railed to and from the Port of Richmond.

Richmond's 32 miles of shoreline stretch along the San Francisco Bay's northern and eastern reaches, and the port includes five city-owned terminals. The tenant-operated terminals handle a wide range of liquid and dry bulk commodities, automobiles, and diversified cargo. Ten privately-owned terminals are handling bulk liquid, dry bulk materials, metals, and break-bulk cargoes.

The port's management team is quite proud that in two categories, liquid bulk and automobile tonnage, the port ranks first in throughput among the ports on San Francisco Bay. Automobile freight is one key segment where the Port expects to see real growth over the next 10 years – complementing a similar growth in oil cargo flows.

San Francisco

San Francisco may be the most interesting of the 3 ports, in large part because the city has seen such incredible economic growth during the past decade.

When the Port released an update to the "San Francisco Waterfront Plan" it sparked some heavy debates, including in some boardrooms and City Hall. The update took aim at strengthening the city's border with the Bay in order to address hazards and adapt to future risks, with climate change and rising sea levels being one primary challenge. In support of this effort, the port is also leveraging seawall and resilience investments to support historic pier rehabilitation projects along the Embarcadero.

Over time, port traffic will change and, the port hopes, continue to grow. The Port is making plans and committing hard investment dollars to ensure greater resiliency and flexibility in the face of multiple kinds of change – climate changes, economic changes, public policy changes.

The Bay Area's ports share their most important resource: the Bay itself. While the Bay's ecosystem is getting healthier, there are still common challenges that each of the three major ports face together. Executives at these Bay Area ports have been looking to work together more effectively: the steady march of climate change has been making that more urgent. No one quite knows what shape that collaboration will take, but three-cornered discussions are on-going.

Business in San Francisco has been quite good this past summer. As the high season for tourism, summer brought a greater demand for cruises and Alcatraz tours. Between April and July, there were 27 cruise calls (95,000 passengers). On the cargo side, during the same period, there were 17 auto ships (36,000 vehicles).

San Francisco provides a range of services: vessel berthing, stevedoring, plus ancillary services, and remains the only Bay Area port with cruise ships, providing year-round service at two downtown terminals, Pier 27 and Pier 35. The other primary cargoes in San Francisco are autos and dry bulk (aggregate), while the other regional ports handle commodities such as containers, oil, and agricultural products.

San Francisco is poised for major growth in the cruise sector, with 116 ships expected in 2020 compared to 85 in 2019, and a steady increase in autos of as much as 10 percent.

During the past two years, higher rail volumes led the Port of San Francisco to install two new rail tracks and related upgrades. At the Downtown Ferry Terminal, two new landings have been installed, Gates F and G, to accommodate the expansion of Bay Area ferry service. In the past 5 years, the port opened a new cruise terminal at Pier 27 and revitalized its cargo terminal for autos at Pier 80.

Looking ahead, toward the next stages of port development, the San Francisco is considering upgrading shoreside electrical power in order to support cruise and cargo ships.

 
 

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