Years before the new shipping terminals on the Blair Waterway open, the expense of building them will take its toll on the Port of Tacoma’s finances.
Profit will dip next year – with a loss expected in 2009 – before it rebounds in 2010, according to forecasts. The port has earned less revenue than expected this year due to a downturn in international cargo.
The Port of Tacoma Commission will vote Friday on the 2008 budget.
“In 2008 and 2009 we are seeing the costs associated with expansion,” Tim Farrell, the port’s executive director, said last week.
The port expects its profit to be $2 million next year, compared to an anticipated profit of $13.9 million this year. The following year, the port will likely record an estimated loss of $17 million, with profit then ticking back up to $16.4 million in 2010.
Expenses and revenue have been projected to 2012, the year the NYK Terminal is scheduled to open on the east side of the Blair Waterway.
The profit dip and the recorded loss won’t mean lean years at the port, Farrell said.
In fact, the port will ramp up hiring during the same time period, adding an estimated 13 employees next year. Most of those will be in the port’s engineering department.
Much of the net loss doesn’t represent actual cash spent by the port, Farrell said.
Instead, as the port tears down buildings to clear the way for development on the East Blair Peninsula, government accounting standards require the port to record the value of the structures as an expense.
But there’s also the real cost of the work.
“It’s a double whammy,” David Morrison, the port’s director of financial planning, told the commission last week.
The port announced last summer that it will build a $300 million container terminal for NYK Line, a Tokyo-based shipping line, on the Blair Waterway. To do so, it will need to rebuild the Totem Ocean Trailer Express facility farther down the waterway, and build infrastructure, including a rail yard, on the peninsula.
The total cost of developing the peninsula will exceed $800 million, Farrell has said.
That figure is included in the $953 million worth of capital projects the port plans to embark on in the next five years. The projects include developing the east side of the Blair, as well as environmental projects, road and rail infrastructure, security enhancements and design work for the South Sound Logistics Center.
Port Commission President Dick Marzano said that through the development, the port aims to stick to its standard of making sure that its net revenue can cover the port’s annual debt service twice.
“One thing that’s important is that we’ll maintain that 2.0 debt coverage throughout this growth,” Marzano said.
He said unforeseen events could come up and require the port to go below that.
Though the port’s tax rate will likely stay the same (the commission hasn’t publicly discussed decreasing or increasing it) the amount the port collects from the tax continues to grow with the increasing property values and new construction. The port collects $18.6 cents per $1,000 of assessed property value from Pierce County residents.
That will earn $14.6 million for the port this year and an estimated $16.5 million next year.
The money is used for capital spending projects, such as environmental cleanups and road improvements, and to pay off the port’s general obligation bonds.
The port’s operations constitute a much larger percentage of its revenue.
But this year the port’s international container business has dipped, as has the revenue that comes with it.
The port earns money from its operations by leasing its land and equipment and by providing the service of lifting containers on and off trains. The number of international containers coming through the port was down 7.4 percent as of September compared with last year.
Farrell said the downturn is due to the mainline railroads – such as BNSF Railway – renegotiating their contracts with the shipping lines and introducing significantly higher rates. In turn, shipping lines calling in the Northwest have rerouted cargo in search of cheaper rates. The port saw the first signs of this last year, when the volume coming through the Pierce County Terminal, which serves Evergreen Line ships, started to slow.
Then, much of the diverted cargo went back through Southern California.
Now, Farrell said, he’s seeing shipping lines moving more containers through Vancouver, British Columbia, where they are then loaded onto Canadian National Railway trains.
The port has revised its revenue estimates down because of the slip from an estimated $102.5 million in revenue to $98.2 million for this year. The port anticipates its revenue in 2008 will be $102.1 million.
The port expects cargo will continue to be rerouted in some form as one by one the shipping lines renew their contracts. But Farrell doesn’t anticipate a permanent loss of business. Port executives are expecting a massive cargo influx in the future as the ports of Los Angeles and Long Beach reach their capacity. When that will happen, no one is sure.
Shipping lines, however, are already planning for the Southern California ports to hit capacity by making inroads in the Pacific Northwest. That includes the NYK Line’s decision to move its operations from Seattle to its own terminal in Tacoma. Existing terminals at the port are also planning to expand.
Profit will dip next year – with a loss expected in 2009 – before it rebounds in 2010, according to forecasts. The port has earned less revenue than expected this year due to a downturn in international cargo.
The Port of Tacoma Commission will vote Friday on the 2008 budget.
“In 2008 and 2009 we are seeing the costs associated with expansion,” Tim Farrell, the port’s executive director, said last week.
The port expects its profit to be $2 million next year, compared to an anticipated profit of $13.9 million this year. The following year, the port will likely record an estimated loss of $17 million, with profit then ticking back up to $16.4 million in 2010.
Expenses and revenue have been projected to 2012, the year the NYK Terminal is scheduled to open on the east side of the Blair Waterway.
The profit dip and the recorded loss won’t mean lean years at the port, Farrell said.
In fact, the port will ramp up hiring during the same time period, adding an estimated 13 employees next year. Most of those will be in the port’s engineering department.
Much of the net loss doesn’t represent actual cash spent by the port, Farrell said.
Instead, as the port tears down buildings to clear the way for development on the East Blair Peninsula, government accounting standards require the port to record the value of the structures as an expense.
But there’s also the real cost of the work.
“It’s a double whammy,” David Morrison, the port’s director of financial planning, told the commission last week.
The port announced last summer that it will build a $300 million container terminal for NYK Line, a Tokyo-based shipping line, on the Blair Waterway. To do so, it will need to rebuild the Totem Ocean Trailer Express facility farther down the waterway, and build infrastructure, including a rail yard, on the peninsula.
The total cost of developing the peninsula will exceed $800 million, Farrell has said.
That figure is included in the $953 million worth of capital projects the port plans to embark on in the next five years. The projects include developing the east side of the Blair, as well as environmental projects, road and rail infrastructure, security enhancements and design work for the South Sound Logistics Center.
Port Commission President Dick Marzano said that through the development, the port aims to stick to its standard of making sure that its net revenue can cover the port’s annual debt service twice.
“One thing that’s important is that we’ll maintain that 2.0 debt coverage throughout this growth,” Marzano said.
He said unforeseen events could come up and require the port to go below that.
Though the port’s tax rate will likely stay the same (the commission hasn’t publicly discussed decreasing or increasing it) the amount the port collects from the tax continues to grow with the increasing property values and new construction. The port collects $18.6 cents per $1,000 of assessed property value from Pierce County residents.
That will earn $14.6 million for the port this year and an estimated $16.5 million next year.
The money is used for capital spending projects, such as environmental cleanups and road improvements, and to pay off the port’s general obligation bonds.
The port’s operations constitute a much larger percentage of its revenue.
But this year the port’s international container business has dipped, as has the revenue that comes with it.
The port earns money from its operations by leasing its land and equipment and by providing the service of lifting containers on and off trains. The number of international containers coming through the port was down 7.4 percent as of September compared with last year.
Farrell said the downturn is due to the mainline railroads – such as BNSF Railway – renegotiating their contracts with the shipping lines and introducing significantly higher rates. In turn, shipping lines calling in the Northwest have rerouted cargo in search of cheaper rates. The port saw the first signs of this last year, when the volume coming through the Pierce County Terminal, which serves Evergreen Line ships, started to slow.
Then, much of the diverted cargo went back through Southern California.
Now, Farrell said, he’s seeing shipping lines moving more containers through Vancouver, British Columbia, where they are then loaded onto Canadian National Railway trains.
The port has revised its revenue estimates down because of the slip from an estimated $102.5 million in revenue to $98.2 million for this year. The port anticipates its revenue in 2008 will be $102.1 million.
The port expects cargo will continue to be rerouted in some form as one by one the shipping lines renew their contracts. But Farrell doesn’t anticipate a permanent loss of business. Port executives are expecting a massive cargo influx in the future as the ports of Los Angeles and Long Beach reach their capacity. When that will happen, no one is sure.
Shipping lines, however, are already planning for the Southern California ports to hit capacity by making inroads in the Pacific Northwest. That includes the NYK Line’s decision to move its operations from Seattle to its own terminal in Tacoma. Existing terminals at the port are also planning to expand.