Despite grant, Port of Oakland faces challenges And Takes Anti-Labor Tact Toward SEIU 1021 Port Workers

Despite grant, Port of Oakland faces challenges And Takes Anti-Labor Tact Toward SEIU 1021 Port Workers

Despite grant, Port of Oakland faces challenges

Andrew S. Ross, Chronicle Columnist

Updated 08:26 p.m., Tuesday, July 10, 2012

http://www.sfgate.com/business/bottomline/article/Despite-grant-Port-of-...

"This is a game-changing project. It really puts the Oakland port on the map in the 21st century."
Nice words from U.S. Secretary of Transportation Ray LaHood, touring the site where the port's $1 billion redevelopment project is scheduled to break ground next year.
He accompanied the words with federal money: a $15 million grant for an intermodal rail line designed to shift cargo from trucks to rail, move it faster and support a huge logistics center and bulk terminal to be built on Oakland Army Base land.
While local officials could point out that the Port of Oakland, the nation's fifth largest, is already on the map, thank you very much, they also know that along with the project's potential - including 5,000 new jobs - the port faces a number of 21st century challenges.
First, money. The Obama administration has been good to the Port of Oakland, but with the wider Panama Canal set to open in 2014, other U.S. ports, especially on the East and Gulf coasts, are weighing in with their infrastructure needs.
The Port of Oakland also is reliant on its cash-strapped home state. By at long last green-lighting the Army base redevelopment project - which had been in the works for 15 years - the Oakland City Council late last month just managed to save the $242 million in funding the state had threatened to cut off. Another $271 million is due - that is, if voters approve a regional tax measure on November's ballot.
"We need support from every level of government if we are going to make this project a reality," said Omar Benjamin, the port's executive director.
What the port doesn't need is another shutdown by the Occupy Oakland brigade, like the one in November.

Labor difficulties
What it does need is a contract with Service Employees International Union Local 1021. The rank and file rejected a negotiated contract offer last month and there could be a strike at any time. Like so many labor-management disputes these days, this one revolves around increased health and pension contributions, in part to help fill a huge unfunded pension liability.
"The employees seem not to want to accept that what they have is no longer sustainable, especially when the market shows no sign of getting back to where it was in terms of tonnage," one port official said.
One of the longer-term results of the last serious labor dispute, the West Coast port shutdown of 2002, was a shift of cargo traffic to East Coast ports, notes international trade attorney John Padgett, a partner at McGuireWoods in Norfolk, Va. "The effort to diversify supply chain options was also a contributing factor in the decision to expand the Panama Canal," Padgett wrote recently in the Maritime Professional.
The Port of Oakland had been losing market share, port officials and local shipping industry executives acknowledge.
"In 2007, immediately before the recession, only two U.S. ports actually lost cargo volume tonnage compared to other major world ports - Los Angeles and Oakland," said Mike Jacob, vice president of the Pacific Merchant Shipping Association in San Francisco. "The Port of Oakland is nowhere near the capacity it's built for."
According to the port's latest numbers, container traffic in May rose by 4.9 percent over May 2011, though traffic this year so far has grown at a "modest" 1.5 percent pace. "We are cautiously optimistic that the Oakland seaport will experience continued modest growth for the remainder of the year," said port spokesman Isaac Kos-Read, director of external affairs.
As for the wider Panama Canal, which opens for business in 2014, one year before the port redevelopment's scheduled completion, have no fear, says the canal's head of research, Rodolfo Sabonge.

While noting that 65 percent of goods going through the canal come from or are headed to the United States, and that the $5.5 billion expansion "will significantly impact vessel routings and global trade patterns," the Port of Oakland "may become an even greater ocean cargo gateway for U.S. exports to Latin America," he said at a recent Pacific Transportation Association dinner in San Francisco.
That was good to hear, although a number of analysts have said West Coast ports, including Oakland, can say goodbye to much of their business, especially with Asia. With a wider, deeper canal able to handle larger container ships that previously had to ply longer alternate routes, non-West Coast ports with the same capability become a more attractive option, the thinking goes.
The canal's business plan "explicitly assumes that a lot of the trade between Asia and America's east and Gulf coasts will be diverted from California's ports to the canal," the Economist reported in January.
Such projections have caused great concern, particularly in and around the ports of Los Angeles and Long Beach, which handle approximately 40 percent of Asian imports into the United States. Others dismiss the concerns as overblown.
"It's largely rhetoric, basically a plea for infrastructure spending there," said Jock O'Connell, international trade analyst at Beacon Economics. As the Southern United States continues to grow as a focal point for economic and population growth, "there'll be compelling reason for more cargo to move through the Panama Canal," he said, but he forecast that Southern California ports will see, at most, a 5 percent decline in "discretionary" cargo (i.e. imports). "The sky is not going to fall."
(It should also be noted that Hong Kong's Orient Overseas Container Line signed a $4 billion, 40-year lease for a container terminal at the Port of Long Beach in May.)

Oakland's advantages
Oakland, meanwhile, has two specific advantages: First, it can handle many of the larger containers that other U.S. ports, so far, cannot, including the massive, 1,200-foot-long MSC Fabiola - which stopped off at the Port of Oakland in March on its way back to China.
Second, its main business is exports, including food and wine, for which there's an ever-growing market in China. China. Conveniently located near the Central Valley, the wine country and Silicon Valley, it's often "the last port of call leaving America for the Far East," said O'Connell. At the same time, most of the "discretionary" cargo (i.e., imports) coming into Oakland is destined for local and regional markets, meaning it retains the advantage of convenience over East Coast and Gulf Coast ports - though the Port of Oakland would like more of that discretionary cargo as well.
"The concentration of population and industry in California is hard to dismiss," said Walt Rackowich, co-CEO of Prologis, referring to the Panama Canal issue at the International Warehouse Logistics Association's convention in San Francisco in March.

Private investor
That's one reason why Prologis, the largest industrial property company in the world, is one of the two private investors in the Army base redevelopment project. Prologis, headquartered in San Francisco, will be building the port's new warehouse and distribution facilities.
"This project will help keep the Port of Oakland competitive on the West Coast. It will also be the city's largest development in decades, and will help bring much-needed job growth and environmental benefits to the city," said Larry Hamsen, the company's chief operations officer for the Americas.
Jacob is more cautious. Despite the encouraging moves, "the jury is still out on what the various improvements will do for the port in terms of competitiveness," he said.
"The future of California's ports, including Oakland, is in their hands," said O'Connell. "They have to figure out what to do to remain competitive in the international market."
Andrew S. Ross is a San Francisco Chronicle columnist. E-mail: bottomline@sfchronicle.com Blogging: www.sfgate.com/columns/ bottomline Twitter: @andrewsross Facebook page:sfg.ly/doACKM