Port pitches commitment program to customers

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BIG LIFT. Straddle carries move cargo containers on the Tideflats. Shipping lines are eligible for a rebate of $17.50 for such intermodal moves.

Port of Tacoma Commission approved a new program aimed at providing financial assistance to struggling terminal operators.

The Customer Commitment Program is a one-time agreement allowing the port’s leasing companies that maintain a minimum annual lift guarantee to receive a one-time credit of $17.50 per executed international intermodal lift during the 2009 calendar year. In return, companies will be required to enter a one-year lease extension at the port and would be required to support the port’s Truck Emissions Improvement Program.  

“During times of economic downturn we are all hurting a little bit,” Commissioner Dick Marzano said. “Customers who chose to come to the port did so with a commitment to grow and prosper here. We need to make a commitment to ensure they are willing to stay here.”

Anna Soderstrom, manager of the container line of business for the port, said several ports around the country have already launched similar programs. The Port of Los Angles has implemented a $50 million program to aid its struggling customers. The ports of Long Beach, Oakland and Seattle have also implemented similar multi-million dollar financial assistance programs. However, Soderstrom noted that Seattle is the only port asking for something in return from its customers, in exchange for financial assistance.

“The benefits of this program are going to maintain our competitiveness,” Soderstrom said. “However, we have to keep in mind that ports such as L.A. and Long Beach put their programs in place in order to attract intermodal cargo, so that makes us very vulnerable.”

To qualify for the program, customers must be current with all outstanding invoices. If all qualified terminal leasing companies choose to participate in the Customer Commitment Program, the port’s 2009 revenue would reduce by $4.2 million. This loss in revenue would reduce the port’s projected debt service coverage ratio in 2009 from 2.8 to 2.6. However, the yearlong lease extensions would make up for the loss of revenue with a net present value of about $10.4 million, at a 10 percent discount rate.

During the past two and a half years, the port estimates that the fiscal loss to international steamship lines has been the highest in the history of container trade. Carriers this year are expected to lose an estimated $20 billion.

Container trade between Asia and the United States has plummeted in recent years, which has negatively impacted port container volumes on the West Coast, including the Port of Tacoma.

In addition to lower cargo volumes, vessel capacity around the world has increased, creating a supply-demand imbalance. This has contributed to a decline in ocean freight rates.

The port commissioners unanimously agreed that this program is needed to ensure the Port of Tacoma remains competitive in the future.

“I think it’s best to recognize the economy we are in and that the world won’t come back to where it was for some period of time,” Commissioner Don Johnson said. “We need to maintain a competitive edge.”

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