A new 10-year lease agreement between the Port of Tacoma and Union Pacific Railroad (UPRR) will help diversify business and promote the local economy.

UPRR will relocate its domestic business to Tacoma from the Port of Seattle, allowing the company to free up room in Seattle for new international business. UPRR will use the Tacoma site for transloading, or moving cargo from truck to rail and from rail to truck, for cargo produced and distributed within the United States.

“That’s sort of a trend in the industry, to do more transloading, and we have not done that traditionally here (at the Port of Tacoma),” said port spokesperson Tara Mattina. “This is providing more of a domestic service for us. It is goods produced here that are going to Chicago or other Midwest markets or goods produced elsewhere that might want to come to the U.S. market.”

Historically, the cargo going through the Port of Tacoma is bound for international markets or for Alaska or Hawaii. Recently, however, the port has been working to diversify business from international intact containers to other categories of business.

The port approached UPRR about relocating to Tacoma a few months ago, aware of the company’s capacity limitations in Seattle and in hopes of diversifying Tacoma’s intermodal business. Currently, Burlington Northern Santa Fe (BNSF) controls about 80 percent of the international intermodal business in Tacoma.

According to the deal with UPRR, the port will lease 10 acres at the beginning of the lease, with provisions to expand up to 25 acres during the term of the lease, at the South Intermodal (SIM) Yard on Lincoln Avenue. Over the term of the lease, UPRR can expand its footprint at five-acre increments, up to a total of 25 acres. The yard was only at about 5 percent of its capacity and was used primarily by the Maersk and Horizon shipping lines.

The deal will generate revenues for the port in the form of the lease, which stipulates a monthly rate of $0.12 per square foot, and through lift fees and facility fees. For the first 10 acres, the port will generate about $3 million in revenue. The deal will also benefit the region economically.

“It provides more jobs for our region, which we always like,” said Port of Tacoma Commission President Dick Marzano. “I think anytime you have a bigger presence with two railroads servicing the Port of Tacoma, it helps our customers.”

The agreement will also increase productivity at the SIM Yard, allowing many workers to keep their jobs.

“It helps us one by diversifying the services (offered), adding a service that we haven’t traditionally provided,” Mattina said. “It increases the productivity of a yard that is seriously under capacity. And it establishes another really good relationship with another Class One railroad.”

The lease agreement will not require significant capital investment, as rail infrastructure, pavement and fencing are already in place. The port will need to adjust fence lines and invest in fencing to realign the facility adjacent, where Kia vehicles are parked.

“This is a great opportunity for the port and Union Pacific and our customers and Seattle,” said Port of Tacoma Commissioner Clare Petrich.

The lease will take effect Dec. 1, 2008.