Posted on May 3, 2023
In 2015, the Port of Tacoma and the Port of Seattle created an alliance through an interlocal agreement designed to increase marine cargo traffic through the Pacific Northwest and to increase maritime-related jobs. The continued loss of market share of containerized cargo was identified by major businesses as a key indicator that more cooperation was needed between the two ports.
It has been almost eight years since The Northwest Seaport Alliance was created. The goal was admirable: work together to attain more market share of marine cargo and trade instead of undercutting each other.
The goal is still valid; however, the results for Tacoma have not been satisfactory.
In 2015, Tacoma was responsible for 8.5% of all imports and exports through West Coast ports. That market share has decreased to 6.1%; a loss of more than 25% of Tacoma’s market share. There are several reasons for the decline, including competition from Canadian ports, loss of rail traffic and, most recently, an uncertain labor contract on the West Coast. Most certainly, the goal of the Alliance to increase the pie to be divided has not been achieved.
What has been even more damaging to Tacoma, which has received little public discussion, has been the method of determining Tacoma’s share of income and expenses. The current method has been questionable, and it impacts Tacoma’s ability to develop job-creating facilities and pay for other environmental and community initiatives.
Upon creating the Alliance, each port contributed land and other capital to the partnership, including marine terminals and other licensed properties; total contributions from each port were supposed to be of equal value, with evaluations based on the projected income of those terminals from each port. Likewise, the method of paying for capital and maintenance projects at each port was supposed to be fair and equitable.
In practice, over the past eight years, it has not turned out to be fair or equitable for Tacoma. Today, about 60% of the income generated for the Alliance comes from shipping activities in Tacoma, while 40% comes from Seattle. Yet, the distributable income is split exactly at 50% for each port. Distributable income is used to develop future terminals and infrastructure, and support multiple port activities in each county.
On the expense side, 60% of the funds spent by the Alliance to maintain and build terminals has been invested in Seattle, with only 40% going to Tacoma. While Seattle and Tacoma are intended to equally split the cost of Alliance projects and improvements, the high cost in Seattle means Tacoma pays a disproportionate amount, and we’re not retaining our fair share of the income.
The Alliance’s charter, approved by both Seattle and Tacoma Commissions in 2015, is in need of change. Properties selected were supposed to be of equal value to generate equal income. Building costs and maintenance expenses were also supposed to be fair. But many of the properties in Seattle had substantial deferred maintenance, and new modernization projects continue to be much more expensive there.
For example, it cost twice as much to redevelop Terminal 5, a major international terminal in Seattle — roughly $450 million — than it did to redevelop the major international Husky terminal in Tacoma, which cost roughly $225 million. Some licensed properties in Seattle had income much lower than anticipated. Some lease contracts, which were used to evaluate Seattle properties, were changed.
As a half-owner of the Alliance, Tacoma pays for half of the projects in Seattle, while project costs soar on terminals that had not been maintained. In practice, Tacoma ends up paying half of the millions of dollars on over-budget improvements in Seattle. Meanwhile, Tacoma shares income that it earns in an equal amount with Seattle, while generating more than 50% of that income.
Tacoma has many projects it wants to accomplish for the community and ideas for new job-producing expansion. The Alliance’s current charter has no clear provisions for adding or removing properties managed by the Alliance. In short, the charter needs to change, which is something that the commissioners of each port have the authority to accomplish.
The original agreement contemplated adjustment by agreement. The Alliance is a good idea, even in a declining market, but distribution of income and project costs need adjustment or Tacoma will continue to suffer.
In our opinion as elected Port of Tacoma commissioners, it is time for an independent review of the past eight years and an assessment of how properties managed by the Alliance can be better evaluated to create a more equitable distribution.
It is time to consider the useful life of properties, the extraordinary expense of some properties which were not properly maintained, and project management practices — including whether the Alliance or homeports should direct project development and oversight.
This op-ed reflects the opinion of John McCarthy and Don Meyer, both elected members of the Port of Tacoma Board of Commissioners. It does not represent the opinion of the Port of Tacoma or the Northwest Seaport Alliance.
Don Meyer is the former executive director of the Foss Waterway Development Authority and a former deputy executive director of the Port of Tacoma. He was first elected to the Port of Tacoma Board of Commissioners in 2010.
John McCarthy has been elected to four terms as a Port of Tacoma Commissioner. In 2020, McCarthy held the office of president of the Port of Tacoma Commission and co-chair of the Northwest Seaport Alliance.
