Port of Oakland to bid on Sacramento

Posted on Tue, Sep. 20, 2005

Port of Oakland to bid on Sacramento harbor

By George Avalos

Source: Port of Sacramento

Maneuvering to serve a fast-expanding Asian market, the Port of Oakland has become one of a half-dozen bidders vying for the task of navigating the Port of Sacramento out of a financial whirlpool of falling tonnage and a wave of red ink.

Oakland officials believe a deal to run the Sacramento port would bolster the East Bay port's ability to handle more imports from Asia. An agreement would also enhance Oakland's emerging strategy of increasing business by using more freight trains and barges as a way to reduce the truck traffic that congests the roads near the port.

The Port of Oakland, if selected, would operate the smaller Sacramento port, improve the marketing of the port to industry and help manage the Sacramento port's real estate assets.

The Sacramento port is seeking an operator in the wake of financial woes.

From 2000 through 2004, the average tonnage at the Sacramento port was down 19 percent, compared to the previous five-year period of 1995 through 1999. Revenue was down 6 percent in the comparable periods.

The Sacramento port has bled money for three straight years, with an average annual loss of $1.4 million. The setbacks were topped by a $1.7 million loss in fiscal 2004.

"The last few years have brought the worst losses in the history of the port," said John Sulpizio, Sacramento port director.

Northern California ports such as Sacramento that are inland have struggled over the past decade because their waters are too shallow to handle the relentless shift to giant, ocean-going cargo ships. Their distance from the Pacific Ocean is another obstacle. The limitations have hammered Sacramento with the loss of port customers.

"These hits have decreased our tonnage and decreased our revenue," Sulpizio said. "There is only so much cost-cutting you can do before expenses exceed revenues. That is what has been happening the last few years."

Sacramento also has foundered because disagreements among local governments in that area have hampered efforts to develop the considerable real estate acreage the Sacramento port owns.

"The land has been lying fallow," Sulpizio said. "Most ports have revenue from their real estate business to buffer the ups and downs of their maritime business. We always operated close to the bone with our maritime business, but we struggled to get our real estate holdings to produce money."

The Sacramento port has proposals from six entities: the Port of Oakland, Kinder Morgan Inc., Archer Daniels Midland Co., Farmers Rice Cooperative, Yara fertilizer and Marine Terminals Corp. Final proposals are due early next month, Sulpizio said.

The Port of Oakland hopes to use the Sacramento port, which is smaller than Oakland, to handle barges that would carry 40-foot-long containers to Oakland. Under the plan, agricultural companies would deliver their products by truck or train to Sacramento and then barges would carry the products to Oakland. At present, agricultural exports going through the Oakland port often arrive by truck.

"We're looking at this as a strategic alliance," Oakland port spokesman Harold Jones said. "We're looking at ways to increase the efficiency of goods being moved in and out of Oakland."

The barge system between Oakland and Sacramento would be similar to the use of barges traveling on tributaries that feed into major ports along the Gulf Coast.

Oakland is looking at ventures beyond Sacramento to support and expand its maritime business. The Oakland port is studying ways to use port facilities in Humboldt and is in discussions with the Port of Stockton about increased railway access.

Moreover, the Oakland port is also seeking ways to use trains to connect an inland port such as Sacramento with distribution centers and warehouses in the Kern County city of Shafter.

"We are trying to push the envelope in our strategies to find viable alternatives to move goods in and out of Oakland," Jones said.

SACRAMENTO PORT BLUES

The Port of Sacramento has been afflicted in recent years with reduced tonnage, slumping revenues and mounting losses.

Year Tonnage Revenue Profit/(Loss)

2000 833,421 $10,942,830 $296,388

2001 922,081 $11,794,530 $598,682

2002 745,052 $8,761,761 $(948,831)

2003 878,803 $9,149,865 $(1,425,942)

2004 778,678 $8,306,887 $(1,685,957)

Source: Port of Sacramento


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George Avalos covers the economy, financial markets, and banks. Reach him at 925-977-8477 or gavalos@cctimes.com





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