In response to ongoing financial challenges related to Terminal 6 container operations, Port Commissioners on February 13 voted 6 to 1 with one abstention, approving a $3.7 million partial rent rebate program for its terminal manager, ICTSI Oregon, to help preserve and grow Portland’s role as an international container shipping gateway. ICTSI Oregon manages the terminal under a 25-year lease – an operating model common among U.S. ports.
Sustained productivity declines resulting from labor disputes at Terminal 6 have caused operating costs to increase. Consequently, without any offset, terminal manager ICTSI Oregon must incorporate the economic impact from productivity declines into the already increasing rates charged to the container carriers calling Terminal 6. The rebate program provides an offset to the increased operational costs caused by the productivity declines to assist ICTSI Oregon in successfully concluding contract negotiations with carriers on mutually acceptable economic terms.
No tax dollars are involved. The rent rebate, effective during the 2013 calendar year, will come directly from the $4.7 million in annual rent received from ICTSI Oregon, not to exceed $308,333 per month. The maximum rent rebate payment requires that existing container services are retained and that the carriers call at the same frequency as during 2012. In the event that there are changes in service levels during the rebate period, the Port has the discretion to reduce payments in proportion to the service change. In addition, if labor productivity improves, then the Port will have the ability to decrease the rebate payment to ICTSI to reflect the improved productivity and decreased operating costs.
“Since 1974, the container terminal has been a mission critical part of our marine operations, and we are doing everything we can to ensure it remains that way,” said Sebastian Degens, general manager marine and terminal business development. “This is a delicate and complicated phase of a relatively new terminal lease arrangement. It is in our shared interest to ensure it is successful and that our customers have certainty of continued, reliable service through Terminal 6.”
This new program follows a carrier incentive program approved in January and related business retention efforts in 2012. While Port officials acknowledged that this response to the challenges faced at the terminal is a stopgap measure, they emphasized that it is necessary to keep the gate open and keep cargo flowing while the longer term issues are resolved.
“It is our hope that all parties involved can come together to reach resolution on the fundamental issues that have necessitated today’s action,” said Jim Carter, Commission president. “We view this as a temporary measure. Moving forward we must stay focused on long term solutions. The end game is keeping the container terminal operating and keeping the related jobs in our state and region.”
Over 1,000 businesses depend on Portland’s container terminal to get their goods to and from market. The majority are small and medium sized businesses, including a number of inland agricultural exporters. An estimated 2,149 jobs rely on the container terminal to be functional, efficient and competitive, totaling $178,549,000 in total income.
At the Port Commission meeting, commissioners heard from: Brenda Barnes, Director of Customer Services for Allports; Kit LaBelle, Global Logistics and Sales Support Manager for Hampton Lumber; Melinda Merrill, Director of Public Affairs for Fred Meyer; and Dave Doeringsfeld, General Manager for the Port of Lewiston. They expressed support for the continued operation of Terminal 6, emphasizing the economic importance of the terminal for the logistics sector, shippers and upriver ports.
The Port of Portland is governed by a board of nine volunteer commissioners who are appointed by the governor and confirmed by the State Senate. At the meeting, one Commissioner was absent.