Thursday, March 25, 2010

Marine Contractor Signs Lease for Tacoma Port Facility

The Port of Tacoma has signed a five-year lease with Houston, Texas-based marine contractor Northwest Marine Co. for a 3.5-acre facility on the Tacoma Tideflats. The terms of the lease, which include two optional five-year extensions, cover the use of various buildings and two piers at the location.

Owned by heavy civil marine contractor Orion Marine Group, Northwest Marine plans to use the Tacoma facility as a base to serve the Pacific Northwest and West Coast.

Two weeks ago, Orion announced that it had acquired the marine equipment assets of a private marine construction company exiting the business for $7 million, including derrick barges, cranes, hammers and ancillary equipment. Orion also said that it had hired several key personnel with West Coast heavy civil marine construction experience to help establish the Tacoma base.

Inland SoCal City Appeals Loss in Port Impact Suit

The City Council for the inland Southern California desert city of Riverside has decided to appeal a March 10 California Superior Court ruling that sought to stop the expansion of the China Shipping Container Line terminal at the Port of Los Angeles.

"The City Council has unanimously directed the City Attorney's office to file a notice of appeal and to seek appellate relief in the matter of City of Riverside versus City of Los Angeles," said Riverside City Attorney Gregory Priamos on Monday.

The suit, filed in May 2009, claimed that the port did not adequately consider the impacts of increased intermodal rail traffic from the terminal to Riverside when preparing environmental documents for the project. City attorneys argued in court that proposed terminal expansions at the Los Angeles and neighboring Long Beach port could increase Riverside-area train traffic by more than 15 percent per day. The city claimed that the added train traffic would lead to increased pollution, greater street traffic logjams at train crossings, and possibly the loss of access by emergency personnel.

The desert community sits more than 50 miles inland from the port but serves as a key rail hub for Southern California port rail traffic headed east.

In the suit, Riverside demanded that the port redo environmental documents key to the Los Angeles terminal expansion moving forward. In addition, the city sought payments from the port to build grade separations isolating cargo rail traffic from the city's street traffic.

Orange County Superior Court Judge Ronald L. Bauer ruled that the port environmental documents properly considered the possible impacts to Riverside and, in turn, properly concluded that the terminal expansion would have "an insignificant impact" on the city. The March 10 decision was made public last week.

Concerns had been raised by the shipping industry that a Riverside victory could set a precedent where ports could be held financially liable for increased cargo traffic impacts to dozens of communities regardless of distance from the actual ports.

A similar city suit against the Port of Long Beach is still awaiting a ruling.

Olympia Port Won't Challenge Tacoma Port Sale of Maytown Parcel

Attorneys for the Washington state Port of Olympia have advised port officials that they have no say in the Port of Tacoma's decision last week to sell the 745-acre Maytown parcel that raised questions about the failed partnership between the two ports to develop the property as an intermodal rail facility.

The Port of Olympia governing board, on the advice of the attorneys, decided Wednesday not to challenge the sale of the Maytown property.

The two ports agreed in 2006, when Tacoma purchased the property for $27 million, to partner on the development of the parcel which sits within the Olympia port's jurisdiction. State law prohibits a port from operating a facility in another port's jurisdiction.

The partnership agreement between the two ports expired in 2008, at almost the same time Tacoma port officials decided not to move forward with the rail facility project due to a decline in cargo traffic and growing local public opposition to the project.

When Tacoma officials announced last week that they had reached terms to sell the property to Maytown Sand and Gravel for $17 million, Olympia port officials became concerned about a clause in the sale agreement. The clause allowed the Port of Tacoma to reap any profits from the future sale of a 65-acre portion of the Maytown property for rail use. The smaller parcel sits near a main rail line.

Port of Olympia commissioners raised the concern that if the Port of Tacoma is holding a vested interest in part of the Maytown property without the cooperation of Olympia, Tacoma may be in violation of the state law barring one port from operating in another port's jurisdiction.

In response, Port of Tacoma officials told Olympia attorneys that the port has no desire to force the smaller parcel to be sold as rail property and were only trying to recoup part of the $10 million loss sustained on the sale of the entire parcel if the smaller property were used for rail facilities.

Long Beach Port Gets Strong 'AA' Rating from Fitch

Despite falling cargo numbers and an aging infrastructure, ratings agency Fitch has reaffirmed the Port of Long Beach credit rating as 'AA.'

The move comes only days after the port approved a major debt restructuring plan that, by taking advantage of lower interest rates and avoiding certain federal taxes, will allow the port to save up to $1.3 million a year.

Fitch almost immediately affirmed the very strong 'AA' rating on approximately $785 million of outstanding harbor revenue bonds and harbor revenue refunding bonds. All of the port's bonds are secured by a gross lien on port revenues, with a final maturity in 2027. In addition, the port has $31.4 million in commercial paper notes, series A, which are not rated by Fitch.

Like many large ports, Long Beach saw declines in cargo volume during 2008 and 2009 due to both the global economic situation and an overall reduction in U.S. consumer spending.

Total container volume at the port dropped 21.6 percent in 2009 to 5.3 million TEUs for the year, following total container volume declines of 8.5 percent for fiscal 2008. Cumulatively, the port has experienced a 28.2 percent drop in total container volume from the peak year of 2007, when 7.4 million TEUs moved through the port. Fitch attributed portions of these declines to adjustments in schedules and ports of call by shipping lines servicing the port, though the majority of the decline was attributed to the broader global economic downturn.

Fitch highlighted that despite the declines, in 2008 and 2009 the port implemented customer incentive programs that have experienced success with both terminal operators and ocean carriers. In addition, due to the port reliance on minimum annual guaranteed lease revenues and lease terms which establish a floor of revenues, the port has minimized risk to its bottom line. The port has maintained an average earning from these minimum annual guarantees of around 60 percent of total operating revenues. This has been sufficient, Fitch pointed out, to maintain the port's annual debt service at a ratio of 2.72 times cash-to-debt.

Despite one-time expenses and cost increases at the port raising total operating expense at a compound annual growth rate of 21 percent for fiscal 2004-2008, Fitch expects "that port management will make adjustments and control the expense profile to preserve the port's profitability and meet all internal policies going forward."

And while the port has maintained debt service levels as high as 3.1 times cash-to-debt, the ratio dropped slightly to 2.8 times cash-to-debt in 2009, well above the rate covenant of 1.25 times cash-to-debt. The port maintains an internal debt ratio minimum level of 2.0 times cash-to-debt.

Fitch also ran scenarios that contemplated further container volume declines through 2011, funding of the port's full capital plan with an additional $2 billion of debt obligations through 2038, and careful management of operating and capital expenditures. The analysis found that the port in this situation should be able to maintain a debt coverage ratio of 2.0 times cash-to-debt. Additional declines or stagnation in traffic volumes, according to Fitch, could result in the port being forced to delay or defer portions of its capital program in order to maintain the proper debt coverage ratio.

Currently, the port's 10-year capital improvement plan totals approximately $4.7 billion, of which 26 percent is set to be debt financed. Projects include improvements to container shipping terminals, expansion of on-dock rail facilities, construction of a new bridge to replace the aging Gerald Desmond Bridge, construction of a new Port administration building, dredging of the harbor, and various security improvements.

Tuesday, March 23, 2010

Oakland Port Sees Solid Cargo Numbers In February

The Port of Oakland posted solid across-the-board cargo traffic numbers in February, marking dramatic double-digit increases for total and loaded containers compared to the same period last year. It was also a dramatic increase over January's total cargo container traffic, which was a dismal 0.6 percent below January 2009.

Oakland officials reported total cargo container traffic up to 155,573 TEUs in February, a 17.2 percent increase over February 2009. 

Total loaded inbound containers for the month were up an impressive 30.6 percent to 53,934 TEUs. 

Oakland also scored solid export numbers in February, with total loaded outbound containers ending the month at 71,819 TEUs, up 11 percent over the year-ago period.

Analysts remain split on the reason for the increasing cargo numbers, with some attributing them to a full in-progress economic recovery while others attribute the increases to part of false recovery that is leading to a second downturn in the near future.

SoCal Ports to Truckers: We Are Watching the Data

Southern California port officials are utilizing data collected from radio frequency identification devices on drayage trucks to determine violations of both the letter and spirit of the ports' clean truck program, in some cases even outside port property.

All trucks servicing the ports of Long Beach and Los Angeles are mandated to carry a unique RFID tag that transmits information about each truck when they enter or leave a port facility.

This data on truck moves is collected through a port drayage registry and transmitted to the ports for analysis.

Each month the ports sift through the data for what they call "irregularities" in "use patterns." 

One of the things they can glean from the data, according to Port of Los Angeles Deputy Executive Director of Operations John Holmes, is switching of an RFID between trucks. 

"If the truck goes through the gate at 10:05 and a second truck [with the same RFID] goes through the gate at 10:07," said Holmes, "it could indicate that someone has pulled the RFID transponder from their truck and given it to someone else. Because typically a truck doesn't go through the same gate two minutes apart."

The port then flags such irregularities and then contacts the trucking firm that sent the problem truck for further investigation.

Other things that the ports look for are extraordinary numbers of moves by one truck in a 24-hour period.

"It could indicate that they are taking the container out of the yard and then meeting somebody else and switching off to a non-2007 compliant truck," said Holmes. "Anytime we find this, we contact the trucking companies and ask them to explain why this activity occurs."

Holmes said that in some cases the questionable activity is perfectly legitimate, such as rapid short haul turn-arounds to port-area rail yards.

However, Holmes said that they have found groups of truckers working together to do dray-offs. A truck plan-compliant truck will enter the port, pull a container and then meet his confederates just outside the port to switch trailers to a non-compliant truck.

Holmes said that a normal amount of moves for a 24-hour-period is typically 1-to-6, but when the data shows moves of more than eight a day, the port analysts take notice.

"We’re trying to make sure that people are following the intent of the program," said Holmes.

While admitting that dray-offs are not illegal, Holmes said that the port turns for enforcement to the beneficial cargo owners, who in most cases frown heavily on the activity.

"If Walmart found out that there were dray-offs being done with their cargo, they would immediately take action against the trucking company," said Holmes. "It's a behavior that we don't encourage and we allow the BCOs and trucking firms to work through it.

Port of Los Angeles Executive Director Geraldine Knatz said that the trucking firms "know now that we are watching the data," but ultimately, the port expects the trucking companies to police the truck drivers.

According to Holmes, about 0.6 percent of the monthly truck calls are flagged as being irregular – roughly 900 truck calls out a total of 250,000 in January.

Los Angeles Port Truck Incentive Plan Not as Effective as Expected

A Port of Los Angeles incentive program set up in 2008 to lure trucking firms into signing on to the port's clean truck plan appears to have paid out a great deal of money for less than stellar results.

While the port has paid out more than $44 million in incentives to date, port officials have found that approximately 70 percent of the 2,200 incentivized trucks did not meet the minimum number of gate calls required under the terms of the incentive plan. Each of these trucks could trigger a $4,000 payback clause in the incentive agreement.

Port officials also found that nearly 18 percent of these trucks falling short of the minimum trips have made no gate calls at all.

The port surmised that part of the problem is related to the downturn in the general economy, which has in turn led to the closure of a number of gates at the port.

Additional research showed that an upper goal set by the port for incentive program participants of 600 trips port-wide, that would have triggered a further financial reward to trucks attaining the goal, is only being met by less than 22 percent of the incentivized trucks.

The incentive plan began only months before the Oct. 1, 2008 start date for the Southern California ports' truck plan, when the port still had no major trucking firm signaling they would participate in the plan.

Fearing that there would be a serious shortage of drayage vehicles compliant with the truck plan rules when the program kicked off, Port of Los Angeles officials held an invitation-only meeting with representatives of eight large trucking firms in July 2008. Attendees at the meeting said that port officials asked what the port could do to entice these firms to sign up for the truck plan. Several said outright that the answer was money.

Following the meeting, Port of Los Angeles officials worked behind closed doors to negotiate an incentive package with two of the meeting's attendees – Arizona-based trucking firms Knight Transportation and Swift Transportation – to bring in hundreds of their new privately-funded trucks to the Los Angeles drayage fleet.

The finalized package as approved by the port's governing board offered trucking firms up to $30,000 per truck plan-compliant vehicle that firms placed in Port of Los Angeles drayage service.

The first incentive offered a one-time payout of up to $20,000 to those trucking firms that signed up for the truck plan but did not use truck plan funds to buy their trucks.

Applicants for the second incentive were to receive a $10-per-dray payout from the port on all loaded inbound containers moved through the port terminals, limited to a per truck maximum of $10,000. These trucks were required to be truck plan compliant and also not purchased with truck plan funds.

Trucks such as those owned by Knight and Swift were eligible for both incentives, for a total of $30,000 per truck. Another 56 trucking firms signed up for the incentives later, bringing the total incentivized trucks serving Los Angeles to about 2,200.

Part of the incentive plan requirements also set a minimum number of gate calls that each truck was required to make per year to establish it as being in Los Angeles port service.

Under the terms of the incentive plan the trucking firms were required to pay back $4,000 per truck that did not meet the minimum gate calls at year's end.

Tacoma Port to Sell Maytown Property at $10M Loss

The long saga of the Port of Tacoma's Maytown property appears to be nearing an end.
The port's governing board voted last week to sell the 745 acre property – once envisioned by the port as the site for a proposed intermodal rail and logistics facility – for $17 million to a minerals firm that plan to mine the site for gravel.

The port purchased the property in 2006 for more than $21 million and has since invested another $6.5 million in the site for consulting and pre-construction work related to the development of the rail facility.

The port continued to work on the proposed rail facility until 2008, when vehement community opposition to the construction and operation of the rail facility coalesced, leading to the port's decision to abandon the rail facility project and sell the property.

However, the downturn in the real estate market and the economy in general led to lengthy negotiations with purchaser Maytown Sand and Gravel, a partnership between Federal Way, Washington-based gravel firm Lloyd Enterprises and Irvine, California-based real estate firm Southwind Realty Group.

Under the terms of the deal, Maytown Sand and Gravel will pay the port $20 million over 17 years at 7 percent interest, including a $1 million closing payment. The total purchase price will be made in cash and $8.5 million worth of sand and gravel. 

The port hopes to make up the $10 million up-front loss on the property through interest on the deal, variations in the price of sand and gravel it receives from the purchaser, and the future proceeds from a 65-acre parcel on the site that was not included in the sale.

Maytown could still pull out of the deal if a key mining permit is revoked by Thurston County officials. The port was unable to get the go-ahead to mine on the property due to the county labeling the port non-compliant with groundwater monitoring protocols. If the firm meets the protocols and does receive the county's blessing on the special-permit, the firm must still comply with or complete more than two-dozen stipulations set down by the county before the firm could actually begin mining the property.

Monday, March 22, 2010

Webb Institute

America’s College of Naval Architecture and Marine Engineering
By Jay Carson

Webb Institute, the only college in the United States devoted solely to naval architecture and marine engineering since its founding in 1894, is an accredited college like no other. All students receive full tuition scholarships, and work in the field each of the four winter terms.

Webb graduates receive a Bachelors of Science degree in Naval Architecture and Marine Engineering, which combines elements of mechanical, structural, electrical, chemical and systems engineering. The quality of education offered at Webb is reflected in the comprehensive academic load, which includes 146 credit hours of classroom education, 2 design projects that illustrate both a small ship and a large ship design process, and a rigorous senior thesis that hones research, analytical and presentation skills. Development of in-depth engineering, math and science skills is balanced by course work in history, literature, arts, philosophy and communications, anchored by the John J. McMullen Chair of Humanities. Leadership training through a grant from Crowley Maritime Corporation develops interpersonal skills needed for success in project management and business. Webb Institute is fully accredited by ABET and Middle States Commission on Higher Education.

Webb alumni have been known for decades for their practical and theoretical understanding of design and engineering principles. In large part this comes from the Winter Work internship program required of all students. First semester ends in mid-December, and second semester starts in late February or early March. During the intervening period, freshmen work in a shipyard and sophomores serve as cadet/observers aboard a vessel at sea, while juniors and seniors work in a technical office or research environment. Students earn money during all of these assignments. Winter Work often leads to a position after graduation, and professional interests are established that may last a career. Winter Work assignments take students around the globe, with some professional experiences occurring this year as far afield as Shanghai and Sharjah in the United Arab Emirates.

The small size of Webb Institute leads to a culture that is unique. Webb’s student body numbers fewer than 100 students, selected through a highly competitive admission process. Students come from across the United States, and the admission of a limited number of qualified students from abroad is contemplated in the near term. Webb has a student faculty ratio better than 9 to 1 – far better than any other American college.

Webb students are taught and graded exclusively by faculty members who are readily available to answer questions and meet with students individually. There are no teaching assistants, and undergraduate education is the principal professional endeavor of each member of the faculty.

All students at Webb Institute live and study together, providing a group-learning environment. Projects are set up not only to teach engineering skills, but also to develop teamwork. The Webb experience is intense, requiring hard work over long periods, and team efforts are vital to success in this environment, similar to the workplace. Tenacity and the ability to work hard and effectively are attributes that have distinguished Webb graduates for decades.

Student life is governed by an Honor Code developed and administered by the Student Organization. As a result, Webb students learn and practice a high degree of academic and personal integrity that carries over to the workplace after graduation.

While academic excellence is the principal focus of Webb, the experience is not all studies. Sixty five percent of Webb students regularly participate in extra-curricular athletic activities. Webb is a member of the Mid-Atlantic Intercollegiate Sailing Association, and the Sailing Team competes both at home and away. Basketball, soccer, volleyball, tennis and cross-country sports are other team activities. Webb also participates in the Hudson Valley Men’s Athletic Conference. Due to Webb’s small size, athletic teams are often co-ed. Individual student fitness is encouraged by free memberships in the excellent local YMCA located a few miles from the school.

Cultural extra-curricular activities include a choral society (the WOOFS) and the Webb Players. Students that play instruments may continue their musical development with the North Shore Symphony Orchestra. Course work includes field trips to museums, opera, theater and ballet in New York City, within an hour of Glen Cove.

Webb’s campus is located at the 26 acre former waterfront home of Herbert L. Pratt on the shores of Long Island Sound in Glen Cove, New York. Classrooms are located in the main building, Stevenson Taylor Hall. Most students also live in this building, which was the Pratt home. The Gymnasium, Labs, Workshops and Sailing Club are also located on campus. Webb has a Model Basin and model fabrication facility for direct hands-on measurement of ship and yacht resistance. This is one of the few such facilities dedicated to teaching and thesis research in the United States. A state-of-the-art engineering computer lab was established in 2008 through a grant from John Couch in honor of his father, Professor Richard Couch, a Webb alumnus and Dean of the University of Michigan’s School of Naval Architecture. The Livingston Library houses an excellent collection of books on naval architecture and marine engineering, humanities, a current model collection in the Rosenblatt Gallery, and historic artifacts and drawings from William Webb’s shipyard. Students have access to the Library around the clock.

Originally located in Fordham Heights in the Bronx, New York, William Webb built Webb’s Academy and Home for Shipbuilders in 1894. Mr. Webb was one of the foremost designers and builders of nineteenth century ships, delivering 169 vessels. His ships included the first steamship to enter the Golden Gate, renowned record-setting clipper ships and sailing packets, large and powerful warships, and opulent ferries operating on Long Island Sound. A strong advocate for good government, Mr. Webb served as chairman of several reform committees. Mr. Webb was encouraged to run for election as Mayor of New York City on three occasions. His diverse business interests also included the Third Avenue Railroad, design and construction of the Hotel Bristol, oil fields in Pennsylvania, insurance companies, and enterprises in the South Pacific and Australia. Mr. Webb was a noted philanthropist and a founding contributor to the Metropolitan Museum of Art, the Bronx Zoo and the American Society for the Prevention of Cruelty to Animals.

Webb Institute has continually evolved and improved. With the passing of the original shipbuilder “guests” the school took precedence and became Webb Institute of Naval Architecture. The State of New York granted Webb Institute the right to award Bachelors degrees in 1933. Webb continues to add new features, such as an exchange program with University of Southampton in England that allows students to take a semester abroad. Webb has also been generously supported by the American Bureau of Shipping (ABS) which last year made a $2 million pledge to establish an endowed academic chair. Further improvements to the Model Basin are also planned through a Federal grant. Webb’s participation in the Navy Engineering Education Consortium (NEEC) program sponsored by the US Navy is in the proposal stage and may provide funding for research activities for faculty and students.

The measure of Webb Institute is its graduates. Almost all Webb graduates take the Fundamentals of Engineering Exam for professional certification, and Webb boasts a 100-percent pass rate and high scores on this exam. Webb students and alumni also participate in large numbers in the marine industry’s professional organizations; including the Society of Naval Architects and Marine Engineers (SNAME). 

Webb has a long history of 100-percent placement of its graduates in jobs or in graduate school. In recent years approximately one-third of each graduating class has elected to go on to graduate school to continue their technical education or to broaden their skills through MBA or law degrees. Webb alumni are employed in a wide variety of commercial, recreational and naval projects, including:
• Tanker and containership design, construction and operations
• Design and operations in the tug and barge industry
• Research and development of offshore structures
• International yacht design
• Forensic engineering and marine accident investigation
• Engineering and building of US Navy submarines, surface combatants and supply ships.

Webb also produces business executives responsible for strategy and cost, schedule and quality performance of major maritime corporations in the USA and abroad.

The Webb experience binds alumni together in a remarkable way. The approximately 1,040 living alumni and the current students interact as an extended family to support school affairs and fundraising. Alumni giving during the most recent period (2008-2009) was 4.4 percent year-over-year, achieving an all time record, despite the economic downturn. Webb has a remarkably high participation level of 71 percent of living alumni, one of the highest in the nation. Moreover, the five most recent graduating classes achieved an impressive participation of more than 96 percent, setting a heartening example for their elders. Webb alumni also give generously of their time in corporate governance of the school and in direct support of students through lectures and professional networking.