Ports throughout the Americas are employing an entrepreneurial mindset to develop revenue opportunities outside of cargo
By Tom Gresham
(Originally published in the Q4 2019 issue of AAPA Seaports Magazine; article provided compliments of AAPA)
Cargo may be the work most associated with ports, but ports across the Western Hemisphere are enhancing their other existing sources of revenue and identifying new ones to bolster their bottom lines and better serve their regions. In the process, ports are pursuing creative commercial opportunities that naturally align with their assets and resources, while adding diversity to their portfolio in the event of cargo market slowdowns.
Mike Schiller, director of business development for the Port of Vancouver USA, said industrial and commercial revenue outside of cargo was a crucial component of his port’s budget and an essential part of the port’s role in the local economy.
“As we look to build out commercial and industrial activity, we really are focused on how that impacts our community,” Schiller said. “We see ourselves as a key economic development engine within our community, helping to grow the job base, and that is important to the decisions we make. We look to work with partners who can bring jobs to our community.”
At the Port of San Diego, cargo is far from the only line of work generating revenue to support the port’s operations. In fact, of the $193 million in operating revenue in the 2019-20 fiscal year budget, approximately $116 million derives from non-cargo sources, said Shaun Sumner, vice president of real estate, engineering and facilities for the port. Sumner said pursuing revenue opportunities outside of cargo helps the port serve its broader mission.
“We have a significant amount of infrastructure and management responsibilities around San Diego Bay, so it’s important for us to have a steady flow of revenue in order to cover those,” Sumner said. “And over the last several years, the port has become more entrepreneurial, focused on making some forward investments in planning and infrastructure, as well as in some businesses.”
Ports are considering a variety of paths to new revenue sources that would not have been considered viable not long ago. For instance, a March article in Politico detailed the host of East Coast ports working with governmental partners to explore developing new infrastructure to support the manufacture, assembly and staging of wind turbines for offshore wind farms. The Port of New Bedford in Massachusetts has already constructed a new terminal for the purpose, and several others, including the Port of New York and New Jersey, have demonstrated initial interest in similar efforts.
Emerging sophisticated technology is opening up new horizons for ports’ business interests. Sumner said the Port of San Diego is teaming with academic institutions, other public agencies and tech entrepreneurs “to start building out our blue economy. For us, that’s all of the water-dependent science and technology initiatives in and around our region.” In particular, the port is playing a role in a Blue Economy Initiative that is identifying and assisting the development of businesses around San Diego Bay.
“That’s a way that we as an agency have become more directly invested in the types of technologies that are transforming the Bay,” Sumner said. “Ultimately, some of those may lead to new revenue streams for the port down the road.”
Infrastructure investments and private-public partnerships often are integral to developing new revenue sources. For instance, the Port of Everett in Everett, Washington, is partnering on a 65-acre, $85-million redevelopment project that will create a commercial, recreational and residential community on the waterfront. The 142-room Hotel Indigo opened in September as part of the project. Also that month, the port and its private partners announced the start of construction on a two-building apartment project tied to the redevelopment effort that will bring housing to the Everett waterfront for the first time.
Terrie Battuello, the Port of Everett’s chief of business development, said the port was following a strategy of “investing in more stable real estate for less vulnerability to the cycles of trade.” Battuello said the waterfront project comes with major upfront costs and a significant level of risk.
“In this particular project, mixed use, the physical project has a lot of built-in conflicts to resolve,” Battuello said. “Garbage and parking management and change management are the top problems that keep our team up at night.”
“Many of the early adopters of the new market require greater incentives to make a riskier investment,” Battuello said. “Keeping the project moving in the right direction is a marathon and not a sprint, and takes a lot of project stamina and a strong administration and brave legislative body to take the tough votes in the periods where the likelihood of success is not immediately apparent.”
“Agencies need to be able to provide efficient, predicable and feasible opportunities so that the private market will invest,” Battuello said. “In Everett, a second-tier city, we are in a period of renaissance and growth. Largely this is a result of economic forces outside of our control of which we are benefactors, i.e. the Seattle market is soaring. That being said, keeping the project moving in the right direction is a marathon and not a sprint, and takes a lot of project stamina and a strong administration and brave legislative body to take the tough votes in the periods where the likelihood of success is not immediately apparent.”
“Similarly, the Port of Vancouver USA is embarking on a major new project that marks an unprecedented step for the port into the commercial development realm,” Schiller said. Terminal 1 is a mixed-use development planned for a 10-acre property along the Columbia River. The development will feature office, residential and ground-floor retail facilities. It also will include a hotel, public spaces, overwater, moorage and dock space, and a visitors’ center.
Schiller said, “Terminal 1 represents an ambitious broadening of its revenue sources, giving the port an entry into commercial revenue sources that it had not previously established.”
“We’re excited about Terminal 1 and what it means for us and for the region,” Schiller said. “It represents a really important step into a commercial line of business for our port. We’ve been an industrial port for the most part, but this commercial development gives us a whole different market to be involved in.”
Schiller said, “the port’s entry into a new field has brought some frustrations and met unanticipated obstacles – part of the growing pains of expanding its scope – but he said port officials and the local community are excited about the development’s potential.” He added, “Terminal 1’s prominent location near the Interstate-5 Bridge that connects Portland, Ore., and Vancouver, Wash., will make it a ‘front porch’ for the state, providing a key visual cue for both our community and the entire state.”
“Commercial development is not for the faint of heart, but our commission has guided us in their vision and we’ve been working to execute that vision for five years,” Schiller said. “We think Terminal 1 will be a signature development in Southwest Washington and the Greater Portland Area – and that’s not just me saying that, that’s what we’re hearing in the community, too.”
The Port of San Diego has partnered with developers and municipalities on redevelopment projects around the San Diego Bay. One especially ambitious effort in the works is the Chula Vista Bayfront project, a 535-acre public-private partnership at a previously underutilized industrial area that will feature parks, a shoreline promenade, walking trails, RV camping, shopping, dining and hotels, among other highlights.
Sumner said that strong public-private partnerships are a key element to the Port of San Diego’s commercial development endeavors.
“When we pair our property with some of the best expertise and experience in the private sector, we get really world-class projects,” Sumner said. “We also improve public access and add new recreational opportunities.”
Sumner said that involving the community in the port’s plans has been essential to developing the types of projects it has chosen to pursue. The port is updating its master plan and is seeking extensive community feedback. “Part of developing these plans is we get community buy-in early. That means that when we’re ready to go to market with these projects they’re more likely to be successful.”
“It’s really an important part of the process of getting to a common vision with the community and the public,” Sumner said. “Part of developing these plans is we get community buy-in early. That means that when we’re ready to go to market with these projects they’re more likely to be successful.”
Sumner also noted that the involvement of the local community in the planning process ties to the importance of ports keeping perspective in any business endeavors, understanding how non-cargo interests fit alongside the port’s maritime and environmental responsibilities.
“Our purpose is to make sure we always strike that balance,” he said.
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