Tom Butt is
September 21, 2006
Tom Butt is Anti-Port?
At the September 19 City Council meeting, Councilmember Viramontes quoted me, in my absence, saying “He said he is against the port, period.”
She went on to say “He has completely opposed Richmond having any port;” and, “He does not want to have a working part of Richmond.”
These are serious accusations, and they are completely without merit. What I will plead to is being apparently one of only a couple of Council members who ever question what is going on with the Port of Richmond. Most of my colleagues appear to routinely lap up whatever Port-related myths they are fed with excessive alacrity, no matter how inaccurate or imaginary they might be.
I fail to understand why the Port of Richmond so galvanizes certain City Council members into entrenched positions that have no basis in fact or reality. Perhaps they are dazed by the romance of ships and the sea. I just don’t know.
Let’s set the record straight.
Councilmember Viramontes not only misquoted me but also mischaracterized my history on Port of Richmond issues. If there is an ironclad position on the port complete with tunnel vision and blinders, it is hers.
Viramontes is an otherwise intelligent person who has actually demonstrated on occasion a flair for municipal finance but has inexplicably been blindly supportive of everything related to the Port of Richmond since she was elected to the City Council.
Perhaps it is time to dissect the Port of Richmond to find out the truth.
What is the Port of Richmond?
First of all, what is the Port of Richmond? Some visionaries consider the Port of Richmond to be the entire collection of maritime operations within the City, including such diverse locations as the Chevron Long Wharf and the “Sugar Dock” (see the diagram from the Port website, above, which even includes abandoned facilities such as Point Orient and Point Molate). But that is not what we are talking about.
The part of the Port of Richmond that the City of Richmond owns (or recently owned) consists of five separate waterfront locations, described below. You can see photos and detailed descriptions of these on the Port website and by clicking on the hyperlinks below.
The Port of Richmond is not, like the Port of Oakland, an independent “port authority.” It is simply a department of the City of Richmond. The port director reports to the city manager, and the City Council makes policy related to the Port. The finances of the Port are part of the City of Richmond finances, but they are tracked separately as an “enterprise fund,” which is an entity that is supposed to make money.
So, what the Port of Richmond, as a municipal department, actually consists of is only three waterfront locations totaling some 150 acres, all of which is currently leased out to contract operators.
What is the Profitability of the Port?
According to the 2006-2007 City of Richmond Budget, the Port of Richmond is projected to yield $12,318,234 in revenues with $11,901,446 of expenses, including $9,535,129 in debt service, some of which results from the purchase of container cranes for Terminal 3 in the 1970s when the Richmond City Council last dreamed of a container port. The operating loss is expected to be made up from one-time proceeds of sale of the former Terminal 1 property to Toll Brothers for a net $7 million, a prospect that is increasingly uncertain, at least in the near term.
The $7,000,000 is simply a pass through to the City of Richmond General Fund for the sale of Terminal 1, so the net profit from operations is $416,788.
The fact is that the Port of Richmond has been a loser for over a hundred years. A classic study by the League of Women Voters, with Lucretia Edwards as principal author, published Port of Richmond 1901-80 in 1980, detailing how one slick operator after another took the City fathers to the cleaners.
Point Potrero Terminal and its booming automobile import business is now the showcase of the Port of Richmond. According to the 2006-2007 Budget, the revenue is $3,532,273, ad the expenses are $1,956,775, resulting in a modest profit of $1,575,498.
Deferred Maintenance and Capital Reserves
What none of the Port budget figures include is an allowance for deferred maintenance and capital reserves. The Port’s flagship property, Point Potrero, was built during WW II and has had little maintenance in the last 60 years. You can’t keep milking an asset forever without renewing it, the cost of which would be in the tens of millions and would swamp any projected future profits. Yet the Port and the City Council continue to ignore this economic reality.
The costs of cleaning up Terminal 4 and maintaining Terminals 2 and 3 are also substantial but unaccounted for.
Councilmember Viramontes also trashed me for what apparently was insensitivity to the jobs created by port operations in Richmond. The truth is that the Port has almost no jobs. According to its 2006 business license, Auto Warehousing Company, which operates the flagship automobile importing business at Terminal 3 and Point Potrero, employees a grand total of 23 persons on 141 waterfront acres. That is a job density of 0.16 jobs per acre. In comparison, the 25 employees of my firm constitute a job density of 312 employees per acre. The assumption that Port operations are employment magnets is just plain wrong.
Why Should Richmond have a Port?
The three port properties currently operated by the Port of Richmond are in a Port Priority Area under the jurisdiction of BCDC and the Metropolitan Transportation Commission. Terminal 1 and 4 were removed from Port Priority designation because they are too small, remote or otherwise constrained to function as modern port facilities. The bottom line is that these three remaining Port Priority areas can, by law, only be used as a port. The City has no choice.
Contrary to the characterization of my Colleague, Ms. Viramontes, I have consistently recognized that the Port of Richmond is a fact of life whether we like it or not ,and that we should be in the business of making it as profitable as possible without causing any adverse impacts on proximate parts of the community. Given that constraint, I have to commend Port Director Jim Matzorkis for making the best of a losing hand. He has brought in good tenants and placed the Port in a marginally positive cash flow position for the first time in years. I also commend Auto Warehousing Company for running a clean operation and for participating with enthusiasm and generosity in the community.
What makes Port Economics so Difficult?
The market forces that have driven port demand in the past have been extremely volatile. In the past two decades, Richmond has made major investments in port infrastructure after the market has peaked and has been left with lousy leases, useless infrastructure and large debts. Typically, lessees strike a bargain with the Port to build expensive and often single-use infrastructure at City expense with the projection of paying it off with future profits. In the past, the City has been stuck with the debt service while the tenant is long gone. The current agreement with Auto Warehousing Company is similar. While we hope for the best, the worst could always come to pass. And any deficits would be borne by Richmond’s General Fund.
What About the Future?
The Port is stuck in an essentially break-even mode with its advocates speculating that automobile imports will continue to grow and Port profits will rise several years out after the loans have been paid off. This speculation may prove accurate, and I hope it does, but history has shown otherwise. What I consider to be my healthy skepticism is interpreted by others as being anti-port.
Port groupies on the City Council appear to have taken their infatuated obsession with the Port and the fact that it has now broken even and catapulted it a quantum leap into the speculation that a new container port in Wildcat Marsh will be the equivalent of winning the lottery, solving all of Richmond’s problems forever and ever, amen. While they may inhabit another plant and delight in exploring other worlds, I can’t help but find myself stuck right here in Richmond, California 94801, on September 21, 2006.
Similarly, Matzorkis and his staff, having leased out all the Port property, have essentially worked themselves out of a job. Since no one is doing any maintenance on Port facilities, there is nothing left to do but collect rent checks. A port director has to do something to justify his substantial paycheck, and Matzorkis is using his valuable time dreaming about how to expand the port. He has his eyes on the property at the southeast corner of Canal and Cutting, currently owned by BNSF railroad and used for automobile storage. Presumably, the City would buy the property, using condemnation if necessary, and somehow expand the current Port automobile import business into it and squeeze out a profit after debt service and operating expenses. Further off in the future, but clearly more titillating is the Wildcat Marsh container port.