"Port of Oakland in expansive mood"

Sunday, August 15, 2004

Port of Oakland in expansive mood 
New chief's ambitious agenda 
By David Armstrong
The San Francisco (CA) Chronicle


You can see jet aircraft gliding across the skies through the windows of
Jerry Bridges' office at Jack London Square, and spot enormous cranes
lifting cargo containers from the decks of oceangoing vessels at anchor.
Every once in a while, Bridges' conversation is punctuated by train
whistles, reminders of the big freight trains that rumble through the
neighborhood. 

Bridges oversees all this activity in more than the literal sense. On
July 1, he became the executive director of the Port of Oakland, a
quasi- autonomous city entity that is poised for a dramatic growth spurt
-- provided it can overcome manifold challenges and competition. 

Oakland's seaport, the nation's fourth-busiest handler of container
cargo, wants to increase its market share in competition with other West
Coast ports, but Bridges says the port needs to begin a major
bay-dredging operation to deepen shipping channels for huge new vessels
and dig up new funding to pay for post-Sept. 11 security measures. 

Oakland International Airport, the port's biggest revenue generator and
Northern California's second-largest airport, is enlarging one of its
passenger terminals and expanding customer parking, but it is still
hard- pressed to keep up with surging growth in passenger traffic. 

The port's commercial real estate division, which had been struggling
financially, has turned many operations over to commercial developers,
who plan to build housing, offices and retail space on port land. 

With the exception of the planned opening of a Wal-Mart store before
Christmas at the new Hegenberger Gateway project near the airport, most
of those plans are moving slowly through the regulatory process. 

It all sounds like a far-reaching agenda for a man who maintains that
the port's "basic foundation will be the same'' on his watch, while he
proceeds to implement "some nuanced changes.'' 

Bridges, 51, has worked in the transportation field, mainly in logistics
and operations, for more than 20 years, and served for three years as
the port's maritime director before moving into the corner office last
month. He succeeds Tay Yoshitani, who resigned as executive director
after three years, for family reasons. 

Befitting a newly installed executive, Bridges is upbeat about the
port's prospects, though he readily acknowledged the challenges ahead in
an interview last week. "We have opportunities in all three lines of
business,'' he said. "We are in a wonderful position.'' 

To capitalize on those opportunities, the port has had to run a tight
ship. Last year, it reduced its staff by more than 10 percent, offering
early retirement and laying off 70 employees. 

Bridges also said that the port has significant depreciation entries on
its books: $73 million for giant cranes, joint intermodal terminals,
container yards and other physical assets for the 2004-05 fiscal year. 

This large sum is a consequence of major maritime expansion in recent
years, port spokeswoman Marilyn Sandifur said, and is in line with the
port's ambitious rollout of new facilities. 

Operating on a $258.6 million budget for fiscal year 2004-05, Bridges
said the port "might make a slight profit,'' pegging the projected
windfall at $200,000. It expects to break even next year, he said. That
compares with a profit of $91.1 million for the much-larger Port of Long
Beach this year. 

Last week, the ports in Long Beach and Los Angeles announced plans to
hire 3,000 part-time workers to handle a flood of business, driven
chiefly by a torrent of imports from China. There has been no increase
in Bay Area waterfront hiring, according to the International Longshore
and Warehouse Union. 

China is important to business at the Port of Oakland, too, accounting
for 32 percent of its two-way trade by value, according to Bridges, who
said China trade helped raise the volume of cargo at the port by 12.6
percent from 2002 to 2003. 

However, Oakland is chiefly a port that exports goods, many of which go
to China and elsewhere in Asia. Agricultural goods, electronics gear and
machine ware leave Oakland to cross the Pacific. Apparel, shoes and toys
come in. Bridges said he would like to see more imports. "I think it's
good for the business, because it's a balanced business,'' he said. 

As things stand, some seaport analysts say, Oakland's operation produces
too little net income. Consultant Don Breazeale of Breazeale Associates
called Oakland's projected profit chump change. 

"Oakland is a very fine port,'' he said, "but it has had difficulty
keeping up'' with the extensive rail and road links in Southern
California, which provide rapid access to major markets in the Midwest
and the East Coast. 

However, George Finceo of Axiom Consulting pointed out that "profit is a
misnomer'' for semipublic ports like Oakland, which, as nonprofit
entities, pour any excess revenue back into operations, rather than rake
it off. 

The $200,000 figure, he said, is not out of line considering the size
and nature of Oakland's operation, especially on the maritime side. 

Money is necessarily an object in all aspects of the port's operations.
"We're fine at the airport,'' Bridges said of Oakland International,
which he said covers its costs and has landed federal grants to cover
some of the cost of additional passenger security since the Sept. 11
terrorist attacks. 

But security funds for the seaport have been much tougher to come by, he
said, even though members of Congress and security consultants have
worried aloud about vulnerabilities at the nation's 361 water ports,
where dirty bombs or other weapons could be hidden in sealed containers.


Oakland has applied for grants in the tens of millions and received
federal funds in the low millions or hundreds of thousands, which it has
used for perimeter fencing, video surveillance and screening of
personnel. 

The Coast Guard, the lead agency for seaport security, boards more
inbound ships than in the past to conduct searches and screens suspect
containers on land with truck-like, mobile gamma-ray machines. 

Additionally, U.S Customs inspectors receive cargo manifests from
shippers well in advance of a ship's arrival, and small teams of U.S.
Customs inspectors work in more than a dozen major seaports in Asia,
Europe and Canada. 

Inside the Port of Oakland, security is the responsibility of private
tenants such as Maersk Sealand, APL and Hanjin Shipping -- companies
that operate warehouses, operate ships and handle the loading and
unloading of ships, Bridges said. The port is a landlord, not an
operator, when it comes to ocean shipping. 

Oakland is very desirous of landing the $30 million to $40 million it
would take to give the port a backup power system that could prove
crucial in case of an emergency. Right now, the money isn't there, he
said. 

The port is also committed to deepening its two shipping channels from
42 feet to 46 feet by the end of this year and to 50 feet by the end of
2005, and it needs more funding to do that, too, Bridges said. 

The port needs deeper water to accommodate large ships capable of
handling up to 8,000 20-foot-equivalent unit containers. Bridges pegged
the sum for dredging at $250 million, and said the port may advance some
of its own money to get the project under way. 

More room is needed to handle ever-bigger ships, which can already find
snug harbors in the 100-foot-deep ports of Long Beach and Los Angeles
and the 60-foot-deep ports of Seattle and Tacoma, Wash., he said. 

Already, larger ships often make their first port calls at other, deeper
West Coast ports, unloading much of their cargo before they reach the
port of Oakland. "That's not good for us,'' he said. "We lose that
business.'' 

Having the capacity to handle larger ships, which allow economies of
scale for ocean shipping companies, "is very, very important to the
economy of the region, very important to the port. Fifty feet, that's
our mantra,'' Bridges said. 

Shipping consultant Jon Monroe of Sausalito said that Oakland's proposal
to dredge its shipping channels to 50 feet is reasonable, but added that
Oakland should not go after the very biggest ships, which may need even
deeper water and can take up to five days to unload. 

Swarms of megaships, combined with the surge in China business, have
created logistical logjams at Southern California ports, playing havoc
with many U.S. companies' just-in-time supply chains. The same thing
could happen here, Monroe warned. 

Oakland, he said, should concentrate on luring big, but not the biggest,
vessels and streamline its rail connections to enhance its
competitiveness. 

In contrast with the seaport, where the biggest question is how to
increase port business, is Oakland International Airport, where the
biggest question is how to keep up with growth that is already well
under way. 

"The airport,'' Bridges noted, "was built for 7.8 million passengers,
but we expect 14 million in a few years.'' The resulting delays and
congestion at what used to be a charmingly uncomplicated airport is
evident to any traveler who has been there recently. 

"We've been putting 10 pounds in a 5-pound bag,'' Bridges said. 

Oakland airport's growth has paced the takeoff of popular low-fare
carriers, especially Southwest Airlines, and more recently JetBlue
Airways. 

Together with expanded Hawaii service by Aloha Airlines and service to
various sun-and-fun destinations by charter airlines, Oakland moved up
from No. 3 to No. 2 among Bay Area airports, passing Mineta San Jose
International Airport and becoming the acknowledged area leader for
bargain airfares. 

Oakland is trying to handle the overflow by building additional parking
and adding five gates to its Terminal 2, as well as putting in an
upgraded food court and expanding its baggage-screening programs. The
renovation is budgeted at $110 million. 

Port authorities are also looking at new uses for the former United
Airlines maintenance center, which the bankrupt carrier closed last
year, relocating most of its maintenance workers to its big facility at
San Francisco International Airport. 

Speculation has centered on the former plant being converted to use as
Terminal 3, but Bridges said that isn't in the airport's plans, at least
not now. 

Port authorities, he said, plan to stay with what is working, chiefly
low- fare, domestic, Mexico and Caribbean service. 

There are no plans to challenge San Francisco International, the
region's international gateway and transpacific leader, for lucrative
international fliers, who stay longer and spend more in the airport once
they are on the ground. SFO handled 31.6 million fliers last year. 

"It's a little bit aggressive for us because the facilities do not allow
for it,'' Bridges said. "We need to get our ducks in a row before we
compete on that level.'' 

That said, Bridges pronounced himself pleased with the financial
situation at the airport, which more than covers its expenses and is the
port's biggest generator of revenue, ahead of the runner-up maritime
division and the commercial real estate unit, which trails by a wide
margin. 

But while real estate is a distant No. 3 in revenue, it's clear that
Bridges' new administration has big dreams for developing portions of
the port's 19 miles of shoreline, beginning with Jack London Square,
where the port has its headquarters. 

"We're going to transform Jack London Square,'' he declared. "It's going
to be a destination. It's going to be the pearl of the city when this
project is done.''


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