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Plan calls for Oakland to ultimately take over management of the inland specialty port

SACRAMENTO - 03/16/07 - The long-term plan for the Port of Oakland to assume operational management of the Port of Sacramento is well into its first phase with Oakland working with the inland port to secure a terminal operator to provide a broad range of maritime services in Sacramento by the end of June.

Phase I of the plan - approved by the harbor commissions of both ports in December - also calls for Oakland and Sacramento to develop a strategic plan including marketing and operations and the creation of the appropriate legal entity to carry out the terms of the agreement.

Actual marketing of the Port of Sacramento to shippers and other strategic port customers is also currently underway, while compensation and reimbursement to Oakland "for services rendered" will be set-up and agreed to by both ports.

Located about 80 miles inland from San Francisco Bay on the Sacramento Ship Channel, the five-berth Port of Sacramento handles about 1.3 million tons of mainly bulk cargo such as rice, cement, grain, logs, fertilizer, lumber, newsprint, and project cargo annually.
 
The port - which is not currently accessible to large, ocean-going container ships - is served by more than 50 trucking companies and both the Union Pacific and Burlington Northern Santa Fe railroads.

The Port of Oakland handled 2.3 million TEUs (20-foot equivalent units) in 2005 - an 11% growth surge over the previous year - and is currently ranked as the 4th busiest container port in the US.

The Bay Area port is served by ten container terminals loads and discharges more than 99% of the containerized goods moving through Northern California, the nation's fourth largest metropolitan area.

The strategic alliance with the Port of Sacramento "is one of a number of opportunities and innovative ideas that we believe could support our efforts to handle our growing business," said Kenneth Katzoff, president of the Oakland port board, when the original Memorandum of Understanding (MOU) was signed.

"We are also taking an aggressive look at how to improve air quality and relieve congestion from trucks in and out of the Bay Area coming through the Port of Oakland," he said, adding that the alliance with Sacramento would offer Oakland "another way to assist those efforts through a barging operation between the two ports."

Many of the containers that are currently trucked out of Oakland go to distribution centers in California's Central Valley such as Tracy, Modesto, and Lathrop that move them locally or to other points in the state or the Western US.

In the past, distribution "hub" centers were located in the Bay Area in close proximity to Oakland's bustling container terminals, but over the years they have been displaced largely by a combination of escalating land values and a lack of "green space" for development in the Bay Area.

Under the Oakland-Sacramento plan, moving containers by barge between the two ports would more "efficiently and economically" utilize those centralized distribution centers.

At the same time, unused commercial space at the Port of Sacramento could be sold or leased to new distribution centers, bringing additional revenue to the port, according to the plan.

Phase II of the comprehensive agreement is slated for implementation from July 2006 to December 2007 and will entail the dredging of Sacramento's 43 miles of ship channels to 35 feet in order to handle deeper draft ships; the acquisition of increased funding; and completion of a plan for the port's internal infrastructure.
 
Both ports will jointly develop performance measures and report the performance results to the Oakland and Sacramento port commissioners prior to June 30, 2007.

At that point, either Oakland or Sacramento can terminate the contract as of December 30, 2007 upon six months advance notice.

During Phase III - which will run through December 2016 - Sacramento will grant Oakland an eight-year exclusive Terminal Operations Franchise (TOF) based on the terms agreed-to in Phase I.

At the same time, Oakland and Sacramento will jointly develop a methodology to assess performance and an annual performance assessment will be conducted and reported to their respective port commissions.

Both ports will also establish terms and conditions of early termination under the agreement; and the contract may be extended for an additional 10 years.

"There is untapped potential for ports to cooperate as well as compete. The strategic alliance makes good business sense for both ports," said interim Port of Sacramento CEO Andrew Belknap.

"This strategic partnership," he said, "could transform the Port of Sacramento into a bustling port creating hundreds of jobs in that region and creating greater economic stability for the area."

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