The Port of Seattle has come to terms with Hanjin Shipping subsidiary Total Terminal Incorporated (TTI) to extend its lease at Terminal 46 through 2025 (with an option to 2035), laying to rest concerns that the port could lose one of its biggest tenants. Terminal 46 accounts for about 20 percent of the Port's container capacity, and TTI's existing operations currently generate about 3,200 direct, induced, and indirect jobs
The proposed deal should be a huge relief for the maritime unions and other Port stakeholders who had feared losing Hanjin to Tacoma or some other West Coast competitor, but it could come at a significant cost to the taxpayer funded Port. The proposed lease includes millions of dollars in concessions, plus an entirely new model for paying rent. And under the "most favored nation" clauses in its other leases, these concessions will be automatically extended to lessees of other terminals as well.
"This is gonna cost some money," Port Commissioner Rob Holland says of the change.
Under the terms of the agreement Terminal 46 will switch from a per acre rate to a per container rate that starts at $50 per container, but drops to $15 per container if a minimal annual threshold is met. Holland is hopeful that the Port will make up the difference in volume, but there are no guarantees. "That's the gamble," says Holland. "Nobody has a crystal ball, so nobody can say what the container business will really do."
But the concessions don't end there. The Port will sell to TTI the existing five giant cranes at Terminal 46 for a token one dollar each, plus commit itself, at TTI's option, to spending up to $25 million on two additional cranes. The Port will also make an upfront payment of $4 million to TTI for traffic mitigation, although there is no requirement that TTI spend this money on anything in particular.
So, is it worth it? In addition to the jobs, Holland says that Terminal 46 generates about $370 million a year in business revenue and $24 million in state and local taxes. "We've got a port 30 miles away from us that'll literally drop its pants to get this business," says Holland.
It is interesting to note that during all the deliberation over whether to approve a new NBA/NHL arena in Sodo, the most serious and credible opposition came from the Port of Seattle, where unions, business owners and other stakeholders feared that game day traffic and gentrification could pose a threat to cargo operations and the thousands of good jobs they support. Terminal 46, directly across from the stadiums, and with its lease about to expire, was the focus of these fears.
But despite the approval of a new arena, TTI appears willing to extend its lease for another 10 to 20 years. And the only concession related to traffic mitigation is one of the smallest parts of the deal. I don't expect Port stakeholders to give up their arena opposition, but a new Terminal 46 lease would certainly take away one of their best arguments.