Port at a crossroads


BY LEE VAN DER VOO

Facing turmoil and transition, the Port of Portland struggles to position itself for the future.

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BY LEE VAN DER VOO
PHOTOS BY JASON KAPLAN

0414 port popoldgrainphoto 
 Photo from the Oregon Historical Society

The photo was taken in 1940. And while that grain hose looks like the corrugated arm of some retrograde, midcentury robot, it was an enormous technological revolution in its day. It’s called an airveyor — a marriage between a vacuum cleaner and a conveyor belt. It came after steel ships revolutionized the waterfront, but before the marine container shifted global trade forever.

The era of its conception is a lot like today: a time of change. Except today’s technological revolution looks less like robots and more like people. In fact, it is people. Fifteen million of them passed through the Portland International Airport in 2013. When you see people sloughing off their belts and shoes at the security gates, bleeping through the metal detectors, it’s hard to imagine them as anything other than fellow souls patiently trying to get where they’re going.

But as the United States awakens to the knowledge that 95% of the world’s customers live elsewhere, some of the best growth commodities this town, and much of the country, have to offer are ideas and talent. In other words: people.

As we enter an era where we are our own growth export, other factors are impacting the trade environment. The United States is on the cusp of an energy revolution. Dovetailing with rising wages overseas, manufacturing may move home. In the metro region, those global shifts converge at the Port of Portland.

Though change is a constant there, it is particularly obvious these days, evident in the outsourced management of marine containers, the sometimes frantic efforts to retain carriers, and disputes over land and labor.

From the outside, the Port of Portland seems to be losing a lot of battles and its foothold. Critics say it’s fallen out of step with a community that’s increasingly focused on livability. But you have to take a broad view to see what’s really happening: macroeconomic shifts that too much squinting obscures.

The world is changing, leaving the Port of Portland at a crossroads. As its executive director, Bill Wyatt, looks toward retirement, and the business community takes stock, the Port is reorganizing and retooling for a new era, asking how to become a port of the 21st century.

The Port of Portland was born in a similarly transitional time in 1890, when grain was king and moving things was the heart of the economy. This used to be a private industry. Wooden ships hitched up to private docks that cropped up on the Willamette River. Oregon City, Vancouver, Milwaukie — all wanted to have the best port on the river.

Portland won the race when wood became metal and the private docks briefly floundered, unable to service steel-hulled ships. The city and state paired to buy the stumbling docks, built better ones and stole the river’s trade show for good.

Thus became the Port of Portland. Today it’s still a gateway at the Willamette and Columbia rivers, acts as a vein gathering cargo from upstream and dominates maritime trade in the metro region. While little of what the Port now exports is built here, the economic footprint of its trade is still felt.

Yet while grain is still the Port’s largest export by volume, accounting for 35% of cargo exports, only about 26% of exports from the Pacific Northwest were actually grown here last year. Instead, semiconductors have the biggest economic ripple, accounting for $15.2 billion of the $27.6 billion in goods exported in 2012.

And as the export economy grows, 18.5% of the money flowing from regional exports came from exports that weren’t goods at all, instead stemming from sales of services overseas, digital content and intellectual property. That number underscores how some of the biggest companies in the region are shifting focus from making things to creating ideas.

“We almost have what I call an accidental economic development strategy … I don’t think it was anybody’s strategy to have sort of the Portlandia view of, ‘We’ll build a place that’s so cool that lots of smart people will want to come here,’” says principal economist Joe Cortright of Impresa, Inc., the Portland-based consulting firm.

But in effect, he says, that’s what we’ve got. So as the Port pursues its mission to serve as a gateway to the Pacific, it must do it in a community that is increasingly focused on moving people and ideas, and in a place that is shifting from being a port town to a city where this creative class ethos reigns.


That creative-class focus has left the Port without as much local support as it weathers global shifts and grapples with local challenges. Port officials recognize tough issues. For years Port leaders have worried about a lack of available land for existing business expansion and any growth — growth they still hope to lure. And 900 acres that could be used for industrial development are contaminated, tied up in brownfields or within the Superfund site on the Willamette River, which means they’re years away from shovel-ready.

There are new worries. Grain exports were down 18% last year, owing to bans on Oregon wheat by Japan and South Korea following the discovery of GMO wheat in a fallow field. Air cargo carrier Asiana Airlines stopped calling on Portland after consolidating its air freight services in Tacoma and cutting the Port’s nonstop cargo tie to Asia. Auto imports fell 17%. And carriers that barge goods up and down the Columbia River system have faltered in the tough economy.

Topping its troubles lately is that the Port is precariously positioned in the marine container trade. It is the smallest container mover on the West Coast, vulnerable as container vessels get bigger while the Columbia River is still 43 feet deep. The Port outsourced management of that terminal to a Philippines-based company, ICTSI, two years ago, hoping to push an enterprise characterized by Wyatt as “barely break even” into the black.

Labor issues followed, however, while ICTSI pushed for increased automation. Failed negotiations with the unions and subsequent work slowdowns allowed for Hanjin — which carries about 75% of the marine containers that leave the Port — room for a power play. Hanjin’s threats to leave Portland since, likely also spurred by the overcapitalized world that is container carriers, pushed the Port to offer it incentive pay. In March the South Korean shipping line announced it would continue calling on Portland; should the company change its mind, the impacts to smaller, more marginal businesses that can’t afford to ship goods to Tacoma or Seattle could be severe. 

Walt Evans, a former Port commissioner and a lawyer for clients engaged in international trade, says there is always that potential that the Port will lose its container business, especially in light of its upriver location. “They are working hard to make sure those conditions don’t present themselves, and that the carriers are treated well enough that they are not going to be lured away,” he says.

Though he recognizes these issues are unfolding against a backdrop of growing service exports, Evans doesn’t think baristas and filmmakers will ever overtake the regional economy. Indeed, data shows they’re nowhere close, only a growing force.

0414 port bd2f7596Voices tied to the community’s rising livability tide agree the Port will always be an important part of the community, but say it has entered an era where jobs numbers aren’t a trump card over other concerns.

Bob Sallinger, executive director of the Portland Audubon Society, has served on committees related to planning for Port futures and the Willamette River. Through the Audubon Society, he opposed Port development on West Hayden Island.

In part because of changing community dynamics, the port has entered an era where its political leadership must be less insular to succeed, Salinger says. Pointing to its rocky relationships with other ports, sectors and unions — and the recent failure to gain ground in West Hayden Island negotiations, even while the Port invested millions — Sallinger says it won’t be enough for the Port to offer guarantees of jobs and revenue.

Instead, Sallinger believes the Port will have to demonstrate real job creation, and address its impact on neighborhoods and the environment more directly. He believes the Port needs to step up to modern challenges — like a lack of land and the river system’s inability to accommodate ever-larger container vessels — through collaborative efforts with other ports. Otherwise, the Port risks losing focus on its long-term goals as a gateway and getting stuck in local bottlenecks instead. “Pretending it’s not happening is self-destructive in the long run,” he says.


There have been gains in the past year for port tenants and traditional industries. In 2013 a new 50-year lease with the Air National Guard secured 1,500 jobs and $44 million in salaries to guard members in Oregon and Washington. A new Daimler headquarters added 400 jobs. Ajinomoto relocated its consumer-foods division from Los Angeles to Portland, building a 9,000-square-foot addition and growing to 216 jobs. Kinder Morgan expanded its pot-ash facilities, reflecting small gains in bulk exports, and Columbia Grain plans new facilities to the tune of $40 million.

The Port has also diversified. New Port land investments have been completed or are thriving: Cascade Station for retail, the PDX Logistics Center for light industrial, the Troutdale Reynolds Industrial Park for large-lot industrial and the Gresham Vista Business Park. Together they’ve added an estimated 1,405 acres for industrial and business development, and while some critics disagree about whether the Port should be involved in economic development, its involvement is increasing the number of places industrial businesses can locate and is diversifying port revenue.

0414 port orbiz port 0036 
 Port of Portland executive director Bill Wyatt
//by Joseph Eastburn

Wyatt also counts new airline agreements and the ICTSI contract, a 25-year deal that eliminates port exposure to the increasingly volatile container market, as success stories. The lease with ICTSI sprang from Port layoffs in 2004, in which one third of the Port workforce was let go when the marine container trade lost two-thirds of its business over 45 days. “It’s not that the picture is entirely rosy,” he says. “We can always use more working capital and more capital to invest in the … equipment because the thing about the Port, whether it’s the airport or the seaport, everything we do is really expensive,” says Wyatt. “But we have eliminated a substantial part of the volatility, and that’s really important. Because if you go back to 2004 and think about the transportation industry, virtually all of it was incredibly volatile — airlines, trucking, railroads, shipping — and even today, it is still very volatile. We had direct exposure to all of that. We’ve been able to limit it.”

Four years ago, Wyatt also reorganized Port administration to put maritime business and the airport under one roof. The strategy readies the Port for 63-year-old Wyatt’s retirement in three to five years. He brought Curtis Robinhold, Governor Kitzhaber’s chief of staff, in as deputy to ease the transition. Robinhold is slated to take the Port’s reins next year. Meanwhile, the entire administration is expected to put heavy emphasis on air transit moving forward, a service that, since 9/11, has grown exponentially, in large part because of Port recruitment. 

In that arena, the Port has seized on the growing need to move people with success, expanding from only one international flight to Vancouver, B.C., daily in 2001 direct access to Tokyo, Amsterdam, Calgary and to dozens of destinations in the U.S. The changes underscore how, even in an economy in which the metro region is focused on idea export, the Port’s role will remain strong.

That’s important, because more than a fifth of the $34 billion in regional exports — $6.5 billion — came from the export of services in 2012, according to the Brookings Institute. Translation? It came from exporting people — to face-to-face meetings with overseas clients. To factories in Vietnam that build their ideas (think Nike). To job sites in Abu Dhabi, where architects design sustainable communities for people who don’t even live there yet (SERA Architects).

“When you look at growth of the middle class and emerging economies all around the world… businesses at a local level, at a metro level, city and local governments, and states have to fundamentally think about doing business internationally,” says Sean Robbins, CEO of Greater Portland, Inc., a regional economic development partnership. As they do, he says, the Port of Portland is also making the shift to exports that “don’t necessarily always come in the form of a container ship.” 

Economists have been saying something like this for years: that the cost of actually moving goods is so nominal, it’s no longer important where companies locate. They tend instead to collect around places where talented people want to live.

It’s within this framework that the Portlandia economy has begun to nip at the heels of the region’s traditional exports. And it’s an indicator of how much our world is changing.


Commodities exports at the Port remain strong but just aren’t as critical to the metro region as they once were. While the demand for grain is towering, with 3.1 million bushels exported during the 2012-13 harvest, efficiency in labor is tighter than ever. Gone are the days of the airveyor and the days when bulk cargo was carried, hand to hand, to the hulls of ships.

Now grain is stored in massive elevators whose advances have whittled its formerly immense workforce. It leaves the Port today in enormous volumes but leaves barely a dribble in the local economy.

Montana native Mike Wong is among those acquired when Japanese-owned Marubeni purchased Columbia Grain in 2007. The rise in the middle class is shifting tastes and boosting demand abroad, Wong says, boosting exports from Portland but without much impact locally. 

“Really, this is just a port. It isn’t where [grain] is produced; it isn’t where it’s consumed. It’s a transfer point.” In his office on the 29th floor of the Wells Fargo building in downtown Portland, a flat-screen TV is tuned to Bloomberg and a constant ticker of commodities numbers. “The Chinese are requiring more of it, so we are answering the demand.”

The Port of Portland is a bit boutique: ranking 13th in the nation and third in the West for export tonnage, but still key to enabling passage of bulk goods to Asia from areas served by either barges on the Columbia River, or the Port’s unique direct rail link to the Midwest, the only such link to a West Coast port.

As export demands from other countries grow, other Oregon industries are indeed looking toward exports for the first time. Jeff Stone, executive director of the Oregon Association of Nurseries, says exports to other countries may soon increase that trade’s sales, which hit $744 million in 2012. “With growth of a middle class, especially in those markets, they are going to have disposable income to be able to look at what they want. That includes the materials that we grow in horticultural trade,” he says.

Wineries, berry growers and other Oregon producers are already seizing on that growing demand, aided by something they all agree the Port does very well: serve its smaller clients with a personal touch they couldn’t get in a larger port, making it possible for niche producers to develop export opportunities abroad.

This, combined with the energy revolution of the U.S., is what has Wyatt, while acknowledging the rise in the service economy in the metro region, unsure that it will shift Port focus completely to the airport over time.

“One thing you don’t hear people talking about today is peak oil,” says Wyatt. “Five years ago, there was a conventional view that we were running out of oil, that we would essentially see it effectively depleted in our lifetimes, and that those elements of the transportation sector — airplanes for example — that could not convert to alternative fuels would become too expensive to be sustainable. Nobody is talking about that anymore.”


What do they talk about instead? Fracking. Shale oil. Tar sands. In terms of domestic abundance and low price. And while Wyatt says there’s a lot of grappling over what, exactly, that means, it could signal the return of basic manufacturing to America, particularly as wages rise overseas. “Is [the manufacturing revival] all going to come to Portland? I don’t know.”

But what it may mean for the Port is that the export economy may still grow, fueled either by local manufacturing or by exporters based in the Midwest, like car companies that will use the rail link to Portland to transport goods overseas.

Already, there’s evidence this trend will come to be. Sectors that moved offshore in the last 15 years are coming home: steel making, aluminum making, metal fabrication. And true to its gateway roots, the Port of Portland has relayed a steady stream of cars from Detroit to Asia in the last two years, exports that may be the first trickle of a stream of Asian-bound exports that have yet to arrive. Nine thousand Fords left the Port for South Korea and China last year. Next year, 40,000 China-bound exports are expected to roll through town. Auto Warehousing Company, which handles the flow, recently announced a $2.8 million expansion and another 50 jobs.

With those factors in mind, Wyatt says he isn’t ready to call all this movement of people a macroeconomic shift, though he notes air travel is a growing emphasis at the Port and for most business sectors. 

Poised to pursue all possibilities to grow jobs and stay relevant, the port’s posture echoes a unique moment for the Portland region — and for Oregon. It’s a time of change, as the region transitions from a place of exporting goods to a place conceived in its own image, one that many years from now may simply be home rather than a ring around the waterfront, or agriculture, or even Intel.

The future of the Port, and of Portland, depends on an array of complex and contradictory micro- and macroeconomic forces: the rise of China, onshoring, livability as an economic strategy and the dematerialization of goods into services. Figuring out how to navigate these murky waters — that is the Port’s challenge going forward.


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