Citizen & Stakeholder Frequently Asked Questions 10/7/2014

Transcription

1 Ports of Seattle and Tacoma Interlocal Agreement Citizen & Stakeholder Frequently Asked Questions 10/7/2014 What s Included in the Seaport Alliance and Why: pages 1 3 Governance: pages 3 6 Leadership, Location and Personnel: pages 6 8 Tax Levy and Finances: pages 8 Rates, Leases and Facilities: 9 10 Next Steps: pages What s Included in the Seaport Alliance and Why Q: What port operations will the ILA cover? A: The Framework Interlocal Agreement will call for unified management of the ports integrated marine cargo terminal operations. Port of Seattle s Seattle Tacoma International Airport operations, cruise and fishing home porting operations and its Real Estate Division are outside the scope of the Seaport Alliance. Port of Tacoma industrial real estate properties are also beyond the scope of the Seaport Alliance. Q: Why are some port operations included and others aren t? A: The Seaport Alliance is designed to serve as a management organization for marine cargo facilities in Seattle and Tacoma. It will be an equitable investment of assets (50 50) between the two ports. Container and support facilities, breakbulk and other properties were included to maximize planning, investment and customer service under a coordinated regional strategy. They are the areas where opportunities exist for direct operational enhancements. Areas where overlap does not exist such as the airport were not included. Q: How will forming the Seaport Alliance help address challenges and create opportunity for the region? A: The Seaport Alliance will allow us to promote economic development of marine cargo terminal operations in Seattle and Tacoma with unified business retention and recruitment, coordinated marine terminal planning and operations, and the general promotion of integrated marine cargo activity. The Seaport Alliance will provide the ability for coordinated capital investments, improvement in aligning customer needs with terminal capabilities, improved pricing models, improved utilization of terminal capabilities and the opportunity to reduce operating costs. 1

2 Q: What are the factors that led the two ports to take this step? Why now? A: The ports of Seattle and Tacoma face fierce competition from ports throughout North America at the same time that the maritime industry is undergoing tremendous change. Shipping lines are forming alliances, sharing space on ever larger vessels and calling at consolidated terminals at fewer ports. Working together, we can better focus on financially sustainable business models that support customer success and ensure our ability to reinvest in terminal assets and infrastructure. The primary driver for the formation of the Seaport Alliance is the shared business interest the ports of Tacoma and Seattle have in the container business. Together, both ports comprise the North America s third largest container gateway and are responsible for jobs that are critically important to our state s economy. An estimated 40 percent of the jobs in Washington are related to trade, with a large share through maritime activities. Collectively, we have invested billions of dollars in infrastructure to meet market demands. We must continue to adapt to the changing business climate. The Seaport Alliance is our approach to addressing the next generation of global trade. Q: Will the new entity affect the environmental programs of the two ports? A: No. The two ports have long recognized that environmental concerns don t recognize jurisdictional boundaries. We have worked together for many years on environmental programs, including the groundbreaking Northwest Ports Clean Air Strategy. We will continue to coordinate our efforts for the benefit of the entire region. Q: Will port community agreements remain in force with the formation of the new entity? A: Yes. The ports will continue to honor commitments to our respective communities, including such examples as the Northwest Ports Clean Air Strategy, regional transportation investments and local community agreements. Q: Will the Port of Seattle continue to make the viaduct payment to the Washington State Department of Transportation? A: Yes. The Port of Seattle s participation in a partnership with the Washington State Department of Transportation, the City of Seattle and King County is an ongoing commitment and is outside the purview of the Seaport Alliance. 2

3 Q: What is the Port of Seattle s commitment to maintaining maritime/industrial uses on the waterfront? A: We are deeply committed to keeping and growing valuable maritime jobs in our region. The Seaport Alliance will remain focused on keeping these essential maritimerelated jobs on the waterfront in both Tacoma and Seattle. Q: Has anything like this ever been done before? A: We are aware that other international ports have gone through organizational restructurings, such as the Port Metro Vancouver amalgamation and a merged Copenhagen Malmö Port. We believe the scope and equitable investment of assets (50 50) and the role of the publicly elected port commissioners is groundbreaking in the port industry. Our ports have previously collaborated and will continue to do so on important regional issues. Governance Q: How is this different than a merger? A: You can think of the Seaport Alliance as an organization hired by both ports to manage their marine cargo facilities and operations. Each port retains ownership of its property and facilities, and each commission retains its responsibility to the citizens of King and Pierce counties. The two commissions will act jointly as the policy makers for the Seaport Alliance, and they will also continue to meet separately to set policy for their individual ports. Q: Why didn t the ports just merge all of their operations? A: We are forming a joint operating enterprise for business needs. A merger would require complex statutory and legislative changes around policy, districts, taxing authority, bonding capacity and other issues. By forming the Seaport Alliance, both ports can take timely action to meet the rapidly changing business climate. Q: Will this eventually lead to a full merger between the two ports? A: Commissioners have consistently said merging is not an option. We recognize and value the responsibility the commissions have to serve the citizens of Pierce and King Counties through robust port activities that support thousands of state wide jobs and generate significant tax revenues to local and state governments. The Seaport Alliance offers the smartest, most thoughtful and timely way to make sure we cooperatively address the changing competitive marine cargo business landscape to serve our customers and grow jobs and cargo volumes. 3

4 Q: How will decisions be made? A: The Seaport Alliance will have a CEO, selected by the two five member commissions, to manage the integrated commercial and marine cargo terminal operations. The two port commissions will work together in a policy making oversight role, but will continue to take action as individual commissions. The Seaport Alliance CEO will report in a singular manner to both port commissions and be accountable for the regional strategies and objectives set by the two five member commissions. Q: What if the two port commissions disagree on something? A: The process to handle disagreements or to act will remain unchanged. Each commission will independently vote on issues, and it will still require at least a majority of a quorum of commissioners from each port to act on a Seaport Alliance matter. The final agreement will further stipulate how the elected commissions will both work together in a policy making oversight role for the Seaport Alliance and continue to function independently for those operations that remain within their individual ports. Given how the two commissions have worked through the discussions to get us to this point, we are confident they will continue to work cooperatively to find common ground. Q: What legal authority do the two ports have to do this? A: The formation of the Seaport Alliance through an Interlocal Agreement is allowed under state law by the Washington State Interlocal Cooperation Act, RCW ch , and the Port Joint Powers authority, RCW , as well as under the authority and subject to the approval of the Federal Maritime Commission in accordance with the provisions of the Federal Shipping Act of Under federal law (46 USC Title 46), Congress has granted authority for ports and marine terminal operators in certain circumstances and if approved by the Federal Maritime Commission, to discuss, fix or regulate rate or other conditions of service; or engage in exclusive, preferential or cooperative working arrangements, to the extent that such agreements involve ocean transportation in the foreign commerce of the United States. [46 USC (b) (1 2)] Q: What has the process looked like since the initial January announcement of the ports discussions? A: The ports sought approval by the FMC to enter into discussions about ways to leverage the strengths of each port to address industry pressures. Discussion Agreement was filed in January 2014 and was approved by the FMC in March. The FMC approved Discussion Agreement provides confidential authorities and legal oversight that enabled the ports to meet, gather/share information and identify options regarding the competitive business climate. Commissioners from both ports have met nine times since March to learn more about the operations and finances of each port, better understand 4

5 the current and future business challenges and consider different business models. The idea of the Seaport Alliance took shape during those discussions and the FMC was regularly updated through this period. Q: Will the new Seaport Alliance still be a public entity? A: Yes. The Seaport Alliance will be governed jointly by the commissions of both ports. They will hold regular public meetings to set policy, approve budgets and investments, in accordance with state law. Q: How do the two commissions, as the board of the new entity, make decisions? A: The Port of Tacoma and Port of Seattle commissions will act jointly as two boards of five commissioners each when dealing with Seaport Alliance business. Seaport Alliance action shall require a majority vote of a quorum of each commission. Certain matters, due to state law, require the majority vote of each independent port commission, rather than the two commissions sitting jointly as two five member boards. The Framework ILA designates that even when the commissions are taking independent actions, regional goals should drive outcomes. Q: How are the activities, votes and business of the Seaport Alliance transparent to the public and stakeholders? Does it fall under the state Open Public Meetings Act? A: Meetings would be publicly noticed as special Port of Tacoma and Port of Seattle meetings of the Seaport Alliance. The two commissions may take joint action in their role as the joint governing boards or as individual commissions, as indicated on the public agenda. Public comment on action items will be welcome, just as they are today at individual port commission meetings. Two types of non public sessions are anticipated: Federal Maritime Commission confidentiality protections, for example, may apply where terminal operating rates and other competitive issues are discussed. The exemptions within the state s Open Public Meetings Act (RCW ) will continue to apply when the criteria of those exemptions are met. Q: Does this require legislative approval or a statutory change? A: The Seaport Alliance does not require any statutory changes or legislative approval, as a merger would. 5

6 Q: How will public review and comment be undertaken by the ports? A: Meetings would be publicly noticed as special Port of Tacoma and Port of Seattle meetings of the Seaport Alliance. The two commissions may take joint action in their role as the joint governing boards or as individual commissions, as indicated on the public agenda. Public comment on action items will be welcome, just as they are today at individual port commission meetings. Q: Will this disadvantage other Washington ports? A: We believe that by maintaining robust port activities that support thousands of statewide jobs, other Washington ports will also benefit. The Pacific Northwest will remain a vibrant cargo gateway that will continue to attract public and private road, rail and facility investments to support it. Q: Could other ports join if they want? A: The Seaport Alliance represents an equal partnership of the two largest ports in Washington state with a shared focus on growing the container volume flow through the Puget Sound gateway. The Seaport Alliance will be created with equity contributions in initial and ongoing operating capital. The Seaport Alliance is being developed as a two port agreement, given the primary container business focus, the financial investment levels and geographic proximity. Q: Is this a permanent change? Could it be undone? A: The commissioners intend that the Seaport Alliance will be a durable, long term commitment by the ports, with a minimum term and provision for extensions. The term and extensions have not been determined yet. Bond covenants and institutional prudence dictate the need for procedures to end the Seaport Alliance, but this provision will require a substantial notice period for termination, and both ports will remain responsible for any obligations made during the period of the Seaport Alliance. Leadership, Location and Personnel Q: Who will lead the new organization? A: Upon FMC approval of the Seaport Alliance Agreement (Amendment #2) in 2015, the two commissions are expected to hire John Wolfe, current CEO of the Port of Tacoma, as the Seaport Alliance CEO, based on his deep industry expertise and collaborative leadership style. That action will require a formal public vote by the two commissions. 6

7 We are fortunate to have strong executives and staff at both ports and there will be staff representation from each port within the Seaport Alliance. During the due diligence period of the Framework ILA, John Wolfe, Port of Tacoma CEO, and Kurt Beckett, Port of Seattle Deputy CEO, will co lead the planning work and coordinate with both port commissions throughout this period. Q: Where will the headquarters be located? A: There are no current plans to establish a new Seaport Alliance headquarters. Once a final Seaport Alliance Agreement is reached and subject to approval by the Federal Maritime Commission, some employees will work immediately on behalf of the Seaport Alliance, while others will work for one port or the other while allocating time to the Seaport Alliance. There will always be port employees and port related marine cargo jobs in both Tacoma and Seattle that support our mission, customers and citizens. Q: Do the ports expect to save money by consolidating functions and reducing duplication? A: Over time, the Seaport Alliance has the opportunity to make operations more cost effective and efficient. The ports are confident of savings related to coordinating capital investments. It will take time to experience efficiencies through shared processes and systems. There are no plans at this time to lay off employees at either port related to the formation of the Seaport Alliance. The intention of the Seaport Alliance is to make our organizations stronger and more sustainable. We commit to providing updates as planning work unfolds. Q: Will my port contact person change? A: Not immediately. Once a final Seaport Alliance Agreement is reached, you might work over time with different people at each port and within the Seaport Alliance. We pledge to make communication at the forefront of our work with you to make sure the Puget Sound remains an easy place to do business. Q: How will this affect the structure of current and future labor negotiations? Does this mean future port labor contracts will be negotiated with the new entity? A: Formation of the Seaport Alliance will have no impact on current labor contracts. The initial phase of the Seaport Alliance will bring together employees who have direct customer and community stakeholder engagement. The employees in these areas are non represented. There are no plans at this time to include represented employees as Seaport Alliance staff. We recognize that significant discussions with represented 7

8 employees and union officials would accompany consideration of any proposal to change current contracts. Tax Levy and Finances Q: Will this impact the tax rate for residents of King and Pierce counties? A: The formation of the Seaport Alliance will not change the current tax rates in either county. Any decisions to change the tax levy rates would continue to be handled independently by each port commission. Q: I pay taxes to support the port in my county. Will my tax dollars be used to support the new entity? A: It is expected that each entity will continue to use tax levy proceeds as they have in the past. In Tacoma, the tax levy helps support costs associated with financing of Government Obligation (GO) bonds, transportation infrastructure and environmental cleanups. In Seattle, the tax levy supports financing of GO bonds, transportation infrastructure, environmental cleanups and workforce development. By leveraging assets between the two ports, tax dollars will indirectly support the shared terminal investments. Q: Does this mean decisions by elected officials in another county will affect marine cargo operations in my county? A: Yes with a positive impact for our region and your community. Decisions by port commissions in either county arguably already affect marine cargo operations in both counties, sometimes to the detriment of one port s business or the other. Q: How does each port district benefit financially from the Seaport Alliance? What improvements should taxpayers expect to see? A: The impetus to form the Seaport Alliance is to grow cargo volumes and protect market share through coordinated investment strategies. Success in achieving these objectives will bring increased revenues that will be divided and returned back to the two port authorities. These revenues will in turn fund future terminal upgrades at both ports to handle larger ships. Q: Will the debts of the two organizations be absorbed by the new entity? A: No. The marine cargo facilities will be managed together and reinvestments will be coordinated, but outstanding bonds will remain the responsibilities of the individual ports. 8

9 Rates, Leases and Facilities Q: Will my rates go up or down? A: We know importers and exporters have choices about where to send their cargo, and cost is a major factor. Our whole reason for forming the Seaport Alliance is to increase cargo volumes through Puget Sound, North America s third largest container gateway. We intend to do that by leveraging our strengths, improving our terminal infrastructure and supporting customer success, not by making the gateway less competitive by making it more expensive to do business here. Q: If I lease maritime property, will my lease continue with the individual port, or will my lease be held by the new entity? A: The lease would be held by the individual port that owns the asset, but the Seaport Alliance would have responsibility for management and future renegotiations. The Seaport Alliance staff also will provide joint management and customer service during the term of the lease. Q: Will my lease at one port be renegotiated to match lower rates or better terms that might be in effect at the other port? A: Many factors influence lease rates. It is expected that leases will continue to reflect the individual harbor pricing factors, such as terminal location, rail service, terminal capabilities and changes in the market that impact lease rates at each port. Q: Will my lease for a port property require approval from both commissions? A: Yes, if the property is related to a marine terminal assigned to and managed by the Seaport Alliance. Otherwise, the lease approval process for properties outside the Seaport Alliance would remain unchanged. Q: Who will set rates for maritime property? A: The Seaport Alliance staff would negotiate the lease rates for properties within the Seaport Alliance, then bring them forward for approval by both port commissions acting jointly. Many factors influence lease rates. It is expected that leases will continue to reflect the individual harbor pricing factors, such as terminal location, rail service, terminal capabilities, and changes in the market that impact lease rates at each port. 9

10 Q: Will this mean a consolidation of port maritime infrastructure? Will existing marine facilities be repurposed? A: We are committed to keeping and growing valuable maritime jobs in our region. The Seaport Alliance will prioritize reinvestment in current facilities. Any potential repurposing of terminals will be for maritime oriented uses with a focus on working waterfront jobs in both Tacoma and Seattle. Next Steps Q: Who needs to approve this? A: The Framework Interlocal Agreement is subject to approval by the Federal Maritime Commission, which is the same agency that approved the Discussion Agreement that brought us to this step. Discussion Agreement was filed in January 2014 and approved in March The Discussion Agreement provided the ports the authority and legal framework to meet, gather and share information and to identify options regarding the competitive business climate. Per directives from the FMC, it did not include subsequent steps, presupposed outcomes or the authority to reach agreement. We are now seeking the FMC s approval to outline the Seaport Alliance. Given the complexity of forming the alliance, we expect to submit a more detailed agreement by a target date of March 31, 2015, for the FMC s approval. Q: When do you expect the formation of the Seaport Alliance to be complete? A: Given the complexity, we expect the formation of the Seaport Alliance to require at least two steps. This first step is seeking approval from the FMC for this first amendment to the Discussion Agreement. This first amendment will be in the form of a Framework Interlocal Agreement between the two ports. The second step would be a more detailed second amendment to be submitted by a target date of March 31, The final agreement will: Identify how the Seaport Alliance will manage the commercial and marine cargo terminal operations, related functions and investments under a CEO and unified management in order to optimize the value of marine terminal assets, increase market share for the region, manage overall terminal capacity and improve overall financial returns. Specify method of sharing profits, losses and returns of the Seaport Alliance, as well as annual accounting and operating standards, borrowing capacity and valuation of assets. 10

11 Stipulate how the elected commissions of the ports of Tacoma and Seattle will continue to function independently and work together in a policy making oversight role for the alliance. Define the steps and timeframe related to a transition period for the formation of the unified management structure. Q: What are the impediments to approval? A: We are taking a measured approach to help reduce any concerns the FMC might have about adverse impacts on private sector competition. Q: This is a major decision for the region. How will the residents of Pierce and King Counties, and other stakeholders, have an opportunity to provide their input? A: Both port commissions will continue to hold their public meetings, where public comment is welcome and encouraged. We will also reach out to community members and stakeholders to continue talking about the competitive challenges facing the ports and updates on the Seaport Alliance as it moves through the process. Information about public meetings, how to submit written comments and other related news will be regularly updated on the Port of Seattle and Port of Tacoma s websites. 11