The resolutions are in, and it's shaping up as a lean, mean new year for the Port of Oakland, which also operates Oakland International Airport.
Despite layoffs and other cost-cutting measures this year, the port's number crunchers say the predicted gross revenues of $298.7 million this fiscal year will fall $12.1 million short unless steps are taken to reduce costs or increase operating revenues before then.
Given the global economy, the dire state of the airline industry, and the declining number of shipments coming in and going out of the port's marine terminals, the former seems a more likely solution, said Marilyn Sandifur, the port's public information officer.
"The global economic crisis has redefined what we are able to do," Sandifur said. "The port's situation is very different today than it was a year ago or even three months ago."
To close the gap, on Dec. 18 the Board of Port Commissioners voted to temporarily lay off nonessential staff for 13 days this fiscal year, matching steps taken by the city of Oakland to reduce its own $42 million budget deficit. The port layoffs affect 54 percent of its workforce for a total estimated savings of $1.3 million, or $100,000 a day, Sandifur said.
The board also approved an action plan with a series of short- and long-term measures to address the port's finances, some of which include:
The cost-saving steps highlight a change in philosophy for the Port of Oakland, by inviting more public-private partnerships to manage and upgrade port facilities rather than doing it alone.
For example, in the past, as landlord, the port would take the risk, do the design and build whatever needed to be built, usually to its customers' specifications. Now it is looking for companies willing to invest the time and money to upgrade, modernize and manage facilities in exchange for long-term contracts.
The port recently put out a request for proposals to find a concessionaire to modernize and manage the Outer Harbor Terminal, which involves berths 20 through 24, for a term of 50 years.
The port also is planning to issue a request next year for qualifications to find a "master lessee" for its 168-acre portion of the former Oakland Army Base land, where the Port once had planned to relocate its intermodal rail yard before market forces and competition put that plan on the back burner.
The lessee would assume ownership of the port's existing leases at the base and define potential development options for the land, whether it be rail, warehousing, distribution facilities or parking to support maritime activities and serve the port and the region.
"We are facing economic challenges during a very difficult period, without precedence for our port," said Victor Uno, president of the Board of Port Commissioners. "During this year, there has been a decline in passenger traffic at our airport, as a number of airlines have closed or reduced service at Oakland International, and our maritime operations are also affected by the worldwide economic contractions affecting goods movement."
About $11 million of the shortfall is attributed to the decline in the port's aviation sector, compared with $1 million in the maritime division.
Inbound container movement continues to decline. Year-to-date figures from January through November reflect a 7.8 percent drop compared with the same time period a year ago, Sandifur said.
Container exports had been up more than 4 percent earlier this year, as the weak dollar made U.S. consumer goods, agricultural products and raw materials more affordable. Exports still are up 1.8 percent, compared with last year, but the number of container exports are likely to fall lower as the dollar gains strength again, Sandifur said.
The new measures follow corrective steps the port took last fiscal year when the economy sputtered and the airlines started running into trouble.
The port restructured its debt, reducing interest costs by $18 million. It also eliminated, modified and delayed planned capital improvement projects for a savings of $400 million.
For example, the port wanted to add another airline passenger terminal at the airport when passenger activity was booming not all that long ago. But that project won't be considered until business picks up again, Sandifur said.
The port ordered a hiring freeze last fiscal year. Further cuts were made this fiscal year by first eliminating vacant positions that weren't related to safety and security services, followed by reductions of about 40 employees in late August and early September, mostly in areas that had worked on capital projects, Sandifur said. Overall, 100 positions were eliminated, leaving a staff of 575.
Uno said the port would continue to tighten its belt.
"Earlier this year we adopted a budget that called for austerity and reorganization," Uno said. "Since that (time) we have been closely monitoring our financial health. We are working hard to address the port's overarching financial concerns, and 2009 will be a very challenging year."