Port of Oakland, Calif. commissioners approved a litigation settlement agreement Thursday to extend lease agreements on cargo terminals that were nearing expiration.
“We think the settlement helps the port achieve greater stability,” said Sara Lee, its chief financial officer. “All of those leases were expiring in 2016-2017.”
The settlement involves short-term revenue loss in exchange for longer term revenue growth and stability, the port said.
As a result of the agreement, SSA Terminals signed leases that will expire in 2022 on the two terminals it ran, and will also take on the responsibility for operating a third terminal.
Port of Oakland officials oversee the Oakland seaport, the fifth busiest container port in the U.S., and Oakland International Airport, a regional airport.
The litigation involving SSA came about because the company contended a lease agreement with Ports of America, another terminal operator, created a non-competitive environment. The port entered into a 50-year lease agreement with Ports of America in 2009, said Robert Bernardo, a port spokesman.
Under the new agreement, SSA agreed to pay 10% more per acre than what Ports of America is paying, but the shorter lease term means SSA can renegotiate terms again in 2022 when its lease agreements expire. Ports of America also agreed to make capital improvements to its terminal in exchange for lesser lease rates, Bernardo said.
SSA’s lease agreement extends the lease at the rates the terminal operator is currently paying, Lee said.
The agreement comes at a time of change in leadership for the port.
Chris Lytle, who had served as executive director of the Port of Long Beach since November 2011 and was named the Oakland port’s new executive director in June, begins work this week, taking over from Deborah Ale Flint, acting director since October.
The board of commissioners selected Flint while it conducted a search to replace Omar Benjamin who retired abruptly after it was discovered that he and other port officials ran up a tab at a strip club that was expensed as port business.
“The Port Commission set a high standard for its next leader and has successfully achieved this goal with the selection of Chris Lytle, who has a proven track record of growing business while engaging the community and ensuring leading environmental stewardship,” board president Gilda Gonzales said in a release.
The port’s current five-year capital improvement plan includes $660 million worth of projects, of which $500 million will go for airport improvements.
It currently anticipates issuing $125 million in long-term debt in early 2014 to fund the projects. Port officials haven’t received approval on plans for the debt from the board of commissioners, Lee said.
Debt issued related to airport improvements is typically paid using revenues gained through passenger facility charges, she said.
“The port would utilize its commercial paper program in the interim and, at some point, look at doing permanent long-term financing,” Lee said.
Next year’s debt sale would represent the port’s first new money issuance since 2007 when it did a combined sale with an 80% refunding and 20% new money sale, Bernardo said. The port has $1.2 billion in outstanding debt, according to its financial statements.
The port’s capital improvement projects include completing major development projects such as the Oakland Army Base redevelopment, and enhancing the port’s 18 miles of waterfront including the Jack London Square retail, restaurant, and hotel area.
The current $660 million five-year capital improvement plan doesn’t include the costs associated with redevelopment of the Oakland Army Base, Lee said.
In April 2011, the city officials led a joint planning effort along with the port for a master planned development of both the port and city-owned OAB lands expected to cost $1.2 billion.
The plans include a new intermodal rail terminal, a new bulk marine terminal, 30 acres of truck parking and service areas, 2 million square feet of new warehousing space, and a new recycling center, according to information on the port’s website. The projects also includes infrastructure improvements such as a new roadway and utility network, a grade separation for the new intermodal rail terminal, soil stabilization,
More than 90% of the first phase, which has already begun, is being funded through a $221 million grant received from the state, Lee said. Phase 2 hasn’t been included in the five-year capital plan, because officials are still working on development of that funding plan, she said.