Whither Portland?

By Jock O’Connell

The Port of Portland on the Columbia River has definitely seen its ups and downs, as has the city it serves. There was a time when the City of Portland was widely touted as a model of enlightened municipal government. Civic officials from around the country and even from abroad made pilgrimages to the “City of Roses” to learn the secrets of promoting economic prosperity and cultural innovation while fostering an inclusive, environmentally conscious, and socially progressive atmosphere in which to live, work, and drink lots of coffee.

These days, if any municipal leaders flock to Portland, it’s to figure out what went wrong. Civil disturbances, rampant drug abuse, homelessness, and a downright nasty political climate have gravely tarnished the city’s reputation, although, to be sure, Michelin still thinks the town features some fine restaurants.

As for its Port, it’s also had its moments…mainly in the past.

From a financial perspective, the Port of Portland is primarily a thriving airport with a maritime subsidiary. In the fiscal year that ended on June 30, 2023, 76.2% of the Port’s $401.1 million in operating revenue came from its commercial aviation sector, Portland International Airport (PDX). The other 23.8% came from activities categorized as “Marine & Other”, a category that oddly includes both the Port’s maritime operations and Hillsboro Airport, a general aviation airfield said to be Oregon’s second busiest airport.

As for the Port’s non-aviation business, Exhibit A shows that maritime container traffic through the Port of Portland actually topped out at 338,941 TEUs in 2003. But even such a seemingly high container volumes did not translate into profits.

According to a February 2017 report in The Oregonian, the “Port operated the terminal itself for more than 30 years, turning a profit during only two of them. It subsidized the operation as part of the public agency's mission to support the state's economy. But by 2007, Port leaders saw a private operator as the only sustainable option.”

In 2010, the Port signed a 25-year lease with the Philippines-based International Container Terminal Services, INC. (ICTSI) for $4.5 million in annual payments. ICTSI’s tenure at the Port was not an altogether happy one. In 2012, the International Longshore and Warehouse Union (ILWU) complained that ICTSI had failed to reassign to the ILWU two jobs that involved the handling of refrigerated containers after ICTSI had assumed control of container operations at the Port’s Terminal 6 the previous year. The two positions were under the jurisdiction of another union, the International Association of Machinists. (Full disclosure: In 1957, before heading off for eight weeks of summer camp on Maine’s Long Lake, I briefly played on a Little League team sponsored by the IAM.)

The dispute over who got to plug in or unplug reefers at the Port played out over the next few years and would eventually cost the union dearly. But not before work slowdowns and other dilatory practices drove major ocean carriers away. In March 2015, Hanjin, the South Korean-based shipping line, that then accounted for 78% of all container traffic at the Port, stopped calling at T6. Hapag-Lloyd soon followed suit, with Westwood Shipping Lines ceasing service to T6 in May 2016.

After a May 2014 National Labor Relations Board judge ruled that the ILWU was intentionally and unlawfully slowing work at the Port, the dispute dragged on in the courts. In November 2019, ICTSI won a $94 million preliminary award following a jury’s verdict against the ILWU for unlawful labor practices including "work stoppages, slowdowns, ‘safety gimmicks’ and other coercive actions" between August 2013 and March 2017. Finally, in March 2020, the judge reduced the amount to $19 million.

But the damage was done. As Exhibit C illustrates, the years of contentious labor relations had dramatic  consequences for container shipping through the Port.

In 2018, the Port commissioned an outside consultant to identify a sustainable business model for container shipping through Terminal 6. The study, while acknowledging the terminal’s role in linking the region’s businesses and consumers to the global economy, also noted that geography and the evolution of container shipping gravely limited the Port’s options as a gateway for containerized cargo. The study concluded that T6’s future would best be realized as a multi-use facility. 

Now, in 2024, the future of container shipping at T6 continues to look grim. Unlike other West Coast Ports that operate as landlords leasing space to terminal operators, the Port of Portland continues to operate T6.

In a January 16 letter to members of the Legislative Joint Committee on Ways and Means of the Oregon Legislature, Curtis Robinhold, the Port’s executive director, requested a $10 million infusion of state funds: “This practice has never been financially sustainable. Facing a projected loss of $14 million this year, we are requesting necessary gap funding as we negotiate rate increases with carriers and seek a third-party terminal operator for a long-term lease.”

He warned that “without other funding to offset ongoing losses associated with container operations, we will be forced to begin conversations about ending container service at T6”. [Italics added.] The Port’s request was later pared down to $8 million.

The Port justified its requested bailout by citing the Port’s role in supporting the local and regional economy. “Container operations at T6 are important for Oregon businesses and our region’s economy, and that’s why we’ve continued doing everything possible to maintain container service. We remain committed to working with our shipping community, with other industry stakeholders and with state leaders as we determine what’s next,” Keith Leavitt, Port chief trade and economic development officer, told a reporter at Transport Topics.

In a March 13 statement provided by the Port, Mr. Leavitt confirmed that the Port had “endured losses of more than $30 million from container operations over the past three years, including a projected $14 million shortfall in the current fiscal year.”

Voicing an optimistic outlook, Leavitt went on to say ”we remain focused on securing a long-term lease with a third-party operating partner, following the model used by other container terminals up and down the West Coast.”

Indeed, this would seem to be the only viable pathway forward. For, even though the Port’s financial request was pared back to $8 million, the Port’s bid for a state subsidy went unrewarded.

In a March 11 letter signed by both the Speaker of the Oregon House of Representatives and the President of the State Senate, the legislative leaders acknowledged the role of T6 in supporting the state’s economy, but they also recognized “the unique challenges Terminal 6 faces, including the region’s small import market compared to other West Coast Ports, and Portland’s distance from the ocean”. The door was not completely shut: “while we were unable to allocate the $8 million in funding requested during the 2024 legislative session, we commit to continue conversations for opportunities of funding.” Still, the letter ended with an implicit challenge: “the State is more likely to offer funding if the Port has signed contracts with new shippers.”

That, as everyone knows, is likely to be a tall order. At the moment, the Port’s container trade involves a South Korean carrier, SM Line, which currently serves the Port via its China Pacific Express (CPX) service. Any efforts to attract other carriers might put it in direct competition with the much larger and more strategically located Northwest Seaport Alliance Ports of Tacoma and Seattle.

For Portland, the problem is that both of those Ports are currently handling far fewer containerized cargos than they had in the years prior to the COVID pandemic. Last year, the NWSA Ports handled 21.3% fewer inbound loads and 35.5% fewer outbound loads than they had in 2019. Both, though, are far better suited by geography and infrastructure to handle the post-panamax vessels favored by ocean carriers.

The clear implication of that last sentence in the legislators’ letter is that, absent the emergence of new ocean carriers to move containers through T6, the Legislature would be no more willing to underwrite the Port’s container operations than it was during its now concluded session, during which it did manage to appropriate $10 million to dredge the navigation channel at Coos Bay.

While the end of containerized trade through the Port of Portland is not entirely inevitable, it does increasingly appear to be the most likely outcome.

Even so, international trade will still be conducted through the Port. Statistics provided by the U.S. Commerce Department show that containerized trade represents a minority share of the Port’s overall maritime business. Last year, for example, just 12.0% of total tonnage of international trade through the Port was containerized. By value, containers carried 24.0% of the $9.981 billion in merchandise that passed through the Port last year. Airborne shipments from Portland International Airport (PDX) accounted for just under half of the dollar value of Oregon’s merchandise export trade.

Still, a loss of container service will disrupt existing patterns of goods movement and will result in added costs to importers/exporters and their clients. A rejiggering of Portland’s existing supply chains will then ensue, and that may be a beneficial outcome if it brings hitherto ignored logistical efficiencies into play. The end of containerized shipping at T6 may not necessarily mean the end of containerized shipping at Portland.

Could there have been a worse outcome for the Port of Portland?

Well, it could have been named the Port of Calais.

How’s that?

While most Oregonians was probably taught in grade school the tale of how Portland, Oregon got its name, here’s the short version. Two guys from New England flipped a coin for the privilege of naming what was then locally known as “Stumptown” after their respective hometowns, and the guy from Portland, Maine won.

Well, not so fast. True, there was a coin toss. The flip involved two business partners, Asa Lovejoy of Boston and Francis Pettygrove of Calais, Maine. In 1843, the two had established a land claim some fourteen miles upriver from the confluence of the Willamette and Columbia Rivers. As the settlement took shape, it became clear it would need a name. So at a dinner one night in the home of one Francis Ermatinger in nearby Oregon City, Lovejoy and Pettygrove hit upon a game of chance to determine the town’s name. Using a coin Pettygrove had in his pocket, they agreed to a two-out-of-three-toss contest. Boston, it would be called, if Lovejoy won. Portland, if Pettygrove won. On the third toss, Portland got its name. (The “Portland Penny” is now on display at the Oregon Historical Society.)

But wait. Although Pettygrove’s wife Sophia hailed from the Maine Portland, his own connection to the city was practically non-existent. He was indeed born in Calais, a town on Maine’s eastern border just across the St. Croix River from the Canadian Province of New Brunswick. But his biography next puts him in New York City, where a merchant firm dispatched the barely 20-year-old lad to open a store in far-off Oregon.

So why, at that fateful dinner 23 years later, he would opt to name Stumptown after the town after Henry Wadsworth Longfellow’s hometown rather than after his own on the St. Croix is something of a mystery. Perhaps, it was because Portland, Maine was then the 25th most populous city in America. But maybe it was because Pettigrew knew that the locals back home pronounced Calais not as we pronounce the French town on the English Channel but rather as “callous”, a word when used as an adjective means “unkind, cruel, and without sympathy”.

Not exactly the moniker a community might aspire to. So, Portland it was and Portland it is.

Oh and there’s one more thing to add here. Last year, Oregon’s Port of Portland handled 116,063 TEUs. Should the container trade at T6 be suspended, then Maine’s Port of Portland, which handled 44,013 TEUs last year, would inherit the bragging rights as the nation’s leading (and only) container port named Portland.

It’s not clear the citizens of Portland, Oregon could endure that indignity.