Port of Walla Walla “Railex Case Study”

Port of Walla Walla
National Association
of
Regional Councils
“Railex Case Study”
Tuesday, December 5, 2006
www.portwallawalla.com
1
Port of Walla Walla
Port District Background
2
Port of Walla Walla
Background & Strategic Focus
Founded in 1952, the Port of Walla Walla is a
municipal corporation responsible for fostering
economic development throughout Walla Walla
County.
We measure our success in terms of our ability to:
• Create and retain family wage jobs
• Expand the region’s tax base
• Maintain multi-modal transportation linkages
• Build Community Infrastructure to Support Economic
Development
• Provide leadership in enhancing Walla Walla County’s
overall economic vitality and quality of life.
3
Port of Walla Walla
Background & Strategic Focus
Commissioner Paul Schneidmiller, District 1 - Commissioner Schneidmiller has served as a Port
Commissioner since June 2000 and represents District 1, which encompasses more than half of
the City of Walla Walla and the stateline area. Schneidmiller is President and Chief Executive
Officer of World Wide Travel Service, Inc. and has been involved in the travel industry since
1968. He is a graduate of the University of Washington and is a Certified Travel Consultant.
Schneidmiller has been active in a host of community organizations including past president of
the Walla Walla Exchange Club and served as co-chairman of three Walla Walla School District
Maintenance & Operation Levy campaigns. Commissioner Schneidmiller currently serves as an
officer in the Washington Public Ports Association.
Commissioner Mike Fredrickson, District 2 - Commissioner Fredrickson is currently serving his
first term on the Port of Walla Walla Commission and represents District 2, which includes the
eastern third of the City of Walla Walla, Dixie, Waitsburg and Prescott areas. Commissioner
Fredrickson is a 1988 graduate of Walla Walla High School and a 1992 graduate of Washington
State University with a BS degree in Agri-Business. He served 8 years on the Walla Walla
County Planning Commission (5 years as Chairman). Commissioner Fredrickson is a certified
general real estate appraiser and works for Associated Appraisers located in Walla Walla and is
Vice President of the Columbia Basin Chapter of the Appraisal Institute.
Commissioner Fred Bennett, District 3 - Commissioner Bennett served as a Port Commissioner
from 1980-1991. In January 1998 Commissioner Bennett was re-elected and represents District 3
in the western portion of Walla Walla County, which includes the communities of College Place,
Touchet, Lowden, Burbank, Eureka and Clyde. Commissioner Bennett is a retired Professor of
Engineering at Walla Walla College. He has served as an officer of the Washington Public Ports
Association and has dedicated 30 plus year to the College Place Volunteer Fire Department.
Commissioner Bennett is recognized as a leader in advocating for regional transportation
investment including the four-laning of U.S. Highway 12 from Burbank to Walla Walla.
4
Port of Walla Walla
Background & Strategic Focus
PORT OF WALLA WALLA
ORGANIZATIONAL CHART
CITIZENS OF WALLA WALLA COUNTY
PORT COMMISSION
Fred Bennett
Paul Schneidmiller
Michael Fredrickson
ATTORNEY
Thomas K. Baffney
EXECUTIVE DIRECTOR
Jim Kuntz
ASST. AIRPORT MGR.
OPERATIONS
Ron Johnson
ARFF/SECURITY DEPT.
Ken Clayton
Brent Partlow
Mike Graves
ASST. AIRPORT MGR.
ADMN. SERVICES/
DEPUTY TREASURER
Jennifer Skoglund
MAINTENANCE DEPT.
Gary Stewart
Darren Brinson
Elias Alonso
Louis Gagnon
ECONOMIC DEVELOPMENT
DIRECTOR
Paul Gerola
EXECUTIVE
ASSISTANT TO
EXEC. DIRECTOR
Becky Hulse
AUDITOR/
TREASURER
Jackie Hardesty
RECEPTIONIST
June Meiners
5
Port of Walla Walla
Port District Financials
6
Port of Walla Walla
2006 Projected Revenues - $16,431,759
Property Tax
Revenue
$1,535,186
Non-Operating
Revenue
$11,229,959
Port Lease
Revenue
$1,618,521
Airport Lease
Revenue
$2,048,093
7
Port of Walla Walla
2006 Projected Expenses - $16,555,460
Administration
& General
$1,273,262
Operations
$2,002,857
Capital Projects
$11,547,428
Debt Service
$1,731,913
8
Railex Project
Walla Walla County, Washington
“Streamlining Produce Distribution”
9
Railex Project
“Solving a Transportation Problem”
Railex was created to fulfill a need in the produce industry and
solve an ever increasing nationwide transportation problem.
Long-Haul Trucking
Long-haul trucks are currently used to distribute fresh produce.
However, the industry is plagued by two major problems:
•
Increased costs due to fuel and insurance prices and
government regulation.
•
Lack of availability due to driver shortages and increased costs.
Conventional Rail
Conventional rail has been historically less expensive than truck
transport, however, traditional rail operation methods make rail
unsuitable for shipping certain produce:
•
Rail is generally too slow, too unpredictable and too risky.
•
Multiple shipping locations and receiving locations create
delays and variability in transit times.
•
Refrigerated box car shortages has deter growers from using rail.
10
Railex Project
“Solving a Transportation Problem”
Why not build a large single point of origin warehouse
where produce could be consolidated and build a large
single point of destination where the produce could be off
loaded to the end user?
11
Railex Project
“Solving a Transportation Problem”
Wouldn’t the railroads be more efficient and make more
money by hauling dedicated produce trains from point A to
point B with no stops along the way?
12
Railex Project
“Solving a Transportation Problem”
Wouldn’t a logical point of origin be in the Pacific Northwest
were they grow a variety of high quality fruits and
vegetables and are having a hard time accessing the East
Coast market?
WHATCOM
OKANOGAN
PEND
OREILLE
SKAGIT
SAN JUAN
FERRY
ISLAND
CLALLAM
STEVENS
SNOHOMISH
SPOKANE
CHELAN
JEFFERSON
DOUGLAS
LINCOLN
KITSAP
GRAYS
HARBOR
KING
MASON
KITTITAS
GRANT
WHITMAN
PIERCE
ADAMS
THURSTON
PACIFIC
GARFIELD
FRANKLIN
LEWIS
YAKIMA
WAHKIAKUM
COWLITZ
SKAMANIA
WALLA WALLA
COLUMBIA
ASOTIN
BENTON
KLICKITAT
CLARK
13
Railex Project
“Solving a Transportation Problem”
Wouldn’t the logical point of destination be in the Northeast
where 50% of the United States population lives?
Montreal
MAINE
VERMONT
Montpelier
Toronto
Lake Ontario
NEW YORK
Albany
Rochester
108
hours
Buffalo
Lake Erie
Augusta
NEW
HAMPSHIRE
Concord
Boston
MASSACHUSETTS
Providence
CONNECTICUT
Cleveland
Columbus
Oh
Cincinnati
Dayton
io
R.
OHIO
Pittsburgh
WEST
VIRGINIA
Harrisburg
Baltimore
Annapolis
RHODE
ISLAND
New York
Trenton
Philadelphia
Washington D. C.
Charleston
Hartford
PENNSYLVANIA
NEW JERSEY
Wilmington
Dover
DELAWARE
MARYLAND
14
Railex Project
“Creation of Railex”
Yes, Yes, Yes, and Yes
Railex was born.
•
Railex committed to building the West Coast consolidation
facility in Walla Walla, Washington.
•
Railex committed to building the East Coast off loading facility
in Albany, New York.
•
Railex, Union Pacific & CSX Railroads developed a produce train
containing 55 high efficiency 64 foot long refrigerated box rail
cars. The produce train would run weekly, 52 weeks a year, and
transport produce from the West Coast to the East Coast in less
than 6 days.
15
Railex Project
Walla Walla County, Washington
16
Railex Project
Walla Walla County, Washington
Building dimensions are 1,500 feet long by 140 feet wide.
17
Railex Project
Walla Walla County, Washington
18
Railex Project
Walla Walla County, Washington
RAILEX SHIPPING VOLUMES
55 Railcars = 200 trucks per week
loading produce into Wallula warehouse
19
Railex Project
Walla Walla County, Washington
RAILEX SHIPPING VOLUMES
55 Railcars = Approximately 8 million pounds
of produce per week shipped to East Coast.
20
Railex Project
Walla Walla County, Washington
RAILEX SHIPPING VOLUMES
55 Railcars x 52 weeks = Approximately 416 million
pounds of produce per year shipped to the East Coast.
21
Railex Project
Walla Walla County, Washington
•
Railex will create 100 new full-time positions.
•
There will also be a host of secondary jobs created via
short haul truck drivers.
•
Railex is a logistic company that will get your produce to
the east coast.
•
They will grade and package your produce in Albany, NY.
•
Five days of free storage in Albany, NY allows Pacific
Northwest growers and shippers to position their
inventories on the east coast. Some produce is being
sold in route to the east Coast.
•
Bar code capabilities for real-time inventory.
•
Trucking logistics to deliver produce to the customer.
22
Railex Project
Walla Walla County, Washington
Fuel Savings from Washington State to New York (one-way)
Unit Trains
Weekly Gallons Annual Gallons
of Diesel
of Diesel
Savings
Savings
Present Value
Savings
1
84,000
4,368,000
$12,754,560
2
168,000
8,736,000
$25,509,120
3
252,000
13,104,000
$38,263,680
4
336,000
17,472,000
$51,018,240
* National average per gallon for diesel on 07-10-06 was $2.92 per gallon
23
Railex Project
Walla Walla County, Washington
Railex Funding Partners
Railex, LLC
Land Purchase
Warehouse (200,000 square feet)
Initial Rail Improvements
Approximately $20,000,000
Union Pacific Railroad
110 Railcars
Four Locomotives & Crew
Approximately $30,000,000
State of Washington
CERB Grant (Road Improvements)
Community Development Grant (Water System)
Capital Budget (Site Infrastructure)
Transportation Budget (Rail Infrastructure)
$ 4,400,000
$ 200,000
$ 700,000
$1,000,000
$2,500,000
24
Railex Project
Walla Walla County, Washington
Railex Funding Partners
Port of Walla Walla
Capital Fund (Site Infrastructure)
CERB Loan (Road Infrastructure)
$1,701,301
$901,301
$800,000
Federal Government
Transportation Appropriation (Rail Infrastructure)
$1,500,000
Walla Walla County
.08% Economic Development Sales Tax Grant
$ 400,000
Total Investments
$58,001,301
25
Railex Project
“Solving a Transportation Problem”
Why did Railex select Walla Walla, Washington for its first
produce rail distribution center to the east coast?
•
Washington State produces a high volume of fresh produce;
potatoes, onions, apples, pears, cherries, asparagus, broccoli
and carrots.
•
Railroads on the West Coast are hesitant to commit car supplies
for fresh produce because of long car turns and high risk of
spoilage claims.
•
Washington State’s lack of proximity to the East Coast results in
Washington State having one of the highest truck rates to the
East Coast. Washington State shippers are forced to reduce
FOB costs to a very low level in order to become competitive
with imported produce and produce from other lesser quality
growing areas.
26
Railex Project
“Solving a Transportation Problem”
Why did Railex select Walla Walla, Washington for its first
produce rail distribution center to the east coast?
Progressive State Tax Policy
•
No state sales tax had to be paid on the construction of the
distribution center in consideration the facility is over 200,000
square feet. Construction savings equal $20,000,000 x 6.5% =
$1.3 million.
•
Distribution center will not have to pay state business &
occupation tax in consideration the produce in the facility is not
processed into a higher value commodity.
•
State of Washington does not have a corporate income,
personal income, inventory or unitary tax.
•
The only major tax Railex will pay is property taxes at $15.00 per
1,000 of assessed value = $300,000 per year.
27
Railex Project
“Solving a Transportation Problem”
Why did Railex select Walla Walla, Washington for its first
produce rail distribution center to the east coast?
•
Port of Walla Walla’s commitment to work with the State of
Washington and Federal Government to fund site infrastructure
improvement: Industrial Park Road, Public Water System, Rail
Loop.
State of Washington
$4,400,000
Port of Walla Walla
$1,701,301
Federal Government
$1,500,000
•
Union Pacific Railroad liked the site. Good access to its rail
main line that has capacity.
28
Railex Project
Walla Walla County, Washington
Why the Union Pacific Railroad?
•
•
•
•
In Washington State, Burlington Northern Santa Fe Railroad
has the dominate market share of rail car movements. The
Union Pacific wants to increase its market share.
The Union Pacific main line in the western portion of Walla
Walla County, next to the Railex Site, has remaining capacity.
The Railex project is exactly the type of new business Union
Pacific is looking for. Weekly service (52 weeks per year) with
a single point of consolidation (Walla Walla, WA) and a single
point of destination / off load (Albany, NY).
Union Pacific gets paid for the movement of 55 rail cars each
week regardless if they are full or not.
29
Railex Project
Walla Walla County, Washington
•
•
•
WHY THE UNION PACIFIC RAILROAD?
The Union Pacific locomotives and rail cars are never
unhooked once they leave Walla Walla which substantially
reduces produce damage claims. The potatoes leaving
Washington look like Washington State potatoes when they
arrive in Albany, NY.
The produce cold chain is never broken. Produce arrives at
the Walla Walla distribution center in refrigerated trucks. The
produce is then unloaded into a refrigerated warehouse which
is climate controlled for each type of produce. Produce is then
loaded into modern refrigerated rail cars which have GPS
systems that track the internal temperature of each railcar as
they cross the United States.
Railex loads all 55 railcars and does all internal switching of
the railcars as they are loaded 19 railcars at a time. The Union
Pacific’s role is limited to hooking onto the loaded 55 railcars
and moving them across the country.
30
Railex Project
Walla Walla County, Washington
•
•
•
•
Union Pacific Railroad Performance Convenances
Guarantees a transit time of less than six days.
Guarantees a refrigerated rail car supply.
Guarantees locomotive power, weekly service schedules and
rail crews.
Willingness to expand service in increments of 55 railcars
upon proper notice from Railex. Second produce train
expected to come on line during first quarter of 2007.
31
Railex Project
Walla Walla County, Washington
What is in it for the Port of Walla Walla?
How are you going to get your $1.7 million investment back?
Railcar Fees
Years 1-10
Unit Trains
per Week
Railcars per
Week
Railcars per
Year
Railcar
Rate
Yearly
Revenue
1
55
2,860
$30.00
$ 85,800
2
110
5,720
$30.00
$171,600
3
165
8,580
$30.00
$257,400
* Annual revenues maximum is $257,400
32
Railex Project
Walla Walla County, Washington
What is in it for the Port of Walla Walla?
How are you going to get your $1.7 million investment back?
•
The Port is receiving inquiries regarding the back haul of
products from the East Coast to the West Coast. This could
result in a host of distribution warehouses being built within
the Port District that would store and transport a variety of
products to end users in the Pacific Northwest and Northern
California.
•
Another potential is to duplicate the Railex building, however,
dedicate it to all frozen commodities.
33
Railex Project
Walla Walla County, Washington
Railex Project Receives Praise
Port of Walla Walla receives the Governor’s Best Practices in
Economic Development award for the Railex Project at the Governor’s
Economic Development Conference in Vancouver, Washington.
34
Railex Project
Walla Walla County, Washington
Railex Project Receives Praise
Ken Casavant, an agricultural economist and professor at
Washington State University, said “Railex is as promising as any
transportation solution he’s ever seen. It offers the best of all
worlds because it allows the efficiencies of short-haul assembly
combined with the efficiencies of long-haul movement.”
35
Railex Project
Walla Walla County, Washington
Railex Project Receives Praise
Jody Easterday, who’s family packs more than three million bags of
onions (yellow, red and white) per year, said “Railex is an
economically viable option. We have never had this transportation
tool before. It will allow us to sell our onions in markets previously
not accessible”.
36
Railex Project
Walla Walla County, Washington
Railex has developed a long-awaited system for efficiently shipping
produce from the west coast to the east coast. The system is
efficient and cost effective and successfully addresses the problems
faced by conventional rail transportation and the trucking industry.
When fully implemented, the system will revolutionize the produce
industry and have a considerable impact on the economies of the
states of Washington and New York.
37
Railex Project
Walla Walla County, Washington
38
Railex Project
Walla Walla County, Washington
39