ITEM NO: ______7c_Attach 2_____ 
DATE OF MEETING: August 7, 2012

Economic Issues of Proposed Arena 
Prepared for: 



Prepared by: 



August 6, 2012

Executive Summary 
The Port of Seattle seaport is a thriving job- and revenue-creator for King County, the Puget Sound
region, and Washington state. Marine cargo operations support more than 33,000 family-wage jobs and
generate $3 billion in revenue for our region. 
Because much of the cargo that crosses Port of Seattle docks is discretionary  able to reach market
destinations via a variety of gateways in Canada and the U.S.  the port's ability to compete for that
cargo rests in large part on the port's naturally deep harbors, fully-developed terminal facilities, and
excellent connections to road and rail systems. Shippers primarily base their decisions on efficiency and
cost.
Shippers place a high degree of importance on overall transit times, overall cost of the shipment (of
which transit time is a large component), and reliability of transit times. Drayage trucks, the trucks that
move containers from ship to rail yards or to local destinations, are a crucial component of the supply
chain that shippers depend on to move goods to market. Drayage truck "turn times"  how long it takes
a truck to move a container to or from port terminals  is one of the most important criteria for shippers
when choosing a gateway port.
Congestion increases costs and decreases efficiency and reliability for shippers.  Gentrification of
industrial areas also has an impact on costs, as industrial firms are forced to relocate to more distant
locations, or, in some cases, go out of business.
Should the arena be located in the current proposed SoDo location, not only would costs of
transportation for shippers likely increase because of additional congestion, which increases drayage
truck turn time, but the pressure to convert industrial lands to other uses (such as the proposed
entertainment zone adjacent to the proposed arena) could drive the warehouses, distribution center,
and other support businesses to locations outside of the Duwamish Manufacturing and Industrial
Center.
The Port of Seattle has good opportunities for future growth but these could be significantly impacted if
the arena moves forward as currently planned. 





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I.   The Port of Seattle Has Opportunities for Future Growth 
The Port of Seattle has experienced sustained growth during the past 11 years across all trade routes
and is expected to continue to grow in the future, reaching its Century Agenda goal of 3.5 million TEUs
by 2039 (under the high forecast) to 2051 (under the low forecast). 
Competition with container ports in British Columbia and Southern California is very strong. British
Columbia ports currently hold 3.0 percent market share of the imports from Asia through the West
Coast that are bound for U.S. markets, which an increase of 1.5 percent in 2002. Approximately half of
these containers move through the Port of Prince Rupert and half through Metro Port Vancouver.
Port of Seattle has significant advantages in that competition: 
Naturally deep harbors. Port of Seattle offers 11 container berths with depths of 45-50 feet below
lowest water level, sufficient for the largest ships in transit today.
Fully-built terminals with state-of-the-art equipment. The Port's four container terminals have 27 cranes,
including 13 super post-Panamax cranes, 11 post-Panamax cranes, and three Panamax cranes.
("Panamax" indicates a ship that is the maximum width that can travel through the current
configuration of the Panama Canal.) The Port of Seattle container terminals comprise 512 leased acres
and expansion to 526 acres is possible.
The Port of Seattle's success depends largely on the size of the local market and the efficiency of the
port and inland transportation systems for non-local destinations.
II.   Carriers and Shipper Select Ports based upon their Efficiency and Cost 
The Port's primary tenants are terminal operators, which select a port that best serves the needs of the
ocean carriers, who in turn need to serve the interests of shippers.
Carriers
Ocean carriers' highest priority is to turn the ship on time and at the lowest cost.The objective is to
minimize capital and operating costs subject to providing the highest level of service that is possible.
Carriers need to serve the interests of shippers. 
Carriers have been under substantial financial pressure for the past five years and financial difficulties
are expected to continue for the foreseeable future. The financial difficulties are caused by several
factors. First, as a result of the worldwide economic downturn, there is weakened demand on
traditional key trades, principally the Transpacific and Asia-Europe trade routes. Second, carriers have
ramped up acquisition of larger container ships, which provide significant economies of scale and
potential cost savings. However, these acquisitions are coming on line at a time of weak demand and
the additional debt to pay for the new vessels is a burden for the carriers.
These conditions have the following implications for shippers. Carriers are expected to provide more
basic service, with fewer resources to service the shipper and with a focus on costs as opposed to
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service. The decision to focus on costs means that ports which have additional costs imposed upon
them, like additional trucking costs associated with the proposed arena, could lose market share to
other ports that do not have this challenge. Carriers could also seek to cancel services or modify
services by skipping ports of call if the net revenues are higher. Again, this could impact ports that a re
disadvantaged by external forces. 
In addition, carriers will likely adjust operations to meet space and equipment availability as conditions
change. For shippers, this implies that when carriers provide rates that are too far below market, and
better paying cargo comes available, carriers will find ways to take on the better paying cargo, which
creates additional risk to the shipper. 
Shippers 
Shippers overarching goal is to reduce their supply chain costs, which means having reliable market
coverage across a broad range of routes with favorable transit times while minimizing costs for door-todoor
cost per unit. 
Imports tend to drive the Trans-Pacific trade because there are more full containers of imported
products, the value of the import product is typically higher than for export products and the ocean
shipping rate is also higher for imports than for exports.
In deciding which West Coast port use, shippers placed much more emphasis on results, such as overall
cost, transit time and reliability. Respondents1 to a survey of port selection criteria indicated that their
preference was as follows from highest to lowest importance: 
1.    Drayage truck turn times (72.7% rated this criteria as very important) 
2.    Overall transit time (72.7%) 
3.    Owner cost per container (63.6%) 
4.    Reliability [% on schedule] (63.6%) 
Shippers placed a high degree of importance on truck drayage times and overall transit times as well as
on overall cost of the shipment and the reliability of the shipment. The potential impact of the
proposed Arena could place the Port of Seattle at a competitive disadvantage due to burden of
increased congestion in the Duwamish area and the potential relocation of drayage terminations to
more distant locations. 
III.    Summary of Impacts 
It is likely that the location of the proposed arena will exacerbate the situation for exporters by
increasing the cost of transportation related to both additional congestion and likely shift of businesses
to more remote locations.
1
Source: The Tioga Group, Improving Marine Container Terminal Productivity, prepared for 
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This will impact port-related traffic in two ways. First, road congestion will cause disruptions in firm's
supply chains and will increase transportation costs by reducing terminal-related operations2: 
Some firms have already curtailed trips to Port terminals in the afternoon during existing
sporting events. The addition of the proposed arena will increase the number of days that
will be affected. 
Pushing industrial firms south will impact terminal efficiency by increasing container dwell
time at the terminal.
Likewise, these impacts will increase the cost of terminal operations since containers that
are dropped off late require extra handling/paperwork before being assigned to a vessel. 
Additional road congestion also increases the uncertainty of container pickup and drop-off
time, amplifying the operational uncertainty of the port. 
The bottom-line is that congestion increases costs and decreases the efficiency of the Port. 
Second, increased gentrification of the north Duwamish area will increase property values, forcing
industrial firms to seek more distant locations or go out of business. 
IV.  Economic Impact of changes in the Duwamish Industrial Area 
The Duwamish M/IC is a unique industrial area that provides a sanctuary for family wage working class
jobs. Gentrification could lead to a significant loss of jobs. According to the Puget Sound Regional
Council (PSRC)3, there were 58,744 jobs in the Duwamish M/IC in 2010, the last year for which data are
available. This includes a variety of family wage jobs in the following sectors: 
Services (15,147 jobs), 
Wholesale/Trade/Utilities (13,635 jobs), 
Manufacturing (13,287 jobs), 
Government (6,714 jobs), 
Retail (2,520 jobs), 
Finance/Insurance/Real Estate (1,231 jobs), 
Construction (588 jobs), 
Education (322 jobs).

2
Source: Effects of Hinterland accessibility on U.S. Container Port Efficiency by Wan, Zhang, Yuen, June 2012 
3
Source: Seattle's Duwamish Manufacturing/Industrial Center & Ballard/Interbay Manufacturing Center, PSRC
Growth Management Board, July 12, 2012. 
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There is a strong linkage between the Port of Seattle container terminals and activities and employment
in the Duwamish Manufacturing/Industrial Center. 
V.   Economic Impacts of International Container Operations at the Port of Seattle 
The Port of Seattle prepared an economic impact study in 2009, based upon 2007 port operations.4
International container operations generated 5,703 direct jobs. Including indirect and induced effects,
international container operations created an estimated 15,277 total jobs.
International container operations generated direct wages/salaries of $292 million. Including indirect
and induced effects, international container operations created total income of $1.3 billion.
These are good family wage jobs, with a direct wage/salary of approximately $51,000 per job for
individuals engaged in vessel operations, terminal operations and inland transportation. There is an
expected increase in the number of containers that are cross-docked, which will likely offset decreases
in jobs due to future productivity improvements at the terminals.
Exporters 
Washington State is the largest U.S. exporter on a per capita basis, with 8,000 companies engaged in
exporting. Approximately four percent of Washington companies export, compared to a national
average of one percent. Washington State is tied to trade, either directly or indirectly. The state export
initiative is seeking to increase the number of Washington state companies exporting by 30 percent and
help 5,000 Washington businesses achieve $600 million in new export sales.
The Port of Seattle handled 536,301 full export containers (TEUs) in 2011. Exporters benefit greatly
from the container terminal systems at the Port of Seattle. A substantial portion of these export
containers come from firms in Washington State: 
Approximately 35 percent of export containers through the Port of Seattle (190,000 TEUs)
were generated by firms located in Washington State.
Approximately 12 percent of these export containers (62,000 TEUs) came from firms located
in King County.
Approximately 6 percent of these export containers (34,000 TEUs) came from firms located
in the City of Seattle, and many of these are located in the Duwamish Industrial area.
Washington state exporters come from all parts of the state with a variety of products, including: 
Agricultural products (grain, hay cubes, fruit, vegetables, dairy products etc.) 
Forest products (logs, lumber, paper and other forest products) 
Fish and seafood (cod, salmon, crab and other products) 
4
Source: Martin Associates, the 2007 Economic Impact of the Port of Seattle. 
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Manufactured products (glass and other manufactured products), among others.
Export shippers report that container availability is one of the greatest challenges facing their business.
As ocean carriers attempt to reduce their transportation costs as congestion increases and delays the
return of containers, the availability of containers for export cargo is further comprised, resulting in lost
sales and unreliable service to overseas buyers. 
The more distant exporters (Eastern Washington as well as Whatcom, Clark and other counties) attempt
to get two trips per day to Port of Seattle marine terminals. Congestion due to the proposed Arena will
disrupt the opportunity to accomplish this, which will add to transportation costs for these firms. 
Exporters from Seattle such as those engaged in seafood products have several plants and offices
located in King County and in other parts of Washington State. Exporters are primarily concerned about
the adequacy of system capacity, congestion, lack of containers and increased transportation rates.
There are numerous trips between each location, which would be disrupted by the congestion caused
by the proposed Arena.
Importers 
Importers bring containers through the Port of Seattle to meet the needs of consumers as well as inputs
to manufacturing in both the local and more distant market regions. Importers that serve inland
markets are increasing the use of cross-dock operations, in order "to rapidly consolidate shipments from
disparate sources and realize economies of scale in outbound transportation. Cross-docking essentially
eliminates the inventory-holding function of a warehouse while still allowing it to serve its consolidation
and shipping functions. The idea is to transfer incoming shipments directly to outgoing trailers without
have to store them. The implications of this strategy for ports and port communities are that fewer
containers are sent out directly in international (ISO) containers and a growing share are sent out in
domestic containers. The contents of three international containers can be placed in two domestic
containers. This transfer creates jobs directly as containers are unloaded and loaded as well as other
functions that are performed such as racking, shrink wrapping, pallet building, assembly, inspection,
rework and reverse logistics services, among others. These facilities are generally located close to the
terminals. The proposed Arena could cause operators to move facilities to more distant locations, with
increases in transportation costs. 
Local importers (like Boeing) also seek to minimize the costs of their supply chain. Increased congestion
associated with the Arena would increase the costs of using the Port of Seattle. 




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Figure 1  Location of Importers/Exporters in the Duwamish Industrial Area 
that use the Port of Seattle Container Terminals 
Source: BST Associates using data from PIERS 


















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