This is public-private partnerships at its best and truly is a win-win situation for both parties.  The partnership is expected to generate over 6,000 jobs providing over $100 million in direct personal income.  In addition, the Port of Oakland received a one-time, upfront fee of $60 million and will receive annual rent of approximately $19.5 million.  This will allow them to retire some existing bonds, saving almost $3 million a year of debt service.  Ports America gets access to some very scare waterfront land, in an established port location and will enjoy the full marketing efforts of the Port of Oakland.

Finally, in addition to the innovative financial structure, the new terminal will be one of the most modern and environmentally responsible in the world.  Ports America has indicated that they will utilize several of the environmental and operational best practices to reduce per TEU carbon emissions by as much as 90%.  Some of their strategies include using electric stacking cranes, ship-to-shore power, and scheduled pick-up and delivery times.  All of these will help to contribute to a terminal that is not only financial successful, but also a good neighbor to its community.

Let’s hope we see more of these partnerships in the future.

The Story: The Port of Oakland is soliciting proposals from interested private groups to provide “the master operation and maintenance, and long-term design, construction and finance of facilities of approximately 168 acres to support and enhance maritime activity”.

The Analysis: The opportunity in question is the redevelopment of a former Navy facility on land which is currently owned by the Port of Oakland.  As I understand it, the Port would like a private group to come in and sign a 30-year master lease on the parcel, to begin January 1, 2010.  The private group would then design, construct, finance and operate the facility.  At the end of the 30 year lease, the property and it’s improvements would revert back to the Port of Oakland.

The Public Private Partnership (PPP) idea is an interesting one and has been used very successfully internationally.  Several domestic ports are currently considering the structure to finance new capital programs.  However, the program is still young in the United States and there are issues that need to be worked out.  One issue that stood out to me with the Oakland proposal was the short duration (30 years).  I would want a longer horizon to amortize down my improvements.  This will be a significant capital outlay and a strong selling point for Oakland.  30-years seems a little too short.