PORT OF SEATTLE

MEMORANDUM

COMMISSION AGENDA

Item No.

Date of Meeting

February 10, 2009

DATE: January 22, 2009

TO: Tay Yoshitani, Chief Executive Officer

FROM: Michael Burke, Director, Cargo and Container Operations

Mark Longridge, Capital Project Manager

SUBJECT: Authorization for design and permitting of fender system improvements at

Terminal 18 South.

ACTION REQUESTED

Request Port Commission approval for:

1. Authority for the Chief Executive Officer to execute the Second Amendment to the

Lease between Westway Feed Products and the Port of Seattle;

2. Funding for design and permitting of 800 feet of replacement fender system at

Terminal 18 South in the amount of $450,000, and

3. Authority to enter into or to amend service agreements for an estimated $250,000 to

accomplish design and permitting.

SYNOPSIS

Westway Feeds has been using the southerly berth at Terminal 18 (T18) for product

transfer since the mid 1990’s. The fender system at that berth is now beyond its

estimated useful life and is in need of replacement. Preliminary estimate of total project

cost is $3,100,000.

PROJECT DESCRIPTION AND JUSTIFICATION

The southern 1200 feet of dock at T18 has been used for break bulk and barge traffic.

The timber fender system for that section is well beyond its estimated useful life and

needs to be replaced. Replacing the fender system with steel piling instead of timber will

be a more cost effective replacement in the long term.

Westway Feeds has primary berthing rights for the most southerly 400 feet of berth at

T18, including maintenance responsibility. Westway also has secondary rights to 300

COMMISSION AGENDA

Tay Yoshitani, Chief Executive Officer

January 22, 2009

Page 2

feet of berth north of their primary berth. Replacement of the secondary berth is not a

Westway obligation.

The proposed lease amendment to the Westway lease would obligate the Port to replace

the 300 feet of secondary berth fender system section plus the fender system within

Westway’s primary 400 foot berth. Westway has agreed to a minimum revenue

guarantee for dock charges in exchange for the Port constructing these improvements.

Staff is also requesting the Commission authorize an additional 100 feet of fender system

replacement in this area, making the entire fender project 800 feet. This would create

two full barge berths at Terminal 18 South. Staff is not proposing to replace the fender

system on the most northerly 400 foot section of the break bulk berths at this time.

SSA Terminals, as part of the T18 lease, has 50 percent maintenance responsibility for

the fender systems in this area, but is not necessarily responsible for replacement of the

fender system as that appears to be beyond their maintenance obligation in this situation.

MAJOR ELEMENTS OF THE PROPOSED SECOND AMENDMENT TO LEASE

1. The Port will replace the 400 foot fender system for Westway’s primary berth and the

300 foot section of fender system for Westway’s secondary berth.

2. Westway and/or its agents will pay the Port each year a minimum annual guarantee

for dock operations (Dockage, Wharfage, and Service and Facilities charges) of

$242,500, starting the first full calendar year following completion of the

improvements in item 1.

PROJECT SCOPE OF WORK AND SCHEDULE

 Overall project scope would include the replacement of 800 linear feet of old and

deteriorated fender pile system along with the remaining bullrail and brow at the

south end of T18 with a new steel fender system to facilitate barge moorage for

existing lease tenants and transitory barge traffic.

 Design and permitting scope under this authorization to include preparation of plans,

specifications and estimates for completing this work, and submission of all

applicable permits required for in water work to repair these sites.

 Tentative Project Schedule:

Permits Submitted

April 22, 2009

100% Design Complete

August 25, 2009

Major Works Construction Advertisement

September 2, 2009

In-Water Construction Begins

January 6, 2009

Construction Complete

March 30, 2010

COMMISSION AGENDA

Tay Yoshitani, Chief Executive Officer

January 22, 2009

Page 3

STRATEGIC OBJECTIVES:

This project supports the Port’s strategies to “Ensure Airport and Seaport Vitality” and

“Exhibit Environmental Stewardship through our Actions”, by:

 Replacing the fender system at the subject Terminal so that the Terminal can return to

service for berthing.

 Improving water quality by removing creosote treated timber piles from the marine

environment.

 Replacement of the fender system in this area is basically a renewal and replacement

project for the Seaport. It will help protect dock revenue the Port currently gets and

may allow for some additional barge business in the future.

Meet Environmental Obligations

The project will meet environmental obligations by removing creosote timber fenders. In

addition the project will:

 Acquire all necessary and required permits from appropriate agencies prior to start of

construction; and

 Comply with all conditions stipulated by permit authorizations.

Develop and Maintain Community Support

This project will develop and maintain community support by retaining a longstanding

tenant in our harbor, with its related employment and the necessary purchase of goods

and services to service, maintain, repair and upgrade the vessel while at port.

In addition, the permit process requires notification of neighboring communities,

agencies of interest and appropriate environmental groups. Comment is expected and

welcome. Finally, the waters near Harbor Island are Treaty-protected “usual and

accustomed” fishing areas. The Muckleshoot and Suquamish Tribes will be consulted

during the permitting process.

BUSINESS PLAN OBJECTIVES:

Replacement of this essential protective system will allow continued operation of break

bulk and barge activity in this lease area. The full replacement of 800’ of the fender

system will also allow secondary and tertiary use as an available barge layberth facility,

as planned under the Industrial Moorage Initiative.

COMMISSION AGENDA

Tay Yoshitani, Chief Executive Officer

January 22, 2009

Page 4

Budget/Authorization Summary

Previous Authorizations (prior CEO authorization)

$50,000

Current request for authorization

$400,000

Total Authorizations, including this request

$450,000

Remaining budget to be authorized (to be determined during design & permitting)

TBD

Project Cost Breakdown

Design Services

$ 250,000

Permitting

$ 65,000

Project Management

$ 135,000

Total

$ 450,000

Source of Funds

This project was included in the 2009 Plan of Finance under Committed CIP#C800121 in

the amount of $3,000,000. The initial $450,000 is requested in order to proceed with

design and permitting.

This project will be funded from the general fund...

Financial Analysis Summary

CIP Category

Revenue/Capacity Growth

Project Type

Business Expansion

Risk adjusted

Discount rate

7.5% for Westway lease revenue

9.0% for barge layberth revenue

Key risk factors

 Key risk factors include permitting delays and potential cost

overruns due to project complexity/timeframe.

 The proposed 2

Amendment to the Westway lease would

provide minimum annual guaranteed revenue from dock

operations in the amount of $242,500/yr for the duration of the

current lease (9/30/2018), and would continue to apply for any

renewal options or extensions.

 The preliminary financial analysis includes estimated revenue

from barge layberth. Financial performance could be lower, if

usage demand or market rates are lower than anticipated in the

analysis.

Project cost for

analysis

$3,100,000 (preliminary financial analysis)

Business Unit (BU)

Container Support Properties

COMMISSION AGENDA

Tay Yoshitani, Chief Executive Officer

January 22, 2009

Page 5

Effect on business

performance

Fender replacement at the south end of Terminal 18 will allow

continued operation of break bulk and barge activity for another 30

years.

The estimated impact on Net Operating Income (NOI) and NOI after

Depreciation in Year 1 through Year 5 is shown below.

NOI (in $000's) 2009 2010 2011 2012 2013

NOI $2 $164 $245 $245 $245

Depreciation $0 ($69) ($103) ($103) ($103)

NOI After Depreciation $2 $95 $141 $141 $141

IRR/NPV

Based on preliminary financial analysis.

NPV

(in $000's)

IRR

Payback

(in years)

($285) 6.3% 14

SUSTAINABILITY AND LIFE CYCLE COSTS

In considering the replacement of the existing timber fender system several alternatives

materials and systems were considered. Replacement of the timber system in kind, or

with a steel, plastic or concrete fender system was evaluated for their performance at this

site. The evaluation considered not only life cycle costs, but also structural performance,

maintenance frequency, environmental feasibility and constructability issues. While steel

fender systems do have higher initial costs, the overall life cycle cost proved lower than

the comparable timber, concrete or plastic systems. This paired with increased protection

performance of the steel system made it the recommended choice of material.

 What plans have been made to reduce maintenance costs? If not, why?

This project replaces an essential part of the protective system for T18S (fender

piling). The project will by definition reduce maintenance costs to the Terminal by

preventing damage from barges and vessels impacting on the apron structure. Also,

the proposed steel fender system has the lowest expected maintenance effort of the

materials considered for this system

 What is the design life span of this project?

Thirty (30) Years

 What plans have been made to reduce chemical and pollutant source control (low

volatile organic compounds) in the construction of this project to improve air

quality? If not, why?

This project will remove creosote treated piles and replace them with steel fender

piles.

COMMISSION AGENDA

Tay Yoshitani, Chief Executive Officer

January 22, 2009

Page 6

ALTERNATIVES CONSIDERED AND THEIR IMPLICATIONS:

 Do Nothing: Doing nothing at this time would mean a Port tenant is not able to

utilize 300 feet of secondary berth with sufficient fender system protection to the

dock.

 Replace only 300 foot secondary berth: Replacing only 300 feet of fender system

would leave significant gaps in the fender system at the south end of Terminal 18 and

put at risk the revenue the Port gets from Westway’s dock operations today.

 Construct 700 feet of fender system: Constructing 700 feet of berth at the south

would create only a 300 foot berth area the Port could use for other barge business. A

700 foot replacement does not allow for the full use by the Port of the secondary berth

for other barge activities.

 Replace 800 feet of fender system: Proceeding with the design and permitting for

the full 800 foot section of the south Terminal 18 berths keeps the project on schedule

around the in-water construction windows and combined with the anticipated

minimum revenue stream from Westway gives the Port a reasonable return on the

investment. This is the recommended option.

PREVIOUS COMMISSION ACTIONS OR BRIEFINGS:

Policy and Staff Briefing – Industrial Moorage Initiative, June 3, 2008