As the ships come in, so do their payloads, producing a much-needed payday for San Diego County by injecting more than $29 million into city coffers.
According to a report released by the San Diego Regional Chamber of Commerce (SDRCC) in late 2005, the financial contribution of the Port of San Diego has become a linchpin to the county’s economic health at a time when the city can use all the good economic news it can get.
“The Port of San Diego is a real asset,” said Ryan Singer, an economist for the SDRCC. “It serves as a conduit for new investment and new goods and wealth into the region.”
Activities at the port in 2003 and 2004, the latest figures available, produced $4.1 billion of the county’s gross regional product (GRP), or 3 percent of San Diego’s $133.1 billion GRP that same year.
The report did not take into account economic activity generated by the San Diego International Airport or military operations to prevent the double counting of some financial impacts.
“We’ve increased our business over the years tremendously,” said Marguerite Elicone, a spokeswoman for the Unified Port of San Diego, the government agency that manages public land along the port and its three maritime terminals. “We’re excited about that.”
A cornerstone for that economic output has been the wide range of industries and businesses on port land. Industries on the port include maritime, manufacturing, construction, wholesale, warehousing, hospitality and tourism, creating a broad economic support network.
The upbeat picture coincides with a previous report by the SDRCC on the county’s overall economic rebound with a low unemployment rate, strong real estate growth and higher consumer spending.
Amid the positive numbers, the Port District is currently pushing through several improvement projects aimed at increasing the port’s business capacity and quality of life. Perhaps the most noticeable to the public will be the redevelopment of the South Embarcadero, on which the Port has already spent close to $950,000, and the development of the old Campbell shipyard site, on the corner of Eighth Street and Harbor Drive, to include a $325 million Hilton hotel.
The South Embarcadero Redevelopment Project (SERP) encompasses the Old Police Headquarters adjacent to the Hyatt at the northern most end of Seaport Village and will include a new public park and plaza area.
The Port District is also developing a huge infrastructure and public access update for the North Embarcadero that would involve an esplanade extending the entire length of the bay front and incorporate redevelopment strategies for housing, business and port access.
“I think the two projects will marry all the current land uses of the port together to produce an area where San Diegans can work and live in a great environment,” Singer said.
Unseen, but much-needed, improvements to the operation of the bay and port itself are also scheduled, such as the Port District’s continued efforts at dredging key shipping channels. The central navigation channel will receive the most work in an attempt to make the shipping lane more accommodating for larger cargo ships at a cost of $4.5 million.
In October 2004, the main channel was dredged down to a depth of 42 feet from the mouth of the harbor near the Point Loma submarine base to just north of the Coronado Bridge. The effort produced about 300,000 yards of sand at a cost of $2.2 million.
Dredging the bay’s berths and terminals to the same depth began last November and are scheduled to be completed this summer. Terminal depths currently stand at about 38 feet.
“With the dredging, we’ll be able to increase marketing efforts for larger cargo ships,” Elicone said.
The Port District’s target markets for future growth include Latin America, the Pacific Rim, Australia and the Russian Far East.
Additionally, improvements continue to be made to land infrastructure, security, terminals and cargo holds to facilitate increased traffic and shipments, not the least of which are people. Passenger arrivals from cruise ships increased by 1,700, from 328,000 passengers in 2003, to 329,792 in 2004.
The Department of Homeland Security has also issued a $6.5 million grant to the Port District to enhance explosive detection capabilities aboard passenger ships and related facilities as part of a nationwide effort to secure the country’s most critical ports.
But the government isn’t alone in spending big money to make sure San Diego’s port remains competitive. A 2003 report commissioned by the Port District found private tenants invested $240 million of their own money for capital improvements in 2002 alone.
Mary Lou Lo Preste, owner of the Sun Harbor Marina on 5000 North Harbor Drive, was the largest private spender on capital improvements and redevelopment, investing $5 million into her docks, restaurant and mixed-use office space, totaling 120,000 square feet.
Extra money was spent on making sure her facilities received certification for Leadership in Energy and Environmental Design (LEED).
Lo Preste, a port tenant since 1983, said the money was well spent.
“I’ve been a tenant here for 25 years and I believe in the future of the boating industry and the sport fishing fleet,” she said.
While the future of sport fishing may have the full confidence of Lo Preste, the future of San Diego’s cargo capacity and market share received very little in SDRCC’s report.
The report outlined two weaknesses faced by the Port District as it steams into the future with ambitious redevelopment plans.
Although commerce activity is strong, cargo activity remains somewhat slow. Cargo tonnage increased by 4.6 percent to 4.7 million in 2004, but that’s just 1.5 percent of the total tonnage passing through West Coast ports.
Elicone said it is difficult to compete with the large-scale ports of Long Beach and Los Angeles when San Diego lacks the capacity, forcing it to serve more of a niche market.
Although Singer agreed that San Diego’s is a niche port, backlogs at other major ports have created a need for more container capacity. Dredging efforts should place San Diego in a better position to acquire more business.
“It’s one step closer towards catching some of that market,” Singer said.
The port’s primary cargo continues to be autos and trucks, which made up 47 and 25 percent, respectively, of the total cargo processed through San Diego in 2004 and just over 10 percent of auto imports entering through the West Coast.
San Diego also continues to be a net importer of goods, receiving $11.5 billion more goods than it sells abroad. That means cargo ships usually come in full and leave empty, making the port less profitable for carriers.
Singer said there’s not much the port can do to reverse those numbers on its own, since the trade imbalance is largely a national issue, so the port’s continued success will rely on its ability to expand its infrastructure for future growth.
“It needs infrastructure investment to capture some more of that port cargo activity to help it grow,” Signer said.