Chapter 5. The Pebble and the Pond

Oakland's Waterfront is one of the world's premier transportation centers. The intermodal Gateway has a highly efficient harbor with excellent truck and intercontinental rail connections. These civilian facilities are mirrored by Pacific Basin military logistical centers at the Naval Supply Depot and the Oakland Army Base. The Airport Complex provides commercial and general aviation services from two airports and serves as an important cargo hub.

These facilities are critical to the economic vitality of the Bay Area and the Central Valley. The Port of Oakland estimates that the marine terminals and airport directly or indirectly account for more than 300,000 jobs.

With such an impressive economic powerhouse in Oakland we assume that it naturally produces spin-off jobs and business in the local economy. By merely relying on this assumption, though, Oakland may be missing some important opportunities.

The economic impact of these facilities is much like dropping a pebble into a pond. Just as a pebble's impact is measured by the ripples that roll outward across the pond, the economic effects of Oakland's transportation facilities spread across a vast region. This leads to two critical questions:

• What is the impact of Oakland's transportation centers on the local, as distinct from the regional, economy?
   

• How can Oakland take lull advantage of these transportation centers in its economic development?

This chapter analyzes the economic impact of the Waterfront and explores ways of increasing its impact on the local economy. It focuses on transportation because the marine terminals and airport have such a major presence on the Waterfront and because they give Oakland a competitive advantage over other cities. Other types of commercial opportunities, particularly in the Estuary Shore area (between Jack London Square and the Coliseum), are discussed in chapter seven.

How Big is The Splash? How Wide are the Ripples?

Recently the Port of Oakland commissioned studies of the economic impacts of the marine terminal and airport facilities. As shown in Table I, these studies found that the facilities generated four different types of jobs:

• Direct employment is the number of persons directly involved in the operation of the transportation facilities; such as cargo handlers, crane operators and customs officials.
   

• Induced employment is created in non-transportation industries as the immediate result of direct employees spending their wages on goods and services, such as food and housing.
   

• Related employment is in firms which rely to some degree upon the transportation facilities. This category includes manufacturers and farms which ship or receive goods through the Port, as well as suppliers and repair shops which support transportation operations.
   

• Visitor industry employment is in businesses used by people who travel through the Oakland International Airport. These include hotels, restaurants, entertainment and convention-related businesses.

Table 1 does not show where the jobs are located. Because direct jobs are involved in the operation of the terminals, most of these are probably within Oakland. Jobs in the other three categories are dispersed across a much wider area. Induced employment is created wherever a direct employee spends income. Related jobs range from local industries, such as the NUMMI plant in Fremont, which must be near transportation facilities, to remote users such as farms in the Central Valley. Visitor industry jobs, while not as wide-ranging as related jobs, occur throughout the Bay Area, not. just within Oakland.

Because of the distinctive character of direct and indirect jobs, different strategies are needed to maximize the direct and the indirect effects of the transportation facilities in the local economy.

Increasing the Splash: The Direct Effects

Most direct jobs are within the marine and airport terminal areas, and so they have a visible impact on the local economy. Tables 2 and 3 show the job categories which comprise direct employment at the two facilities.

There are two principal ways to increase the direct impact of the transportation facilities on the local economy:

• Increase the volume of cargo and passengers passing through the facilities:
  
  The Port of Oakland estimates that 7.8 direct jobs are created for every one thousand dry cargo containers which pass through the marine terminals. Increases in passenger and cargo traffic in the Airport Complex also create new direct jobs, additional visitor industry and related jobs in associated industries such as hotels, restaurants and suppliers.
  
  Consequently, the Port of Oakland has placed significant emphasis on maintaining the competitive position of the transportation facilities. Recent proposals to deepen the harbor channel and realign dockside land connections are linked to the goal of increasing direct employment at the terminals.
   

• Maximize immediate effects on the local economy:
  
  Some aspects of marine terminal and airport operation can be targeted so as to maximize their impact on the local economy.
  
  One such target is the hiring of residents for direct jobs. As Tables 2 and 3 indicate, nearly all of the direct jobs are in private companies, with the Port of Oakland accounting for only about five hundred direct jobs. As discussed below, the Port of Oakland has recently undertaken efforts to encourage its tenants to train and hire local residents. Targeted training programs in public schools and community colleges can also help increase the degree of local hiring.
  
  Local impacts can also be increased by encouraging the use of local support businesses, such as parts suppliers and repair firms. Some direct business opportunities are available, such as airport concessions, which can be used to create opportunities for local residents.

Despite the number of direct jobs, this impact comes at a high price. If we assume that all the direct jobs in Table 2 are actually in the marine terminal area, this facility would produce an average of six jobs per acre - less than the residential density of Walnut Creek and less intensive than many agricultural operations.

The marine terminals and airport are vast, highly mechanized facilities. Therefore, the challenge is not simply to increase utilization of the facilities - the splash - but to capture a greater share of the ripples which they generate:

Capturing the Ripples: The Secondary Impacts

How can Oakland capture a greater share of the secondary effects of its outstanding land, air and sea connections? The answer lies in defining the competitive advantage which these facilities offer.

The relationship between competitive advantage and the creation of spin-off business opportunities can be seen in the Airport Complex. The Oakland International Airport is centrally located on the West Coast, is conveniently linked to ground transportation and has vacant land adjacent to it. This combination of assets has attracted three types of related commerce:

• Airline maintenance: Alaska Airlines, United Airlines, and National Airmotive have maintenance operations in the Airport Complex, accounting for more than one thousand jobs (Classified as direct jobs in Table 3). In addition, a variety of smaller scale repair and parts supply businesses are located at North Field. Metal working shops in East Oakland also benefit from these airline maintenance operations.
   

• Distribution: Federal Express and the United States Postal Service are also major employers in the Airport Complex, accounting for more than me thousand jobs (Classified as direct jobs in Table 3).
   

• Traveler Services: Hotels, restaurants and car rental companies are located on Port of Oakland land at the airport and along Hegenberger Road. The amount of local visitor industry employment depends upon both the volume of passengers using the Oakland International Airport and passengers' selection of Oakland services, rather than those in neighboring cities.

Although the competitive advantage of the airport is relatively well defined, the Port has encountered difficulty in expanding airport-related enterprise. About twenty years ago the Port developed the Airport Business Park north of the junction of the Nimitz Freeway and Hegenberger Road. Originally envisioned as an ideal site for businesses which require convenient land and air connections, today few of its occupants are airport-related.

The competitive advantage offered by the marine terminals is less apparent. Possibly due to the lack of vacant land, there are few warehouse, distribution and related manufacturing or commercial operations near the marine terminals. While there are several types of local businesses which are closely associated with the marine terminals, such as container repair and trucking firms, the secondary impacts of this facility on the Oakland economy is poorly defined. Moreover, it is not. clear what types of new businesses and industries Oakland might seek to attract based upon its superb land/sea/air connections.

A possible secondary impact of the marine terminals is the recent location in Oakland of the corporate headquarters of American President Lines, NOL and Crowley Maritime Corporation. Undoubtedly, the ocean terminal gives Oakland prestige which can be used in marketing the city generally.

A Responsibility Vacuum?

Cooperation among a variety of local agencies is the key to tapping the economic potential of the Waterfront. This cooperation comes into play in three major areas:

• Creating employment and training opportunities.

• Maximizing local business opportunities.

• Attracting and retaining businesses which rely on service the transportation facilities.

The Port of Oakland is a key player in each of these areas because it is responsible for operating the airport and marine terminals. However, the Port has traditionally taken a narrow view of its role in creating spin-off economic effects and has limited its mission to expanding the use of its facilities. This can increase the number of direct jobs, but neglects the larger potential offered by secondary businesses.

The broader goal of economic development - employment and training opportunities, small business development and the attraction and retention of related businesses - has been left primarily to the City of Oakland. However, the City has tended to defer to the Port's exclusive jurisdiction over the tidelands. Consequently, neither agency has systematically defined Oakland's competitive advantage in transportation, nor aggressively sought to maximize local benefits from these operations.

During the past year the City and Port began several joint efforts to increase local economic benefits from the transportation facilities. Significantly, these initiatives include other essential players, including high schools and community colleges, the Private Industry Council and business and labor organizations. These initiatives include:

• Aviation Academy: The Oakland Unified School District, the Port and several business and training organizations are pursuing establishment of an aviation maintenance training program at Castlemont High School. This program would be aimed at providing high school graduates with the skills and certificates necessary for employment in the aircraft maintenance industry. The Peralta Community College District has also been involved in this project to provide related training beyond high school.
   

• Direct jobs and business opportunities: The Port's Equal Opportunity Division has expanded efforts to encourage affirmative action in hiring and contracting by the Port and Port tenants. In addition, the Employment Resources Program assists Oakland's unemployed and underemployed residents in finding employment with Port tenants.
   

• Education and training: Several collaborative efforts, involving City and County governments, educational institutions and business and labor organizations have sought to improve the projection of labor market trends. While not aimed exclusively at transportation-related employment, these efforts can improve our ability to target education and training programs at job categories needed by local industries, including those related to the air and marine terminals.
   

• Port Customer Council: Last year an organization consisting of Port tenants and directly associated businesses was formed. Its purpose includes increasing involvement of its members in the Oakland business community.
   

• Port/neighbor relationships: The Port has a special need to develop partnerships within areas, such as the Coliseum area and West Oakland, which are adjacent to its operations. Currently, the Port is involved in community efforts affecting its jurisdiction and surrounding properties. These include the possible formation of the Coliseum Redevelopment Area, planning of the replacement of the Cypress section of Highway 880, and solving difficult problems such as toxic contamination and truck parking in areas adjacent to the Port.

Catching the Wave

By all appearances Oakland's Waterfront is an economic powerhouse. Few cities are endowed with such efficient air, sea and land transportation facilities, centered in an economy as rich as California. However, the benefits of these facilities are spread throughout a wide region.

Oakland derives important direct effects from these facilities. To obtain the lucrative secondary effects, though, requires an accurate understanding the comparative advantage that these facilities offer and collaboration among a variety of local governmental agencies and the business and labor communities to tap that potential.

We have seen the beginning of this collaboration. Its ultimate success will determine how many of the ripples from these important regional facilities will be felt in Oakland's economy.

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