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Honda deal to drive job, revenue growth in Richmond

By Katherine Tam
Contra Costa Times

Posted: 10/30/2009 01:21:27 PM PDT

Updated: 10/30/2009 01:21:28 PM PDT

Jobs and fresh revenue are bound for Richmond as part of a deal that has taken nearly four years to finalize.

Construction is starting at the Port of Richmond to prepare for the arrival of at least 145,000 Honda cars a year beginning in April. The 15-year deal guarantees the city about $5.5 million annually.

Factoring in assorted fees, the deal should generate a total of at least $85 million in revenue for the city -- minus an initial outlay of $37 million for port improvements.

"The city will have a significant amount of cash flow for many, many years, and it'll provide a lot of jobs," port Director Jim Matzorkis said. "These are blue-collar, good-paying jobs so people can afford to raise a family, buy a home."

The project will employ 100 people during the six-month construction and more than 200 people when the Honda shipments begin, Matzorkis said. Thirty percent of the jobs will go to Richmond residents.

"Work coming to Richmond is long overdue," said Melvin Mackay, president of International Longshore and Warehouse Union Local 10. The union has 1,400 members, a third of whom are from the Richmond area.

The city's unemployment rate rose to 17.9 percent in September, surpassing the county rate of 11.2 percent and the statewide average of 12 percent, according to the state Employment Development Department.

Honda operated in Richmond until the mid-1990s. Today, it distributes cars on the West Coast through ports in San Diego and Portland, Ore., said Scott Crail, Honda's manager of logistic operations. The company wants a more efficient way to get cars to dealerships in Northern California so it doesn't have to truck them from San Diego, and it began looking for a third port of entry. Richmond beckoned.

It has taken nearly four years to negotiate the deal, conduct an environmental review, hold hearings and finalize contracts. A lawsuit challenging the adequacy of the environmental report delayed the project for about four months; officials agreed in a March settlement to implement clean-air action plans.

The port improvements to prepare for Honda's arrival include rail upgrades, such as a new rail yard so cars can be unloaded from ships directly to rail cars instead of being trucked to a yard up to a mile away. A two-mile road with a bike lane will take Bay Trail users from Canal Boulevard to the water's edge, where the S.S. Red Oak Victory is docked.

Officials expect to recoup those costs and more through the Honda deal, Matzorkis said. The auto giant guarantees at least 145,000 cars a year, totaling at least $85 million in revenue over 15 years for the city. Honda will reimburse the city if it misses the target.

Honda is likely to bring in more cars than the guarantee. The company hopes to move 145,000 to 200,000 cars a year through the port, Crail said.

Richmond's port has the capacity to process as many as 300,000 cars a year, said Marek Bocian, terminal manager for Auto Warehousing Co., which is leading the project. Port officials are trying to woo other companies; Matzorkis declined to name specific companies while talks are ongoing.

A 15-year deal isn't common, Bocian said. Companies typically agree to five-year terms or less. Honda made the extended commitment because it is looking at the long term, Crail said.

The Honda cars arriving in Richmond will come from Japan and include hybrids. One-third will be distributed to dealerships in Northern California; the rest will head south to such destinations as New Mexico. Distributing them to dealerships from here will save 1,720 truck trips from San Diego to Northern California, Crail said, and cut carbon dioxide emissions by 3,200 tons.

Katherine Tam covers Richmond. Follow her on Twitter at www.twitter.com/katherinetam.