FINAL REPORT June 11, 2013

Thurston Regional Planning Council (TRPC) Regional Housing Market Study Approach FINAL REPORT June 11, 2013 Port of Douglas County Cross Dock Market ...
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Thurston Regional Planning Council (TRPC) Regional Housing Market Study Approach

FINAL REPORT June 11, 2013 Port of Douglas County Cross Dock Market Feasibility Study

Prepared by Qvigstad & Associates, Inc. and SCJ Alliance

Cross Dock Market Feasibility Study Contents Executive Summary ................................................................................................................................. 5 Background ......................................................................................................................................... 5 Key Findings ........................................................................................................................................ 6 Consolidation................................................................................................................................... 6 Industry Practices ............................................................................................................................ 6 Intermodal Rail ................................................................................................................................ 6 Cross-dock/Warehousing for Boxcar moves ..................................................................................... 6 Exports/Puget Sound Ports .............................................................................................................. 7 Fundamental Facts .............................................................................................................................. 7 Tree Fruit Production ....................................................................................................................... 7 Markets ........................................................................................................................................... 7 Modes of Transport ......................................................................................................................... 8 Economic Impacts ............................................................................................................................ 8 Recommendations............................................................................................................................... 8 About the Port of Douglas County: ...................................................................................................... 9 Chapter 1: Purpose and Need for this Study .......................................................................................... 10 What is the purpose of the study? ..................................................................................................... 10 Who is sponsoring the study? ............................................................................................................ 10 What was the role of the Technical/Industry Advisory Group (TAC)? ................................................. 10 Where is the project region? ............................................................................................................. 11 What is cross-docking? What is transloading? ................................................................................... 11 How were potential users identified? ................................................................................................ 12 What was the purpose of the interviews? .......................................................................................... 12 Would an additional cross-dock facility stimulate economic growth?................................................. 13 Chapter 2: Existing Operations and Users of Cross Dock Facilities ......................................................... 14 Impact of Tree Fruit Industry to State of Washington ......................................................................... 14 Who controls the shipment of goods? ............................................................................................... 15 How does product ship to market? .................................................................................................... 16 Is there demand for a cross-dock facility? .......................................................................................... 17 Are there other cross-dock facilities in the area? ............................................................................... 19 Case Study: Port of Quincy – ColdTrain/Quincy, Washington............................................................. 19 Case Study: Port of Walla Walla - RailEx /Wallula, Washington ......................................................... 20 Chapter 3: Potential Cross-dock Sites and Design Concepts ................................................................... 22 What are considerations for a cross-dock facility? ............................................................................. 22

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Cross Dock Market Feasibility Study What are attributes of a viable facility? ............................................................................................. 22 What is the role of public investment ................................................................................................ 24 What sites were evaluated?............................................................................................................... 25 What is the estimated cost to build facility / rail improvements? ....................................................... 25 Chapter 4: Summary of Findings and Recommendations ....................................................................... 27 What were the findings from the interviews? .................................................................................... 27 Market Demand............................................................................................................................. 27 Industry Practices .......................................................................................................................... 27 Consolidation................................................................................................................................. 28 Intermodal Rail .............................................................................................................................. 28 Cross-dock/Warehousing for Boxcar moves ................................................................................... 29 Exports/Puget Sound Ports ............................................................................................................ 29 Rail Funding ................................................................................................................................... 30 Economic Viability ......................................................................................................................... 30 Port/Public Participation ................................................................................................................ 30 Regional Site Evaluation................................................................................................................. 30 Primary Recommendations................................................................................................................ 31 Provide Advocacy for North Central Washington Agriculture Industry ............................................ 31 Collaborate on Solutions to Increase Capacity for Intermodal Rail.................................................. 31 Promote the Export Market –Pursue Westbound Intermodal......................................................... 32 Support Private Sector Investment in New Facilities....................................................................... 32 Increase interaction with Yakima Valley ......................................................................................... 32 Hold 2015 Manufacturers/Shippers Summit .................................................................................. 32 Secondary Recommendations............................................................................................................ 32 Promote Agri-tourism activities ..................................................................................................... 32 Engage in Planning Efforts with State of Washington ..................................................................... 33 Consider a Software System for Consolidating Smaller loads .......................................................... 33 Appendices............................................................................................................................................ 35 References ........................................................................................................................................ 35 Fact Sheet.......................................................................................................................................... 36 Interview Questions .......................................................................................................................... 38 Summary of Meetings........................................................................................................................ 39 Summary of Contacts Interviewed ..................................................................................................... 41 What sites were evaluated?............................................................................................................... 42 Site A – Columbia Colstor Worthen Street, Wenatchee .................................................................. 43

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Cross Dock Market Feasibility Study Site B – Columbia Colstor Columbia Street, Wenatchee ................................................................. 43 Site C – Appleyard, South Wenatchee ............................................................................................ 45 Site D – Industrial Area, Rock Island ............................................................................................... 46

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Cross Dock Market Feasibility Study Executive Summary Background In June 2013, consultants completed a feasibility study intended to help decision makers evaluate the need for a new cross-dock facility and other strategic investments that would increase the competitiveness of the tree fruit industry in the region. The study focused on the tree-fruit industry in North Central Washington, which supplies 72 million boxes of apples domestically and 37 million cases to international markets each year. The Port of Douglas County held a Manufacturing Summit in 2010 that indicated strong interest in addressing infrastructure and/or other investments that would improve the economic competitiveness of the region’s agricultural commodity producers and shippers, primarily in the tree fruit industry. One specific recommendation that emerged from the Summit was for the Port to assist in the development of a freight cross dock or transloading facility that could be utilized by shippers throughout the Wenatchee Valley, the intent of which would be to increase the competitive position of growers and shippers relative to other tree fruit producing regions in the Pacific Northwest. A growing number of communities and economic interests in our state recognize that efficient freight movement is directly associated with the health of their local and regional economies, successfully balancing the demand for transportation capacity and service with the quantity supplied of those services and capacities. As a result, the public sector has made strategic investments that improve freight mobility through operational improvements and new public infrastructure. Cross dock warehouses and truck-rail facilities, where goods are transferred between truck and rail for shipment to markets, are intermodal examples of these improvements to freight movement in the region. The Project Team, led by Qvigstad & Associates, Inc., was retained to conduct the cross-dock feasibility study efforts in coordination with SCJ Alliance and a Port executive-level policy committee. The general purpose of this research was to investigate the potential economic viability of cross-dock, warehousing and/or intermodal truck-rail facilities for tree fruit growers in North Central Washington. The study was intended to help decision makers evaluate the need for a new cross-dock facility and other strategic investments or strategies that would increase the competitiveness of the region. After initial meetings, the Port Steering Committee agreed to center the study on the apple industry due to the volume and value of fruit shipped from the state. The study considered market demand, current industry practices and other attributes and characteristics associated with successful cross-dock activities as a framework for determining the economic feasibility of a new facility. Additional considerations for analyzing freight mobility and competitiveness include understanding whether consolidation of buying activities is a trend that will continue and how it affects transportation costs, understanding who benefits from consolidation and whether a cross-dock facility adds a “new” link in the logistics chain or creates efficiencies or cost savings, understanding local transportation activities, and understanding what types of public investment best support the growth of the fruit industry. Team members conducted outreach to industry representatives in the region to identify potential users and demand, considered complementary commodities that might benefit from a facility, and evaluated potential cross-dock sites, design concepts and models. Finally, the Project Team considered the role for a public entity, identifying risks associated with building a new cross-dock facility in the region.

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Cross Dock Market Feasibility Study Key Findings Based on current market conditions and demand, industry practices, attributes and characteristics associated with successful cross-dock activities, the findings seem to determine that an additional facility could enhance freight movement in the region, but would only provide economic benefits for smaller segments of shippers in the region. The study also indicates that the private sector is making strategic investments to consolidate activities in response to the questions raised at the 2010 Manufacturing Summit. The study and recommendations provide the Port of Douglas County with a great opportunity to understand how transportation impacts the movement of fruit from farm to market, for both domestic and export markets. From that understanding, the Port can develop strategies that address issues relating to the competitiveness of the Douglas, Chelan and Okanagan fruit industry. The following outlines key findings from the study. Consolidation An estimated 80% of the fruit is received, processed, packed, stored, and shipped by 16 major fruit cooperatives or consolidated facilities. The trend of consolidation will likely continue as the industry sees continued reduction in the number of growers. Consolidation of growers occurs as business owners are retiring and costs of production have increased from changes in health care, food safety and immigration regulations. Consolidation of packing houses has achieved savings from higher volumes for receiving, storage, food safety protocols, inventory control, and shipping product to market. Finally, consolidation among the marketing firms has resulted from competition and the buyer’s requirement to supply a diverse line of high quality, consistent product on a year-round basis. Industry Practices Industry practices affect the logistics decisions related to tree fruit. The packing warehouse provides growers cold storage, food safety protocols, inventory control and ultimately distribution services. Packing houses and marketing firms seek control and would likely lease or rent space over using public storage so they can monitor quality, directly manage inventory and provide certainty in complying with food safety regulations. Logistics decisions are predominantly driven by a few large buyers. Tight control over product mix by the packing warehouses and marketing firms drives the location of storage and thus, consolidation. Most of the larger packing houses have transportation and logistics professionals that have achieved efficiency in the logistics chain over the years. There could be some savings achieved through coordinated local movement from orchards to packing house – or from packing house to warehouse controlled by marketing agents as many of these move in less than truckload (LTL) quantities. With continued consolidation, there will be less demand for cross-docking activities, as buying patterns drive the natural consolidation of product at the packing houses. Intermodal Rail Shippers expressed interest in increasing freight movement via rail, particularly using intermodal services where containers are loaded at the packing house and delivered to an intermodal facility for movement to market. Service is driven by the destination market and volume contracts from buyers. As operators such as ColdTrain increase capacity and service additional eastern U.S. markets, volumes will likely increase for rail movements. If the private sector cannot provide the equipment/capacity required, there could be a role for public investment to help build the program. Cross-dock/Warehousing for Boxcar moves The short-line operator, Cascade & Columbia River Railroad (CSCD), a division of Genesee & Wyoming, Inc., is interested in servicing the tree-fruit industry and has been in discussion with a private sector Port of Douglas County

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Cross Dock Market Feasibility Study business looking at opening a facility to service growers in the region. The construction of a welldesigned and properly located cross-dock facility could improve economic viability and provide incentive for businesses in the region as a box-car move is the equivalent of 3.5 truckloads, resulting in significant savings for shippers/buyers on long-haul moves. Shippers must provide adequate volume and the mainline rail carrier, BNSF, needs to support a new service on the short line. Dependable service is critical to helping maintain existing businesses and to attract new industries to the area. Exports/Puget Sound Ports Westbound Intermodal Service has been explored in the past and the economics still don’t pencil out for short-haul rail movements that compete with low-cost drayage rates from trucking companies. Also of significance is the gap in transit time, where it can take days for a rail movement that trucks can deliver in a few hours. The success of a westbound rail service would depend on many factors, including adequate demand for the service from the local shippers, timely delivery, a competitive rate from and support from the Burlington Northern Santa Fe and agreements with the Puget Sound Ports. Apple crops are estimated to increase by 20% in production by 2015, which will drive demand for exports. Marketing firms and fruit brokers typically control the transportation for export shipments, selling on CIF (Cost, Insurance Freight) or C&F (Cost & Freight) terms. As gateway ports and I-90 become more congested, there may be interest in moving freight off highways and onto rail. Future studies for westbound intermodal service should include Central Washington origin / destination cargoes, and not be limited to tree fruit.

Fundamental Facts Tree Fruit Production The Wenatchee Valley tree fruit district stretches from Quincy in the south, Brewster to the north and includes Leavenworth, Cashmere, Chelan, and all of the fruit growing areas of Chelan and Douglas County in the Wenatchee and Columbia River valley areas.  The region represents 36 million of the statewide 110 million 40lb boxes of apples, 9.5 million of the 13 million 45lb boxes of pears,7 million of the 17.5 million 20lb boxes of cherries, and 500,000 boxes of other tree fruit.  Growers have achieved higher productivity from higher density plantings in orchards, resulting in an increase in boxes per acre. Coupled with new orchards, the industry expects a 20% increase in apple production by 2015. Markets Statewide, the tree fruit industry generates approximately $3.5 billion in annual sales with 97% of consumption outside Washington State.  Washington provides about one-half of all apples grown in the United States. Apples represented the top agricultural commodity in Washington and the highest value crop in the nation at an average of $1,221 billion for the period 2003-2007. The Chelan and Douglas regions share about $1.5 billion (2012 crop) of the tree fruit industry.  Export volumes for all countries in 2012 were over 37 million cases of fruit. Of the apples exported, approximately 15% of all fruit was trucked to Canada or Mexico, 10% moves through Puget Sound ports (8-10,000 containers) and 5% was trucked to Long Beach or railed to the East Coast ports for shipment to international markets.

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Cross Dock Market Feasibility Study Modes of Transport The dominant mode of transport is by truck including delivery to the seaports and airports totaling 200,000 truckloads of fruit leaving the district each year, averaging 250 partial or 200 full truckloads per day. Of these shipments, 70% is shipped out-of-state.  Containerized / Exports. Approximately 30% of the apple crop is exported with one-half of that trucked north to Canada or south to Mexico, 10% moves through Puget Sound ports and 5% moves to southern California or east coast ports.  Rail. Only 5% of the domestic fruit is shipped out of the district by rail.  Air-freight. With delivery to markets occurring in a short shipment window, 70% of the cherry shippers use west coast airports. Economic Impacts The Washington State Apple Commission’s 2012 Economic Impact Study notes that in 2010-2011, the apple industry:  generated $7.02 billion in direct, indirect and induced economic activity in 2010-2011,  accounted for an estimated 59,650 jobs and total wages of $1.95 billion  generated business income resulting in tax contributions of $188.7 million at the state and local level, with an estimated $300.3 million in Federal tax revenues, and  resulted in sales of approximately $919.4 million to the apple industry in goods and services, which represents about 377 jobs, and benefits other sectors of the Washington economy such as paperboard carton suppliers, truck transportation, cold storage/warehousing, construction and building maintenance, tree nurseries and banking.

Recommendations The study confirms that the transportation of tree fruit and other agricultural products are linked with the wider transportation in the region. Despite the lack of demand for a new facility at this time, the Port of Douglas County should collaborate with other ports, public and private sectors to facilitate improvements in infrastructure, capacity, changes in regulations and new initiatives in transportation. The following recommendations, grouped into Primary and Secondary categories, are discussed in the report. 1. Primary Recommendations a. Provide Advocacy for North Central Washington Agriculture Industry b. Collaborate on Solutions to Increase Capacity for Intermodal Rail c. Promote the Export Market –Pursue Westbound Intermodal d. Support Private Sector Investment in New Facilities e. Increase interaction with Yakima Valley f. Hold a Manufacturers/Shippers Summit in 2015 2. Secondary Recommendations a. Promote Agri-tourism activities b. Engage in Planning Efforts with State of Washington i. Regional Rail Plan ii. Washington State Department of Transportation Freight Rail Plan iii. Washington State Department of Transportation Origin-Destination Study iv. Monitor role of “Produce Railcar Train” Funding v. Explore southbound rail service c. Consider a Software System for Consolidating smaller (LTL) loads

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Cross Dock Market Feasibility Study About the Port of Douglas County: The Port of Douglas County takes pride in helping create jobs, overseeing public resources and serving as a leader in the community. We accomplish this task in a multitude of ways, including the development of our own business park at Pangborn Memorial Airport, installation of infrastructure for industrial growth, issuing bonds to further economic development projects, and assisting companies with retention or expansion needs. In a nutshell, we seek out and embrace strategic partnerships that will stimulate and enhance the community's economy and quality of life. For more information, visit our website at www.portofdouglas.org or call Lisa Parks, Executive Director @ 509.884.4700

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Cross Dock Market Feasibility Study Chapter 1: Purpose and Need for this Study What is the purpose of the study? In its efforts to seek economic development strategies that will increase the region’s competitiveness, the Port of Douglas County commissioned the study to analyze freight movement of tree fruit in the Wenatchee area and to identify trends related to transporting fruit from farm to market, for both domestic and export markets. Research focused on market demand in the apple sector and local transportation infrastructure. As part of this work, team members surveyed local and regional shippers and industry stakeholders on the utilization of transportation modes and facilities. The Project Team also evaluated general market and economic considerations. Specific elements of the study included the following. 1. Research and analyze market conditions and freight movement in the region to determine whether cross-docking, transloading or consolidating cargoes would achieve a lower cost model for growers and shippers in the region. Research objectives included: a. Understanding existing operations and users in the region including products, volumes, market destinations and modes of transport; b. Understanding potential users and demand for services including industry trends and changes in market; c. Identifying infrastructure for current and projected volumes of freight movement; and d. Evaluating economic considerations for developing cross dock facilities. 2. Describe potential facility attributes including: a. Case studies and business models; b. Address the role of public sector in financing and/or operations; c. Identify risks associated with building and operating a new cross dock facility. 3. Select potential cross-dock sites and evaluate design concepts consistent with the project development scenario. a. Include alternatives for location of a facility and design concepts; 4. Provide a basis for strategies the Port can most effectively implement to achieve its economic development goals. a. Identification of challenges and/or barriers to the potential success of a facility. b. Specific factors leading to the Project Team’s conclusions. c. Recommended strategies that improve freight mobility in the region.

Who is sponsoring the study? The 2011 Washington State Legislature provided the Washington State Department of Transportation (WSDOT) and Port of Douglas County with up to $60,000 to study the need for a new cross-dock facility. Using resources secured by Representative Mike Armstrong in the State’s transportation budget, the Port of Douglas County solicited proposals and selected a consulting team, led by Qvigstad & Associates, Inc., to conduct a study to assess the economic feasibility of a cross dock/trans-loading facility for the tree fruit industry in the region.

What was the role of the Technical/Industry Advisory Group (TAC)? In consultation with the Port, a Technical/ Industry Advisory Committee (TAC) of representatives of the local and state public sector transportation agencies, private businesses and business associations involved in transportation of tree fruit from farm to market was convened for peer review. The committee met early in the process and met once again to provide input on the findings. The TAC also Port of Douglas County

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Cross Dock Market Feasibility Study provided a forum for feedback, guidance and advice to the Project Team at key points during the crossdock feasibility study process, and served as a sounding board for the Project Team to share and discuss ideas and findings, provide guidance, critiques and suggestions on report findings and materials, anticipate reactions and concerns, and explore how these might be addressed.

Where is the project region? The “region” includes Douglas County, Chelan County, and western Grant County to the Port of Quincy.

What is cross-docking? What is transloading? Cross-docking is a practice in logistics of unloading goods from an incoming truck, trailer or railroad car and loading the goods directly into outbound trucks, trailers, or rail cars, with little or no storage involved. It is used to change type of conveyance, to sort material intended for different destinations, or to combine material from different origins into transport vehicles (or containers) with the same, or similar destination. Cross-dock operations were first pioneered in the US trucking industry in the 1930s, and have been in continuous use in less than truckload (LTL) operations ever since. The US military began utilizing cross-dock operations in the 1950s. Distributors in the retail sector increasingly utilized cross-docks in the late 1980s. There are several types of cross-dock facilities including:  consolidation arrangements, where a variety of smaller shipments are combined into one larger shipment for economy of transport;  deconsolidation arrangements, where large shipments (e.g. railcar lots) are broken down into smaller lots for ease of delivery; and  “hub and spoke” facilities, where materials are brought in to one central location and then sorted for delivery to a variety of destinations Common in the Less than Truckload (LTL) trucking industry, cargo often moves from one transport vehicle directly into another, with minimal or no warehousing. In the retail practice, cross-docking operations may utilize staging areas where inbound materials are sorted, consolidated, and stored until the outbound shipment is complete and ready to ship. Advantages of cross-docking include:  streamlining the supply chain from point of origin to point of sale; Port of Douglas County

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Cross Dock Market Feasibility Study   

reducing handling costs, operating costs, and the storage of inventory; increasing transit time to market destination; and/or providing “just in time” delivery to reduce or eliminate warehousing costs and to free up retail sales space.

Key elements for successful cross-docking include adequate demand for services, a lack of customer storage capacities, an adequate transport fleet to operate / deliver to markets, a computerized inventory and logistics system, and adequate equipment and experience to handle freight without product damage Transloading is the process of transferring cargo from one mode of transportation to another and is most commonly employed when one mode cannot be used for the entire trip, such as international or intermodal shipments from one inland point to another. Transport modes may include truck, trailer, rail, air. Since transfer requires handling of goods, it causes expense and risk of damage. Therefore, transloading facilities are designed with the intent of minimizing the handling. Due to differing capacities of the different modes, the facilities typically require some storage facility such as warehouses or rail yards. Intermodal transport limits handling by using standardized containers or trailers that are handled as units and can serve for storage, if needed. Specialized equipment is required to handle the storage containers. The Project Team considered shipper needs for cross-dock, transloading and intermodal facilities in the feasibility study.

How were potential users identified? The project team worked with WSDOT, the Port of Douglas County and the Port’s Steering Committee and Technical/Industry Advisory Committee to identify shippers and potential cross-dock facility users. Between January and April 2013, formal and informal interviews with some of these customers were conducted. The focus of this study was to determine if there was any economic benefit for the tree fruit industry to have an additional cross dock / transloading facility available in or near the Wenatchee tree fruit district. Based on the volume of tree fruit being moved from the Wenatchee district to the domestic market, exports to the Canadian, Mexico and overseas markets, and comparatively low volumes of other products moving through the area, it seemed the primary focus for benefit should be the apple industry. This was not to preclude the potential of utilizing a facility to share with other commodity types if a convenient location nearby made such a facility work.

What was the purpose of the interviews? The Project Team interviewed a cross section of the supply chain, from growers, packing warehouses and consolidated facilities, marketing firms and brokers, transportation companies, purchasers of tree fruit and cross dock and transloading facilities. Not all existing or potential shippers were interviewed due to time constraints. The purpose of the customer interviews was to understand current industry needs, rail, truck and intermodal volumes, potential changes in volumes, and the impact that a new cross-dock facility might have on their particular business and the industry now and in the future. Each customer was provided with background information on the feasibility study during the interviews.

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Cross Dock Market Feasibility Study Would an additional cross-dock facility stimulate economic growth? The findings seem to determine that establishing a cross dock facility could enhance freight movement in the region, but would only provide economic benefits for one segment of the shippers in the region, namely the smaller shippers ones. The Cascade & Columbia River Railroad (CSCD), a short-line rail service that is operated by Genesee & Wyoming, Inc. and serviced by Burlington Northern Santa Fe (BNSF), has been in discussions with a local business to establish a new rail loading site between Wenatchee and Chelan that could serve the region. The service would utilize BNSF refrigerated boxcars and load on-site, transporting fruit to eastern markets. The projected volume is 300 cars per year with approximately $200 per truckload in cost savings. The CSCD short-line currently serves forest products and aggregate customers, both denser, lower value products not requiring expedited delivery to market. The BNSF will need to support the service by providing equipment in a timely manner and competitive pricing. The warehouse, owned by the orchard, has rail access, but the rail spur needs rehabilitation, which is costly. The warehouse owner is open to the idea of making a public transload for other tree fruit growers in the area. There is near-term funding potential through WSDOT for the “Produce Railcar Pool Program”. The Washington Produce Railcar Pool Program provides refrigerated boxcar equipment to Washington State shippers. The State leases the rail equipment and then provides the equipment at a reasonable per use fee. This Program, intended to be used to enable private development the opportunity to develop a sustaining business plan by lowering the cost to procure equipment during the start-up phase of the business plan, is currently non-operational. WSDOT is assessing if there are any opportunities to partner with private business and support shippers across the State of Washington. This funding opportunity could serve as seed money for a new service to the mid-west / east coast.

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Cross Dock Market Feasibility Study Chapter 2: Existing Operations and Users of Cross Dock Facilities The complexity of how tree fruit products reach consumers requires an understanding of the role of the shipper in the supply chain. Most people equate “growers” to orchardist or farmers that grow the crop they are consuming. In terms of transportation and logistics, tree fruit is seldom marketed directly by or shipped to market by an individual orchardist or grower. Most orchardists utilize a fruit packing and warehouse facility that processes, packs and markets fruit in preparation for shipment. When we talk of shippers, it is in reference to this large packing warehouse facility that prepares the product for shipment to large purchasers such as grocery store chains. The Wenatchee Valley tree fruit district is a fairly large geographic region that stretches from Quincy to the south, Brewster to the north and includes Leavenworth, Cashmere, Chelan, and all of the fruit growing areas of Chelan and Douglas County in the Wenatchee and Columbia River valley areas. The Chelan and Douglas regions share about $1.5 billion (2012 crop) of the tree fruit industry. The statewide industry generates approximately $3.5 billion in annual sales and 97% of that is consumed outside Washington State. The Wenatchee District represents 36 million of the state-wide 110 million 40lb boxes of apples, 9.5 million of the 13 million 45lb boxes of pears, 7 million of the 17.5 million 20lb boxes of cherries, and 500,000 boxes of other fruit. With delivery to markets occurring in a short shipment window, 70% of the cherries use west coast airports. Of the approximately 30% of the apple crop that is exported, one-half (15%) is trucked north to Canada or south to Mexico, 10% moves through Puget Sound ports and 5% moves to southern California or east coast ports. Only 5% of the domestic fruit is shipped out of the district by rail. The dominant mode of transport is by truck including delivery to the seaports and airports. According to the Wenatchee Valley Traffic Association, the statistics above equate to approximately 200,000 truckloads of fruit leaving the district each year. The industry has seen a trend towards consolidation over the past years. There has been consolidation of growers as business owners are retiring, and costs of production have increased from changes in health care, food safety and immigration regulations. Growers have achieved higher productivity from higher density in orchards, resulting in an increase in boxes per acre. The industry has also seen a consolidation of packing houses that achieves savings in the higher volumes for receiving, storage, food safety protocols, inventory control, and shipping product to market. Finally, consolidation among the marketing firms has resulted from competition and the buyer’s requirement to supply a diverse line of high quality, consistent product on a year-round basis.

Impact of Tree Fruit Industry to State of Washington The Washington State Apple Commission published a report, “Washington Apple Industry Economic Contributors”, in September 2012. The findings outline how Washington’s apple industry is a major contributor of income, employment and tax revenues to the state’s economy. According to the report, the industry generated $7.02 billion in direct, indirect and induced economic activity in 2010-2011, accounted for an estimated 59,650 jobs and total wages of $1.95 billion. The business income resulted in tax contributions of $188.7 million at the state and local level, with an estimated $300.3 million in Federal tax revenues. Several other sectors of the Washington economy benefit from the apple industry. These include paperboard carton suppliers, truck transportation, cold storage/warehousing, construction and building maintenance, tree nurseries and banking. The report indicates sales of approximately $919.4 million to the apple industry in goods and services, which represent about 377 jobs. Port of Douglas County

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Cross Dock Market Feasibility Study Washington provides about one-half of apples grown in the United States. The Washington State Department of Agriculture report, ”Future of Farming”, notes that apples represented the top agricultural commodity in Washington and the highest value crop in the nation at an average of $1,221 billion for the period 2003-2007.

Who controls the shipment of goods? In most cases, the grower arranges for local transport of product from orchard to packing house at the time of harvest. There is a high level of cooperation among growers in making transportation arrangements. To add efficiency in local trucking, some carriers drop trailers at the orchard and provide a drop and pick-up arrangement. As growers send product from orchard to the packing house, the warehouse consolidates products at the cold storage facility. Most of the tree fruit grown in the district is processed through large consolidated facilities. Currently, 80% of the fruit is received, processed, packed, stored, and shipped by 16 major fruit cooperatives or consolidated facilities. Those sixteen companies are represented by about 8 marketing companies. Orders for fruit are placed through the marketing companies, usually for a combination of varieties. Based on our discussions with industry stakeholders, there can be eight or more varieties of apples on a single truckload. Major growers utilize multiple warehouses in various geographical locations, providing a variety of product mix and inventory for sales to multiple buyers. Other smaller growers utilize fruit stands and have direct agreements with buyers, frequently moving fruit in less than truck-load quantities. Only 5-6 percent of the growers move product from location to location, as most have long-term arrangements or agreements with the packing houses. For domestic shipments, the buyer typically arranges for transportation, purchasing products on FOB (Freight On Board) packing house terms of sale. For export shipments, the marketing firm or broker arranges for transportation, with a delivered price to the foreign port of entry, using CIF (Cost, Insurance, and Freight) or C&F (Cost, Freight) terms of sale Most marketing firms and brokers have exclusive sales arrangements with buyers that are negotiated annually or bi-annually. Supermarkets have been the strongest driver towards consolidation of marketing firms and packing houses, as they require a onestop, one-shop transaction and prefer to coordinate with a single point-ofcontact for transactions comprised of a mix of products.

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Cross Dock Market Feasibility Study Several apple companies are integrated with orchards, packing house and marketing activities occurring within the organization. These larger firms have professional transportation managers in-house that arrange for logistics needs. At times, the marketers cannot fill a truck with all varieties the purchasers want from a single warehouse. Due to the high cost of less-than-truckload shipments, many warehouses (and other districts like Yakima) work cooperatively to consolidate shipments, often using cross-docking to build full truckloads. Over the last ten years, most of the major warehouse facilities have expanded and now provide their own cross dock facilities. An example is a new facility expansion under construction in the Wenatchee area that will have eleven docks with the capacity to expand to 30+ docks. Most of the individuals interviewed agreed there will be continued consolidation in the industry, resulting in a reduction in the number of growers. Both the warehouse and marketing firms seek control of product, so there is little demand for renting warehouse space or using a public facility. The need to monitor product to meet food safety regulations, coupled with providing adequate room to grow drives private ownership or leasing of facilities.

How does product ship to market? Based on interviews, most fruit ships via truck and these shipments are in full truckload (FTL) or full container load (FCL) quantities. There are occasional less than truckload (LTL) movements to short-haul destinations. Buying relationships rather than logistics typically drive the decision to ship in LTL quantities. The logistics of having product available at the warehouse is handled by the packing house, but in most cases the purchaser arranges for shipment to market. The buyers utilize their own trucks, truck brokers or contract haulers at the time orders are placed. The warehouse then stages the products by variety and volume for shipment. If the warehouse does not have all the varieties requested, product may be delivered from another warehouse or an additional stop will be made at a secondary location. These additional stops to pick up fruit in the district can require a surcharge of $200.00 per truck stop. The region has access to BNSF’s main-line rail track that connects with the national rail network and access within the region using the CSCD short-line rail service referenced in Chapter 1. Union Pacific Railroad (UP) operates in other regions of the state, but does not provide direct service to the Wenatchee region. With limited rail service, capacity and routes in Washington State, the Class 1 railroads (BNSF & UP) prefer to utilize the existing capacity for large volume unit trains that carry longdistance, out of state shipments. This, coupled with longer transit times, results in agricultural products generally moving by truck. Of the rail movements, shippers indicated that some shipments originate at the packing house and loaded to boxcar while others are trucked to the RailEx facility in Wallula and transloaded to railcars. More recently, shippers have loaded shipping containers at the packing house and drayed them to Quincy for loading to intermodal train service using the “ColdTrain” intermodal trailer program. The packing house arranges for transportation to the intermodal yard. Many shippers prefer the intermodal shipping model over box-cars as the extra handling and loading of box-cars can result in product damage and bottlenecks in shipping. Most interviewed saw uncapped potential for increasing intermodal activity as the carrier offers service to additional eastern markets and increases equipment capacity. A projected increase in crop production of 20% in the coming years will drive interest in increasing export volumes to overseas markets. Addressing international trade barriers, politics, and providing Port of Douglas County

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Cross Dock Market Feasibility Study equal access to markets is a high priority to the tree fruit industry. Interviewees cited specific trade barriers such as concern over the volume of low value Chinese apples completing in U.S. markets, high tariffs on exports to India, quota limitations, and requirements for SGS inspections on fruit exports to Indonesia. Along with trade policy, efficient freight mobility will play a role in creating a competitive advantage for Washington exporters in the years to come. The feasibility study focused on tree-fruit, but it is important to note the importance of back-haul cargoes and compatible cargoes that affect pricing and the creation of a load center. In a review of rail rates, BNSF’s Intermodal Advisor Search estimated intermodal service to the mid-west at 17-20% less than the current trucking rate. To understand current trucking trends, Washington State University (WSU) is conducting an origindestination study on behalf of the Washington State Department of Transportation (WSDOT) that will be updated later this year. A previous WSDOT freight study indicates an average of 846 trucks depart from the Wenatchee area with less than 50 trips destined into the area and that over one-half of all freight trip origins are at warehouses and distribution centers with only 12 percent coming directly from farms. The intended destinations for truck trips originating in region are distributed in roughly equal proportions between Eastern Washington, Western Washington and out of state. Most of the trips to Western Washington are for local consumption or for export through the Ports of Seattle and Tacoma. Freight trucks in the region use several highway corridors to move goods to market. US 97 and US 2 are primary freight arteries for cargo movement within the area, and shipments moving out of the area most likely connect with I-90 for east-west and I-82 for southbound shipments.

Is there demand for a cross-dock facility? Interviews with industry representatives were conducted by phone and in person. The purpose was to determine if there is a demand for a cross-dock facility, whether tree fruit shippers would use this type of facility, and whether there would be a direct benefit to the industry. Predominately, the larger consolidated facilities were found to handle their own cross docking and have invested substantial resources over the last ten years to do so. In a few instances, smaller shippers with high export volumes felt there may be some benefit to have such a facility. The Project Team considered both cross-dock and intermodal facilities in our discussions. An intermodal facility is different than a cross-dock facility because it handles trailers and containers that can be easily transferred between trucks, trains, and ships. A cross-dock facility may handle containers, but also handles other freight like equipment, lumber, and other goods that are typically not transported in containers. There was significant interest in increased access to intermodal freight movement. During the interviews, concerns were raised over who would construct and operate a new facility, whether loads would be handled correctly and how overflow pallets would be consolidated for a later shipment. The Project Team also heard apprehension over the Class-1 railroad’s requirement for Port of Douglas County

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Cross Dock Market Feasibility Study minimum volume guarantees (as much as 30 loads per day) to supply refrigerated box cars. In a volatile market, shippers expressed reluctance in making guarantees on expensive refrigerated box cars. Questions were also raised as to whether a new facility could guarantee enough volume to support these volume guarantees. Based on the interviews and data collection, the Project Team found there is modest demand for a cross-dock facility and it appears the private sector is meeting this demand. It is important to recognize the limited interest may reflect current industry conditions, where markets are stronger than normal due to crop failures in New York and Michigan, shipping volumes and prices are higher, and fuel prices are lower than in 2010. With the industry projecting a 20% increase in production in coming years, coupled with the return of Michigan and New York production, increased competition may drive renewed interest in alternative logistics solutions. As the study focused on the tree-fruit industry, the project team did not address how a cross-dock facility could attract other industry in the region. Nonetheless, there are only a few sites where large parcels of land are available and rail service to the national network is provided. Access to rail transportation can be an important factor for many industries when they are looking to relocate or expand operations. In summary, the majority of shippers, mid-size companies with larger than average exports and larger volume warehouses, do not support a new facility. There is interest from approximately 20% of the apple producing market, typically smaller warehouses that would benefit from use a cross-dock facility. This includes those:  Contracting directly with large consumers like public school districts;  Delivering their own fruit to markets such as Pike Place Market and smaller, independent fruit stands; and  Selling fruit at farmers markets.

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Cross Dock Market Feasibility Study Are there other cross-dock facilities in the area? In additional to the packing warehouses that serve as consolidation centers for shipment of tree fruit to markets, there are several facilities that offer cross-dock services to shippers in the region. One of several Columbia Colstor warehouses, the Wenatchee cold storage facility on Worthen Street currently provides cross-dock services for Chelan Fresh and one of its’ largest customers, Kroger. The facility covers five street blocks on rail and has room on-site to expand. The Burlington Northern Santa Fe (BNSF) provides a daily switch to the facility, allowing for product to be shipped or received on a regular basis. Columbia Colstor offers a variety of temperature controlled storage options for its clients including state of the art inventory control, import/export services, temperature reports, food safety programs with onsite United States Department of Agriculture (USDA), United States Department of Commerce (USDC) inspection facilities, organic certified facilities and Electronic Data Interchange (EDI) support. The Columbia Colstor management team has over 20 years in the industry with established relationships. The Columbia Colstor facility in Quincy, adjacent to the Port of Quincy’s Intermodal Yard, offers up to one million square feet of cold storage warehousing, distribution, and a 3000’ transloading dock with 30,000 square feet of cooler space at its International Intermodal Warehouse, with a spur directly to the intermodal facility. Although there is ample capacity, Columbia Colstor has not seen regular cross-dock activity for apples as most shippers load containers directly at the packing house.

Case Study: Port of Quincy – ColdTrain/Quincy, Washington The Port of Quincy, known formally as Grant County Port District No. 1, developed an Inland Terminal Industrial Park in 2004. The facility is located on the BNSF mainline with close proximity to the Interstate 90 corridor and Highway 280, which provides access for North Central Washington agricultural growers and food processors to markets both east and west. It was designed to avoid congestion on Interstate 90 in the Seattle Metro area and provide a location where truck traffic can drop and pick up freight from and to the region, allowing the efficiencies of short haul rail to be realized. The intermodal facility was funded in part from Port, State and Federal sources, so the project is a good example of a private/public partnership. Initially managed and marketed by Northwest Container Services, it was intended to serve as an intermodal center replacing existing truck movements of fresh and frozen agricultural products from the local area to the Puget Sound ports. The concept also envisioned high volumes of backhauls bringing containers to the Quincy port for distribution via truck to markets in the south, east and southeast. The westbound rail service was not successful, but in 2010, Rail Logistics launched the ColdTrain service in partnership with BNSF and the Port of Quincy. The “ColdTrain” intermodal service provides shippers access to the Chicago and eastern markets twice daily, six days a week. Transit times range from fourday service to Chicago, five day service into the Ohio Valley and delivery to East Coast markets in six days. In addition to a reliable, efficient and competitive service to mid-west and eastern markets, the program promotes the environmental benefits of shifting from truck to rail, which results in one-half the carbon emissions.

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The service was driven by a destination market. The intermodal carrier obtained the necessary volume commitment from large eastern grocers to commence a regular service (weekly train). The business model mirrors the “Fruit Express” program operated a decade ago by Amtrak. Under this program, refrigerated cars were hooked up to the back of passenger trains running to the mid-west and east coast on a set schedule and lasted until federal budget cuts eliminated the program funding. Under the ColdTrain program, the Port provides the physical facility, rail track, rail siding and loading equipment and Rail Logistics owns the 300+ refrigerated containers and chassis and manages the transportation to destination markets. According to Rail Logistics President Steve Lawson, the service has been successful moving fresh apples, cherries, pears, sweet corn, carrots, potatoes and onions. Approximately 80 percent of the region’s major apple shippers use ColdTrain which equates to approximately 70 percent of the eastbound cargo. The program has also been successful in securing backhaul deliveries to central Washington for distribution. A key to the ColdTrain program’s success has been the commitment to service from major buyers in the mid-west and on the east coast. The Port intermodal center has capacity to expand the site with additional warehousing, bulk and retail distribution centers and container loading / repack facilities.

Case Study: Port of Walla Walla - RailEx /Wallula, Washington RailEx, located on Port of Walla Walla property in Wallula, Washington, offers a state-of-the-art, refrigerated unit train operating a five-day coast-to-coast rail transit time with expedited short-haul delivery to ensure on-time delivery. The RailEx operation includes the following features.  Separate computer controlled temperature zones during storage and in transit enable the simultaneous shipment of mixed commodities and multi-ethylene zones to regulate the product life.  Freight forward distribution offers free temperature controlled storage and door to door service, with a non-stop schedule and multi-stop pick up.  Inventory control and tracking through RF infrastructure and technology. Every pallet is labeled, barcoded and tracked via GPS system.  Security features: 24 hour security monitored facility, camera surveillance and digital video recording, sealed box cars, restricted access and facilities are AIB, SQF, and HACCP certified

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A key to RailEx’s success is the commitment of shippers to consolidation in the region. This is an example where the private sector has responded to the market, recently expanding to meet the wine industry’s needs. The RailEx system currently features:  Three refrigerated, mega-transload distribution centers; in Delano, California; Wallula, Washington; and Rotterdam, New York  Over 225,000 square feet of separate computer controlled temperature zones  Five (5) day coast-to-coast rail transit  Storage services at each distribution center  Temperature controlled unit trains transport refrigerated merchandise each week  Unit trains that consist of 64-foot series cars with fresh air exchange, GPS tracking and temperature control  The latest technologies with its own infrastructure and private non-stop rail service to ensure multiple weekly departures on a consistent schedule 52 weeks a year

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Cross Dock Market Feasibility Study Chapter 3: Potential Cross-dock Sites and Design Concepts What are considerations for a cross-dock facility? A cross-dock facility that serves the tree-fruit industry would need to be rail serviced and have access to the major highways in the region, while also located in a high volume production area. The facility requires a staging area where trucks are parked to transfer cargo, a temperature controlled staging and/or storage area, rail spurs and railcar availability, and appropriate rate agreements with the relevant railroad companies. The operator would require a truck fleet offering competitive rates, the ability to stage and manage that truck fleet and to grow the business volume by increasing the range of the trucks. Depending on the ownership of the facility, the truck fleet could be for-hire or proprietary. Substantial initial investment is required for the development of a facility and ongoing marketing efforts are needed to entice shippers to try the new transportation alternative. The facility would initially operate at an annual loss with the expectation that as volume grows the per unit costs decrease and total revenue increases, bringing the operation to generate a profit.

What are attributes of a viable facility? The Project Team utilized a list of attributes in the WSU report, “Determining the potential economic viability of inter-modal truck-rail facilities in Washington state”, which identifies characteristics that influence operational or logistical efficiency for intermodal facilities and designs that improve transportation efficiencies. Site selection characteristics include the spatial relationship between cross-dock and production / consumption centers, the existence and proximity of competing terminals, access to existing transportation infrastructure, costs and volume through-put. Terminal layout, length of rail sidings, amount of storage, loading and driving lanes for trucks, and stacking capacity are driven by cargo volumes and needed capacity. Other considerations for cross-docking facilities include cost of capital outlay and construction cost, access to or cost of adding a rail spur to the property, and highway access to markets. Operational elements include labor productivity, adequate volumes, competition/pricing, and opportunities for freight flows both into and out of the facility. Shippers of apples, a high-value perishable commodity, are more likely to incorporate speed and reliability into the transportation decision as opposed to shippers of low-value commodities. Distance also influences the demand for cross-docking facilities. The incentive to utilize rail for the long-range efficiencies increases with distance while the demand for truck movements decline. In summary, a viable freight facility results from competitive pricing and volumes that generate a Return on Investment (ROI) or Internal Rate of Return (IRR) to maintain the business and justify continued renovation and reinvestment. Larger volumes put through a facility will lead to lower costs per handling unit and higher revenues.

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Cross Dock Market Feasibility Study The WSU study references three key drivers, identified below in Figure 1.  Place in Market  Sustainable Business Entity  Elements of the Supply Chain Figure 1: Key Drivers of a Sustainable Intermodal Facility

A Place in a Market

Sustainable Freight Facility

A Sustainable Business Entity

Elements in a Supply Chain

   

Market proximity Volume and scale Demand Perceived value for freight users

 Volume  Efficiency & control  Fixed and variable cost      

Lowest cost path for users Supply chain cost elements Market share and volume Connectivity Control Fixed and variable cost

The WSU report referenced three models relevant to the State of Washington: Agricultural Gathering and Assembly, Port Clearing Inland Terminal and Distribution Center. Five attributes were found to be critical to the Agricultural Assembly function, and the availability of adequate land/space was critical in all case studies. Proximity to the production area was probably the most critical in this model. Other variables that were critical to this case were found to be clearly established demand opportunities, ratio of transportation rate to the value of the product, and public/private partnership. The larger, more complex model of Port Clearing Inland Terminal required additional attributes critical to its success: the availability of air and water, and the availability of direct rail service and the construction of adequate capacity in the inland terminal. The magnitude of public investment, the amount of automation and the level of distribution efficiencies were also found critical. The Distribution Center had the most attributes established as critical. Attributes not mentioned above that were critical in this situation were access to interstate highway, the capacity of the facility, the distance to the distribution market, quality of life, expansion capacity and a good taxing/zoning incentive culture. All of the attributes were found to have value to this type of inter-modal center, to varying degrees. The WSU report also notes that the viability of the intermodal centers increases when the traffic flow of the agricultural gathering model is combined with the port clearing model, generating backhauls to each respective movement. The Port of Quincy’s Intermodal Yard has attributes of these two models. Port of Douglas County

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Cross Dock Market Feasibility Study What is the role of public investment As referenced in the Port of Quincy and Rail-Ex models, some degree of public funding participation through the investment in infrastructure can be a positive attribute aiding economic viability. Public benefits arise from the value of reduced highway congestion, reduced air pollution, reduced chances of accidents, reduced fuel dependence, and reduced cost of maintaining and expanding the highways and economic development. The availability of public investment can make these public benefits and achievement of private economic viability occur earlier and there is benefit from public investment when long term private investment is not initially feasible. In some cases, sustained public investment is made because of the public benefits achieved. The WSU Freight Policy study notes a common divergence between expected costs and revenues in the early stages of new investment projects, as illustrated below in Figure 3. Total costs, on a private basis, typically exceed total revenues up to some expected volume v* where break-even occurs and past which positive returns, again on a private basis, insure economic viability and success. However, the top dotted line indicates a magnitude of public benefits associated with the project which, when added to the private revenue, indicates that economic feasibility from societies point of view occurs far earlier, at v+. The amount of public participation to help the investment achieve long term viability is that area above the total cost line and below the revenue line, up till v*. If the traffic level of v* isn’t reached, public participation may need to be continued. This diagram in Figure 3 portrays the viability of public and private investment. In some investments, the case for sustained public investment can be made because of the public benefits achieved. Figure 3: Conceptual Relationship between Private and Public Participation

$ Private Revenue and Public Benefits

Total Private Revenue Viability Total Costs

Public Participation

V+

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V*

Volume

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Cross Dock Market Feasibility Study What sites were evaluated? The project team identified four potential sites for a cross-dock facility. A. Columbia Coldstor Worthen Street, Wenatchee B. Columbia Coldstor Columbia Street, Wenatchee C. Appleyard, South Wenatchee D. Industrial Area, Rock Island All of the potential sites are located within an active industrial area, and all of the property is zoned for industrial land use. Prior to conducting a site review of the area, project planners reviewed GIS maps prepared by the Douglas County Transportation and Land Services. The project team then visited the project area and evaluated existing conditions at the potential sites. This review did not include detailed site investigations such as geotechnical or environmental evaluations, instead focusing on rail and road access, general topography and location. In some cases, access to individual sites was not available, so information for the site was based on information in maps, photographs, and documents. Details on the sites are included in the Appendices. Figure 2: Existing and Potential Cross Dock Sites

What is the estimated cost to build facility / rail improvements? According to Reed Construction Data, the cost to construct a warehouse facility (in 2013 dollars), assuming tilt-up concrete panels and steel frame construction, runs between $85-$95 per square foot. Galvanized steel siding and a steel frame would run between $100 -$110 per square foot. Significant site work, environmental remediation, off-site improvements (such as roadway or intersection Port of Douglas County

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Cross Dock Market Feasibility Study improvements) and demolition would add to these costs. All of the sites evaluated would require some level of improvement beyond construction of the trans-load building. The cost of constructing new rail sidings can vary depending on who does the construction and the complexity of the system (whether there are switches, topographical challenges, etc., or a simple section of track on open, flat land). Costs typically fall between $1 million and $2 million a mile. Based on these costs, a cross dock facility with a 100,000 square foot building and a modest amount of track work would cost approximately $10 million, exclusive of the land and site work.

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Cross Dock Market Feasibility Study Chapter 4: Summary of Findings and Recommendations What were the findings from the interviews? Evaluating demand for transportation capacity and service with the current supply of service did not result in significant increase in freight mobility for the Central Washington tree fruit industry. Although the Port of Douglas County could play a role in investing in new public infrastructure, it would only serve one segment of the tree fruit industry. The policy and operational conclusions are drawn from the outreach and data analyzed for the feasibility study and summarized below. Market Demand The Wenatchee and Yakima areas supplied 96% of the US market with apples in 2012. Market and demand for freight services for the tree fruit industry is the most important element for assessing the viability of an intermodal/cross-dock facility. The greater Wenatchee area ships approximately 250 partial/200 full truckloads per day, seven days per week, 52 weeks per year. Of these shipments, 70% is shipped out-of-state. Of the apples exported, approximately with one-half of all fruit is trucked to Canada or Mexico, 10% moves through Puget Sound ports and 5% trucked to Long Beach or railed to the East Coast ports for shipment to international markets. Apples moving through the Puget Sound ports total 8-10,000 containers per year. The West Valley Traffic Association (WVTA)’s report, “A Statistical Review”, indicates the total export volume for all countries in 2012 was over 37 million cases of fruit. As the private sector has achieved a high level of efficiency for most freight movement, many questioned whether demand existed for a new facility. The interviews generated the following observations. 1. The industry has already invested substantial resources to provide efficient services for their growers. 2. Major warehouses do not see a benefit to them by providing a centralized transloading facility. 3. A few smaller warehouses do see the potential benefit of a centralized shipping facility. 4. There are private ventures that provide this service to some extent in the Wenatchee Valley and Quincy. 5. One Wenatchee valley warehouse is doing majority of the cross docking for northern district growers (Chelan and Brewster). 6. There is uncertainty who would provide such a facility and at what cost to the industry. 7. There has been some utilization of both the ColdTrain program from Quincy and RailEx facilities at the Port of Walla Walla in Wallula. 8. Generally, all respondents felt centralized pickup services may have worked better ten years ago. 9. No respondent could commit to utilizing a new facility. Industry Practices The Project Team observed several industry practices that effect the logistics decisions related to tree fruit. 1. Most transactions delivered “ex-packing house”, so there is little incentive for the grower to have a vested interest in freight movement. The packing house provides the growers food safety protocols, inventory control and ultimately distribution services. 2. Logistics decisions are predominantly driven by a few large buyers. Most sales are full truck load/trailer (FTL) quantities. Ten packing houses control 80% of the fruit.

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Cross Dock Market Feasibility Study 3. Tight control over product mix by packing warehouses and marketing firms often drives the location of consolidation, rather than efficiency of for freight movement. 4. There could be some savings achieved through coordinated local movement from orchards to packing house – or from packing house to warehouse controlled by marketing agents as many of these move in less than truckload (LTL) quantities. Only 5-6% of the growers move their inventories from location to location. Most have long arrangements. 5. Most of the larger grower/packing houses have transportation and logistics professionals that have achieved efficiency in the logistics chain over the years. Consolidation The Project Team consistently heard that consolidation is a trend among tree fruit growers, packers, and marketing agents and most warehouses already provide cross docking services for their customers. 1. The majority (80% of the total volume) of tree fruit is processed, stored and shipped from 16 consolidated warehouses. 2. Of the remaining 20% of shippers, many are not represented by marketing firms. Anecdotal information indicates that orchardist run fruit stands, individually market to users such as State stores for schools, public markets and farmer’s markets. 3. The majority of the marketing is done by outside (8) firms rather than directly from the warehouses. There has been consolidation in the industry for the past 10-15 years. The following factors have contributed to the trend. 1. The apple industry needs to provide buyers a year-round supply of inventory, thus relationships and tight control over quality and product mix by the packing houses and marketing firms drive the location and thus results in consolidation of product. 2. Aging management and changes in regulatory policies facing tree fruit growers has resulted in higher production costs and smaller operations to retire and sell their orchards to larger growers in the area. The trend of consolidation will likely continue as the industry sees continued reduction in the number of growers. 3. The industry has also seen a trend in increasing acreage, higher density and production resulting in the need for large warehouses and packing houses. In addition, the marketing firms have consolidated, where roughly 8 firms represent the majority of the industry. 4. Buyers seek a one-stop shop approach, so marketing firms and packing houses ultimately consolidate a wide range of varieties under one roof. 5. Packing houses and marketing firms seek more control and would likely lease or rent space over using public storage so they can monitor quality, directly manage inventory and provide certainty in complying with food safety regulations. 6. With continued consolidation, there will be less demand for cross-docking activities, as buying patterns drive the natural consolidation of product at the packing houses. Intermodal Rail Many shippers utilize intermodal truck-rail facilities, where goods are transferred from truck to rail for shipment to domestic markets or though gateways to international markets, as a means of improving the transportation costs. We heard there is strong interest in increasing freight movement via rail, particularly using intermodal services where containers are loaded at the packing house and delivered to an intermodal facility for movement to market. 1. Service is driven by the destination market where the carrier contracted the necessary volume commitment from large eastern grocers prior to commencing a regular service.

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Cross Dock Market Feasibility Study 2. There are limited markets, but as operators such as ColdTrain increase capacity and service additional eastern U.S. markets, volumes will likely increase for rail shipments. 3. There is limited equipment availability by the private sector. Given the lack of capacity, there could be a role for public investment (seed money) to expand the program. 4. Existing services would compete for volume at a new facility Cross-dock/Warehousing for Boxcar moves 1. The mainline rail carrier, BNSF, did not indicate strong interest for putting a new facility on the mainline, but appears open to this on short line. Good rail service is critical to helping maintain existing businesses and attract new industries to an area. 2. The short-line operator, Cascade & Columbia River Railroad (CSCD), a division of Rail America, is interested in servicing the tree-fruit industry and has been in discussion with a private sector business interested in opening a facility that can service growers in the region. A cross dock/warehouse could create a new load center but would require significant volumes for a shortline carrier to provide adequate service schedule and pricing. The short-line carrier may also consider compatible commodities such as back-haul freight and existing business such as forest products and aggregates moving on the rail line. 3. We heard interest in increasing long-haul rail shipments into Eastern Canada and California. In addition to BNSF, the Union Pacific (UP), a mainline rail carrier offering service from the western and southern portions of the state, can be utilized to many U.S. markets, but requires a shortline carrier to interchange at a UP spur. This is presently inefficient due to long transit times and added cost. Therefore, most rail shipments are trucked to a facility such as RailEx for loading to UP railcars. 4. The construction of a well-designed and properly located cross-dock facility could improve the economic viability of these businesses and provide incentive for new businesses to locate in the region as a box-car move is the equivalent of 3.5 truckloads, resulting in significant savings for shippers/buyers on long-haul moves. 5. Boxcars could compete with intermodal moves to Eastern U.S. markets, thus competing with the Port of Quincy Intermodal facility. There is potential for CSCD to interchange with Union Pacific to move box-cars into LA/LB & southern California markets. Although this model is conceptually doable, there are obstacles: UP prefers to ship direct from one of its facilities on SE Washington (RailEx) and there is limited equipment availability for refer box-cars. 6. Although there is significant volume into Mexico, no one is interested in moving boxcars there and the I-5 trucking market is too competitive to justify transloading twice (Southern CA to truck/truck). Exports/Puget Sound Ports An estimated 8-10,000 containers of apples ship through Puget Sound ports each year. Although intermodal connections were explored by the Port of Quincy over the past decade, the mainline carriers have not expressed interest in this service as the economics do not pencil out for short-haul rail movements with competitive drayage rates from trucking companies. 1. The success of a new facility would be dependent on many factors, including adequate demand for the service from the local producers, a competitive rate from and support from the BNSF and agreements with the Puget Sound Ports. 2. Apple crops will increase with an estimated 20% increase in production in the next few years. This will drive interest in increased exports to foreign markets. 3. Marketing Firms and brokers typically control the transportation for export shipments, selling on CIF (Cost, Insurance Freight) or C&F (Cost & Freight) terms, so there is opportunity to collaborate on logistics issues. Port of Douglas County

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Cross Dock Market Feasibility Study 4. Transit times for perishable cargoes present a challenge ranging in 96 hours up to one week compared to a 3-hour trip to dray a container by local trucking companies. Although there is potential for direct movement to the Port of Tacoma’s intermodal yard, moving freight to Seattle may require extra handling through the BNSF’s Seattle International Gateway (SIG) yard resulting in additional transit time and higher costs. 5. There is a perception that as Seattle’s waterfront becomes more gentrified, the Port of Seattle will become more congested. Recent media coverage of a third stadium triggered renewed interest from those interviewed in revisiting west-bound intermodal to the Puget Sound ports. This analysis would need to include a broader commodity base, as there isn’t enough volume for tree fruit alone. This could be an area of further collaboration with the Ports of Quincy, Moses Lake, and others in the region. 6. Political issues, such as trade barriers, higher tariffs in India, quotas in Indonesia, and the Chinese exports to U.S. markets all create challenges for the industry. Efforts are being made to establish equal access to global markets. Rail Funding The State Department of Commerce gets frequent requests for rail funding through the Community Economic Revitalization Board (CERB) program. State Commerce Department staff expressed interest in developing a strategic approach to funding short-line rail infrastructure through a business development plan that represents regional interests and meets the needs of WSDOT, USDA and the State’s Freight Mobility program. The Washington State Department of Transportation’s Freight Policy department also noted short-term funding for the Produce Rail program. The Port of Douglas County could engage in this process to leverage funding opportunities in the future. Economic Viability The availability and magnitude of public participation should be evaluated on the basis of public benefits produced by each individual project. Investment and support for infrastructure and operating environment by the recruiting communities becomes a major recruiting tool that allows attainment of the public benefits. Port/Public Participation Proposed public investment in a cross-dock facility should be considered when: 1. A new facility will succeed in the private market place generating a sustaining return as a commercial investment; 2. A new facility provides the necessary internal efficiencies and meets the demand for service; 3. There private sector interest in a new facility; and 4. The public investment is justified based on the public benefits involved. Recognizing that the private sector has been expanding and consolidating facilities over the past years to capture nearly 80% of the market, there doesn’t appear to be enough demand for a new facility. In addition, should public funds be invested, there would be concern that there isn’t a broad enough public benefit and it might be perceived as a subsidy for the smaller packing houses. Regional Site Evaluation Based on coordination with key industry stakeholders, as well as research and analysis of the rail facilities and potential sites in the North Central Washington region, the project team has developed the following findings: 1. A new cross-dock facility could be beneficial for approximately 20% of the region’s tree fruit growers, providing smaller shippers more transportation options. Better connections between Port of Douglas County

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2.

3. 4. 5. 6. 7.

trucks and rail could help these businesses reach more markets, provide greater flexibility in sourcing prime materials, and lower total transportation costs. The built and natural environments in the Wenatchee area limit sites appropriate for a crossdock facility. Note in Figure 2 that the rail comes into the area from the east through Quincy and then follows the Columbia River north. In Grant County, there is available agricultural land that is relatively unconstrained by urban development and is reasonably flat. Once rail reaches the Columbia River, there are no sites that allow for a facility such as RailEx has in Wallula where a unit train loop can be constructed, so parallel sidings would be necessary. BNSF is reluctant to have a cross-dock facility constructed directly off the main line. Short line facilities connecting to the BNSF main line would address this concern. Existing shippers use the ColdTrain service in Quincy, Washington. Tree fruit represents approximately 70% of the traffic moving to eastern markets via Chicago from this facility. Based on shipper surveys, a new cross-dock facility could not significantly improve transportation costs, as consolidation has occurred over the past years. The existing cross-dock facilities in Wenatchee and Quincy have available capacity already. Although a cross-dock facility with two or three tracks could improve efficiencies for Less than Truckload (LTL) shipments and potentially increase rail traffic on the BNSF mainline, volumes do not appear to warrant the establishment of a new facility at this time.

Primary Recommendations It is clear that the transportation of tree fruit and other agricultural products are linked with the wider transportation in the region. Although the Project Team did not identify overwhelming demand for a facility at this time, the Port of Douglas County should collaborate with other ports and sectors to help bring about improvements in infrastructure, capacity, changes in regulations and new initiatives that improve transportation. The recommendations are grouped into Primary and Secondary recommendations. Provide Advocacy for North Central Washington Agriculture Industry Maintain regular dialogue with the state agencies such as Transportation, Commerce, and Agriculture, the Washington Public Ports Association, ports in the Central Washington region and export ports such as Seattle and Tacoma, trade organizations and other agencies that regularly interact with North Central Washington businesses. Where appropriate, provide advocacy for initiatives that will improve the competiveness of the region. Collaborate on Solutions to Increase Capacity for Intermodal Rail As there is strong interest in growing freight movement using intermodal services and shippers currently load containers at the packing house for delivery to the Quincy Intermodal Yard, the Port of Douglas County should collaborate with the State of Washington Department of Transportation, Port of Quincy, the BNSF and Rail Logistics to support expansion of the existing facility. The expansion may require a combination of the following strategies: 1. Demand driven contracts. Similar to the current Rail Logistics business model, service to additional markets will depend on the destination buying entities. Assisting Wenatchee area shippers in securing volume contracts in new markets will allow operators such as ColdTrain increase service and increase volumes for rail movements. 1. Increase Equipment. If the private sector cannot provide the equipment/capacity required, there could be a role for public investment (seed money) to build an equipment pool for the carrier and/or shippers using the intermodal program.

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Cross Dock Market Feasibility Study 2. Back-haul cargos. As outbound volume expands, the Port could play a role in identifying and securing cargo opportunities for merchandise destined to North Central Washington and surround areas. Promote the Export Market –Pursue Westbound Intermodal Forecasts for apples in the coming years reflect a 20% increase, with a likely shift to increased export markets. The capabilities of critical cargo handling facilities and intermodal links could benefit the tree fruit industry. As transportation corridors become more congested, increased capacity and efficiency of the Puget Sound ports could be achieved in the future by moving containers and economic activity to the docks and port facilities using intermodal services from North Central Washington rather than a constrained port system and a congested roadway system leading to and from the port. The strategy requires the support of major ports as an “agile port” concept and the BNSF railroad. Utilizing the existing Port of Quincy Intermodal Yard could decrease dwell times in the ports and increase efficiencies in the line haul movement away from the port. Dedicated train service could improve custom clearance, on dock transfer and less labor expenses for the overall movement. Containers would be trucked to/from the intermodal yard to warehouses, shippers or consignee for loading/unloading and empty containers would be handled at the intermodal yard, decreasing congestion at the major ports. In addition, the intermodal yard could provide maintenance services for the containers and chassis, allowing repaired containers to be immediately available for usage and avoids some of the congestion apparent around repair facilities near the ports. Support Private Sector Investment in New Facilities Collaborate with the Cascade & Columbia River Railroad (CSCD), the BNSF and the local businesses planning a new rail loading site in the region loading tree fruit to eastern markets. Identify and work with additional customers that would benefit from the new service. Increase interaction with Yakima Valley As a majority of the tree fruit originates in the Yakima Valley and there are strong ties among packing houses and marketing firms in both regions, there is a benefit to both regions for continued collaboration on issues affecting the tree fruit industry. The Port should take a proactive role in maintaining dialogue with the Yakima Valley Grower Shipper Assn. (WVGSA), the ports and economic development agencies in the region. Hold 2015 Manufacturers/Shippers Summit The Port should consider holding another summit of Wenatchee Region manufacturers and shippers in 2015 to continue the dialogue stemming from the 2010 summit. In addition to reporting on industry outcomes and strategies identified in this report, market conditions may drive renewed interest in Port collaboration in addressing the region’s competitiveness.

Secondary Recommendations Following a review of the preliminary findings and discussion with the Port Steering Committee and the Technical/Industry Advisory Group in May 2013, the following strategies were recognized as secondary to the activities noted above. Promote Agri-tourism activities Collaborate with the Port of Seattle and tourism organizations to promote the Wenatchee region as a destination for Agribusiness and increase visitor spending in the region. The Port may wish to explore strategies that increase air traffic into the Wenatchee Valley and add capacity for outbound air freight

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Cross Dock Market Feasibility Study during the cherry season, including Wenatchee as an excursion for the cruise lines, and targeting Asian tour groups to increase awareness in international markets. Engage in Planning Efforts with State of Washington Several recommendations involve collaboration with the State of Washington, as noted below. Regional Rail Plan Participate with Central Washington Ports and the State Department of Commerce in developing a strategic approach to funding short-line rail infrastructure through the Community Economic Revitalization Board (CERB) program through a business development plan that represents regional interests and meets the needs of WSDOT, USDA and the State’s Freight Mobility program. Washington State Department of Transportation Freight Rail Plan Engage with the WSDOT Freight Rail Policy program to participate in the update of the State Rail Plan. Efforts should be made to include strategies identified from the findings of this report. Washington State Department of Transportation Origin-Destination Study Washington State Department of Transportation (WSDOT) commissioned Washington State University to conduct an origin-destination study (2012-2013) that measures freight movements on Washington State Highways. The findings may further inform the Port in its efforts to improve the region’s competitiveness. Monitor role of “Produce Railcar Train” Funding Maintain dialogue with the Washington State Department of Transportation’s (WSDOT) Freight Policy office regarding the near-term potential for federal funding for a “Produce Railcar Train”, currently funded into 2014 but not in use at this time. Engage in dialogue with ports and economic development agencies in Grant and Walla Walla counties who have used a similar program for potatoes, onions and other product to identify opportunities and fatal flaws. If the private sector program takes hold, this funding opportunity could provide additional resources for the start-up program. Increase southbound Rail Service Explore solutions for increasing rail as mode of transport to southern markets. As freight movement via short-line railroad requires cargo to interchange with Union Pacific and result in long transit times and higher cost, perishables are often trucked to destination or to a facility such as RailEx in Wallula and loaded to rail or trucked to destination markets. The Port may wish to partner with the short-line railroad, Union Pacific and Washington State Department of Transportation to explore a program for north-south rail service. Consider a Software System for Consolidating Smaller loads From discussions with industry stakeholders, we heard there are significant volumes of less than truckload freight movements between packing houses and moving between the Yakima and Wenatchee valleys. Most of these small shipments are consolidated through the collaborative relationships that exist in the industry. To create transportation efficiencies for the smaller volumes of Less than Truckload (LTL) shipments, it was suggested the Port explore the concept of an electronic clearinghouse that could publish opportunities for smaller shippers to consolidate their loads. This may involve engaging in discussion with the trucking industry, traffic associations, buyers and possibly a survey of the smaller shippers who handle approximately 20% of the apple to evaluate methods to consolidate delivery and pick-up. Development of “soft” infrastructure (i.e. software and/or a website portal) where member users advertise loads, offer or request trucking service and coordinate sharing of freight

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Cross Dock Market Feasibility Study transportation could serve as an additional resource to regional shippers. The Port of Douglas County should first seek buy-in from potential users.

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Cross Dock Market Feasibility Study Appendices References “Determining the potential economic viability of inter-modal truck-rail facilities in Washington state”, Dr. Ken Casavant, Professor, Dr. Eric Jessup, Assistant Professor, Angelica Monet, Research Assistant, School of Economic Sciences, Washington State University, Pullman, Washington, 99164-6210. “Future of Farming”, Washington State Department of Agriculture, 2009 http://agr.wa.gov/fof/ “Freight Movements on Washington State Highways: Results of the 2003-2004 original Destination Study” Dr. Ken Casavant, Professor, Dr. Eric Jessup, Assistant Professor, Steven Peterson, Graduate Research Assistant, School of Economic Sciences, Washington State University, Pullman, Washington, 99164-6210. Inland Intermodal Industrial Park. Port of Quincy, http://www.portofquincy.org/intermodal.html, February 2013 RailEx Pacific Northwest Region, http://www.railexusa.com/site/ Washington State Department of Transportation, http://www.wsdot.wa.gov/rail/plans/DTA/DTAch_two.cfm. April 26, 2004. “Washington State Industry Outlook and Freight Transportation Forecast: Apple Industry”, Washington http://www.wsdot.wa.gov/NR/rdonlyres/82357736-0241-43E1-98550FDDDFE011E8/0/Washington_Apple_Final.pdf “Washington Apple Industry Economic Contributions”, Washington State Apple Commission, www. “A Statistical Review, Washington State Fresh Apple Crops, 2004-05 through 2011-12”, Wenatchee Valley Traffic Association, Wenatchee, September 2012 “Wikipedia” http://en.wikipedia.org

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Cross Dock Market Feasibility Study Fact Sheet Background The Port of Douglas County held a Manufacturing Summit in 2010 that indicated strong interest in addressing infrastructure and/or other investments that could improve the economic competitiveness of the region’s agricultural commodity producers and shippers, primarily in the tree fruit industry. One specific recommendation that emerged from the Summit was for the Port to assist in the development of a freight cross dock or trans-loading facility that could be utilized by shippers throughout the Wenatchee Valley, the intent of which would be to increase the competitive position of growers and shippers relative to other tree fruit producing regions in the Pacific Northwest. Using resources secured by Representative Mike Armstrong in the State’s transportation budget, the Port has solicited proposals and selected a consulting team, led by Qvigstad & Associates, Inc., to conduct a study to assess the economic feasibility of a cross dock/trans-loading facility for the tree fruit industry in the region. The consultant team will conduct the feasibility study in coordination with a Port of Douglas project team including staff as well as other Port consultants and representatives from other transportation agencies in the region. Team members will reach out to existing operations in the area, identify potential users and demand, consider complementary commodities that might benefit from a facility, and evaluate potential cross-dock sites and design concepts. The study will also assess price points and cost advantages to trans-loading, as well as identify direct, indirect and induced benefits of establishing a facility in the region. The “region” includes Douglas County, Chelan County, and western Grant County, generally including the area encompassed by the Port of Quincy. In consultation with the Port, a Technical Advisory Committee (TAC) of representatives of the local and state public sector transportation agencies, private businesses and business associations involved in transportation of tree fruit from farm to market will be established for peer review. The committee will convene early in the process and reengage to provide input on the study. Should the feasibility study identify an economically viable business model for a cross dock/transloading facility, the final report will discuss potential locations and operational models, including a potential role for a public entity, and identify risks associated with building a new cross-dock facility in the region. Conversely, in the event the findings from the feasibility study determine that establishing a cross dock facility does not enhance freight movement in the region, or that it will not provide economic development benefits for the key stakeholders in the region, the final report will include specific factors leading to that conclusion.

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Cross Dock Market Feasibility Study The Port invites public comment As the Port of Douglas County seeks community engagement and support in achieving the Port’s longterm goals, we are inviting public comment on the cross-dock feasibility study process. The following schedule outlines opportunities for public participation in the process: On-Going 01/22/13 02/26/13 03/26/13 04/23/13 05/14/13 05/28/13 05/31/13

Port of Douglas County website – Periodic updates will be posted on the Port’s website, and please feel free to send an email any time. Commission Meeting – Update on feasibility study and opportunity for public comment Commission Meeting - Progress Report to Port Commission Commission Meeting – Progress Report to Port Commission Commission Meeting – Progress Report to Port Commission Commission Work Session – Presentation of preliminary cross-dock feasibility study findings and opportunity for public comment Commission Meeting – Final cross-dock feasibility study is presented to Port Commission Website - Final cross-dock feasibility study is posted to website

Public Comments can be submitted by the following methods: Mail:

Email: Website:

Port of Douglas County c/o Cross-dock feasibility study Port of Douglas County 3306 Fifth Street SE East Wenatchee, WA 98802 [email protected] www.portofdouglas.org

Public Meetings:

Port of Douglas County’s Offices

Questions?

Please call Lisa Parks, Executive Director @ 509.884.4700

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Cross Dock Market Feasibility Study Interview Questions Review Study Goals 1. 2. 3. 4.

Understand impact of transportation costs on competitiveness of fruit industry Alternatives for addressing competitive factors (regional infrastructure & facility solutions) What is role of Port/government in addressing #2 Other goals for the study?

Committee / Industry Questions 1. How do transportation costs enter into negotiations? 2. What are terms of sale? 3. What are freight volumes (by commodity)? a. Annual vs. seasonal b. Ratio of full vs. partial loads 4. What percentage moves via truck, rail, container, air-freight, or is consolidated off-site? 5. Does location significantly affect profit margins? a. Where is product stored? b. For how long? How many inventory turns per year? c. Do truckers experience significant dwell/travel time? Could it reduced from a strategically located facility? 2. Some buyers require sellers to deliver product to consolidated freight warehouses. Does this affect your business? a. If so, where do you deliver to? b. What percentage is consolidated? c. Is it a trend expected to continue? d. Would you benefit from a transfer warehouse in the region? 3. Are there other factors that impact transportation costs? 4. What are key transportation and infrastructure issues on the horizon that may affect your business? What are the impacts to local infrastructure from larger trucks vs. smaller trucks? 5. What are primary markets (%) a. International b. National c. Regional d. Local 6. What is the long-term market outlook? a. Stable b. Anticipated growth c. Anticipated decline 7. What else can local government do to support growth of fruit industry and associated industries? 8. What are best data sources for obtaining freight volumes and pricing?

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Cross Dock Market Feasibility Study Summary of Meetings Port Steering Committee Kick-off Meeting Summary -February 13, 2013 In attendance: Paul Mahre/WSDOT, Jeff Wilkins/WVTC, Erik Howe/RH2, Lisa Parks/Port of Douglas County, Kari Qvigstad/Qvigstad & Associates, Inc., and Jerry Litt/SCJ Alliance. Discussion: During our kick-off meeting, the Port Steering Committee discussed challenges the Project Team may face in obtaining data and agreed the Technical/Industry Advisory Committee and contacts identified should be able to assist in obtaining data needed to perform the work. There was also consensus that the focus should be on apples, which has the largest volume of freight movement in the region. The committee also understood that some interviews will need to be confidential to gather the needed information for the analysis.

Technical/Industry Advisory Committee (TAC) Kick-off Meeting Summary - February 14, 2013 In attendance: Charles Pomianek/WVTA, Jay Fulbright/Stemilt, Lisa Parks/Port of Douglas County, Kari Qvigstad/Qvigstad & Associates, Inc., and Jerry Litt/SCJ Alliance. Discussion: Lisa Parks emphasized the Port of Douglas has no preconceived ideas about the study findings. The committee understood the need to maintain confidentiality in gathering proprietary information from the interviews and that portions of the input may need to be confidential. The focus of discussion centered around apples in the greater Wenatchee area, which represents 250 partial/200 full truckloads per day, seven days per week, 52 weeks per year. Of these shipments, 70% is out-of-state with 30% exported. Of the exports, one-half (15%) is trucked to Canada/Mexico, 10% moves through Puget Sound ports and 5% moves to the Long Beach or the East Coast (intermodal). The Wenatchee/Yakima area supplied 96% of the US market with apples (2012), but is a volatile industry. There are 16 primary packing houses in the Wenatchee area, represented by 4 entities. The committee provided input on the following issues of importance, priorities and other considerations in analyzing freight mobility and competitiveness.  Study Goals. The study also needs to address who would benefit from a cross-dock/consolidation facility. An addition to understanding whether there are efficiencies or cost savings from consolidation/cross-dock activities, a recognition that increased handling increases risk of product damage.  Buyer controls freight. More than 90% of apple sales are FOB warehouse/packing house; therefore, the buyer has relationships with the warehouse/shipper and ultimately controls the freight. Under these terms of sale, the buyer would most likely benefit from consolidation/freight savings.  Mostly FTL Volumes. Of the 72,800+ truckloads shipped fresh to market per year, most move in full truckload (FLT) shipments.  Potential for growth in rail? An estimated 5% of freight moves via rail. The question was raised whether there is potential for increased rail activity in the future as well as potential to leverage the existing ColdTrain activities in Quincy.  Grower/Shipper relationship. The study needs to acknowledge the relationships in place between growers and warehouse/packers as well as the relationship between warehouse/packers and marketing firms that reaches beyond the Wenatchee Valley to Yakima. The warehouse/packing house contractually represents the growers with the goal of obtaining the highest return to the orchard. Many growers do not want to engage in the complex regulatory environment and investment packing houses have in place to meet buyers’ needs.

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Cross Dock Market Feasibility Study 







Private Sector response to 2010 challenges. The private sector is addressing issues raised at the Port’s 2010 manufacturing summit, which spurred from challenges in the market at that time – specifically fuel surcharges and high cost of small lot shipments. There is already a pattern of consolidation of facilities and cooperation among warehouse/shippers in minimizing less-thantruckload shipments. Consolidation. The trend of consolidating buying activities will likely continue, as it reduces the high transportation costs of small lot pick-ups at multiple facilities. Marketing firms have been consolidating over the years, now representing multiple suppliers/products. In some cases, product is trucked for consolidation at another packing house, resulting in some level of consolidation to the buyers. Competitive, yet cooperative arrangements. We need to recognize that although there is a high level of competitiveness in the region, there is also considerable cooperation, particularly in the area of marketing. For example, a handful of marketing firms represent the 16 some packing houses in the Wenatchee/Yakima areas. Some of these have a presence in both markets. Joint Marketing. There are about 10 marketing firms, with 3-4 firms in the greater Wenatchee area and 3-4 firms in Yakima that represent 85-90% of the market. o Stemilt (Wenatchee/Yakima/Pasco) o Columbia Marketing International-CMI (Wenatchee/Chelan) o Chelan Fresh (Chelan/Yakima) o Oneonta / Starr Ranch (Wenatchee/Hood River) o Kent Christensen, Independent – markets Starr/Oneonta

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Cross Dock Market Feasibility Study Summary of Contacts Interviewed BOLD = Invited to Port team or TAC Blue = Participated on Port team or TAC Data / Source Traffic Counts/Intersections / Heavy vehicles Rail activity, reports on shipments, exports & storage holdings Port Steering Committee Washington State Rail Policy and Activity. Washington State Rail Plan Rail Maps/infrastructure Short-line activity – facilities using rail

Contact Jeff Wilkens Charlie Pomianek

Organization WVTC WVTA

Paul Mahre Barb Ivanov Chris Herman Reeve Geary Catherin Martin

Erik Howe Mike Walker/Larry Allen Witte Jay Fulbright Doug Pauly Dalton Thomas

WSDOT, Region WSDOT Freight Systems WSDOT Freight Rail Policy BNSF Economic Development Cascade & Col River Railroad (CSCD) /Genesse & Wyoming ColdTrain, operated by Rail Logistics RH2 Engineering Eagle Transfer Witte Orchards. Stemilt Growers – Northern Fruit & Witte Oneonta Trading

Todd Fryhover Mike Wade Doug England Jerry Kenyor Stu McDougal Russ Lytle Randy Steensma Reggie Collins

WS Apple Commission Columbia Marketing Int’l Chelan County Commissioner Blue Star/Cashmere McDougal & Sons Columbia Colstor New Chief / Honey Bear Chelan Fresh Marketing

Donna Feltrup Kent Christensen Kirk Mayer

L&M Companies Independent WA Growers Clearing House Assn.

Drs. Ken Casavant & Jeremy Sate Dave Anderson

WSU Freight Policy Institute

Current / Previous Studies

WSDA International Marketing

Patric Connelly Dave Wallace Jean Ashe

Port of Quincy Commissioner WS Deptartment of Commerce WS Department of Commerce

Strategic Plan - Transportation as priority recommendation Port Intermodal Yard /ColdTrain program Economist - Trade flows CERB Funding for rail infrastructure

Steve Lawson

Port of Douglas County

Intermodal service and rail logistics from Quincy, WA to Chicago and East Coast Port Steering Committee Trucking Invited to TAC Integrated grower, packer and marketing firm Market Market (Starr Ranch – Wenatchee & Hood River) Export Data 2011-2012 (CMI) - Marketing Chelan Grower Industry Market New facility (uses CMI) Market/Freight/ColdTrain Industry Marketing - smaller growers Chelan fruit, Gebbers, Gold Digger, Apple House, Obert Cold Storage – Yakima and Chelan Union Gap/Marketing Markets Starr/Oneonta Market data

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Cross Dock Market Feasibility Study What sites were evaluated? The project team identified four potential sites for a cross-dock facility. All of the potential sites are located within an active industrial area, and all of the property is zoned for industrial land use. Prior to conducting a site review of the area, project planners reviewed GIS maps prepared by the Douglas County Transportation and Land Services. The project team then visited the project area and evaluated existing conditions at the potential sites. This review did not include detailed site investigations such as geotechnical or environmental evaluations, instead focusing on rail and road access, general topography and location. In some cases, access to individual sites was not available, so information for the site was based on information in maps, photographs, and documents. Figure 2: Existing and Potential Cross Dock Sites

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Cross Dock Market Feasibility Study Site A – Columbia Colstor Worthen Street, Wenatchee Owned and operated by Columbia Colstor, this warehouse and shipping facility has been operating for many years. Worthen Street runs directly adjacent to the warehouse and provides access to SR 285 via 5th Street. Rail sidings are accessible immediately on the west side of the building in a parallel track configuration. Due to the multiple sidings, there is adequate rail car storage for the plant to expand its loading capabilities.

While the primary function of the building is to accommodate the shipment of frozen foods processed in the Columbia Basin, tree fruit can be stored and moved to refrigerated cars at the site as well. Existing zoning of the site makes it possible to expand the facility and the cross dock and trans-loading functions of the facility. Colstor has planned for but not yet removed a portion of the south end of the building in preparation for adding two additional docks. There is adequate maneuvering and truck storage area to accommodate the two additional docks. These two new docks would increase their cross dock facilities from the single cross dock now available. While the new docks would increase their cross dock capacity, they also have the capacity to increase the trans-load function as well. Based on anecdotal information from Colstor, they can currently load 3 to 4 box cars per day. Site B – Columbia Colstor Columbia Street, Wenatchee Covering approximately five (5) city blocks, the Columbia Street site is a cluster of several older warehouses, with only some connected. Facilities also front on Thurston Street and Orondo Street. Rail access is available via sidings off the BNSF main line. All facilities have some sort of temperature and/or atmospheric control for stored freight. Access to the site is primarily from SR 285 (George Sellars Bridge) via Wenatchee Avenue to Thurston Street. At Thurston Street, heavy trucks must go east to Columbia Port of Douglas County

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Cross Dock Market Feasibility Study Street or under the BNSF rail tracks to Worthen Street. Rail sidings are available to most of the combined buildings and docks are available for loading to box cars. Most of this area of the City of Wenatchee has begun a transition to more mixed uses with warehouses converting to different uses. One of the previous Cascadian Fruit warehouses has been modified for a residence and the remaining warehouse into document storage. A portion of one of the Colstor warehouses on Orondo Street has been renovated and occupied by a brewery and restaurant. This transition is encouraged by the City of Wenatchee and with continued consolidation, the assumption is more of the older warehouses will transition to different uses as the consolidated warehouses progress with larger, modern and more efficient facilities.

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Cross Dock Market Feasibility Study Site C – Appleyard, South Wenatchee All of the land and facilities at the Wenatchee Appleyard are owned by BNSF. While the name indicates a connection to apple industry, the primary use of the site is no longer directly connected to the shipment of apples. With multiple sidings (12+), the area is used for staging, switching, maintenance and storage of rail cars. Since the removal of warehouses on site, a fairly large vacant area is available for future construction. At this time occasional use is made of the open area for various railroad functions. The industrial zoning at this site and extensive rail sidings support consideration of this site for a cross dock facility. A rough estimate indicates that a drive-into facility on a parallel track configuration of about 120,000 square feet could be accomplished. Some constraints do exist, including:  Circuitous access to and from the SR 285 bridge  The bridge approaches and exits in a congested area  Direct access to the site needs improvement  BNSF may not want to relinquish ownership or manage such a facility  BNSF’s reluctance to place such a facility off the mainline.

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Cross Dock Market Feasibility Study Site D – Industrial Area, Rock Island The Rock Island industrial site between the Columbia River and SR 28 also has the BNSF mainline running through it. Roughly 85 acres zoned industrial is in a single ownership that once operated the Silica Refinery. The refinery is no longer operational, but has not been completely removed. Rail sidings that served the silica plant could be improved and extended with relative ease. All of this land is in the City of Rock Island, zoned industrial and would have a full range of municipal services. Access is directly from SR 28 including a fully improved railroad crossing. Disregarding the potential if the remaining silica plant were removed, there is adequate area to construct a fairly large cross dock facility. While the land is not configured as easily as the RailEx facility in Wallula, the acreage alone is somewhat larger than the RailEx facility. The current owner is interested in developing this land area as an industrial park in the future. Constraints at this site include:  Perceived risk of environmental clean-up  The distance between SR 28 and the railroad crossing is fairly short which could pose queuing and blocking problems for traffic on SR 28 when a train is moving through  BNSF’s reluctance to have this siding active for a cross dock facility off their mainline

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