The Decline of the Port
A look at the transformation of the Port of San FranciscoNovember 1, 1999
The 1950's: Infrastructure and Operations Problems
One of the senate committee's basic findings was that the decrease in shipping was related to infrastructural and operational problems which caused "the harbor, as composed of the various ports located along its shores, (to be) not fully competitive with other major United States harbor regions." Labor problems were seen as key in this regard. The report asserted that "a long record of tie-ups has done much to shake the confidence of shippers on the harbor's ability to move cargoes without interruption of services." But even while acknowledging that Bay Area ports needed modernization and had a history of labor trouble, the senate committee optimistically offered that ports needed only to improve "traffic promotion, trade development, and rate protection" in order to be competitive. The repot neglected to stress the importance of shifting world trade routes and competition from other West Coast ports, especially Seattle and Los Angeles/Long Beach.
The Port of San Francisco also faced other problems that hindered its ability to compete for trade, particularly with the neighboring Port of Oakland: longer waiting time at docks, loss of the pallets used to convey goods between ship and shore, and drivers' hesitation to subject their trucks to additional wear from driving over the hills in and south of San Francisco (as opposed to more direct or flatter routes from the East Bay). Pilferage of cargo also concerned shippers.
Many of the port's facilities were in poor physical condition; many piers were outmoded, in need of repair, and had pier sheds with internal support columns that hindered the movement of goods. Furthermore, the senate committee found that after World War II, trucks accounted for 80% of the movement of goods once off-ship, eclipsing rail transport. Since many of the port's piers had narrow aprons designed to accommodate rail access, which made maneuvering trucks quite difficult, this was a real problem. Yet another difficulty was that, even before the arrival of giant containerships, general cargo ships were themselves getting bigger. Many of San Francisco's piers were not large enough to accommodate the new ships properly, and sheds had insufficient floor space. Land Use Changes
By the end of the 1950s, the waterfront north of the Bay Bridge was faced with a problem affecting many central cities. Industry, particularly heavy industry and other activities which relied on material brought through the port, was abandoning San Francisco. The port's connection to nearby inland areas was eroding. Traditionally, production plants had been multi-storied and located near inputs-that is, near raw materials requiring processing and/or packing. But businesses had begun to leave their waterfront locations in order to take advantage of cheaper suburban sites-cheaper because changes in production and warehousing had begun to make multi-story facilities obsolete.
To a large degree, industrial relocation was enabled by the explosion in trucking, which was in turn tied to the expansion of the nation's highway system. Trucks eliminated the cost advantage of being located near inputs, which was insubstantial compared to the savings from the more efficient new facilities in suburban sites.
Additionally, manufactured items were beginning to replace raw, unrefined, or pre-production cargo manufactured items (for example, electronics and machinery began to displace fruits, spices, coffee, and sugar). The result was that few, if any, processing plants were needed near the waterfront and fewer goods were being exported through the Port of San Francisco.
As industry relocated, new uses generated by the rise of a service sector economy replaced it. This transformation, especially inland of port property, caused a classic land use conflict. Once a truck finally maneuvered off of a pier, it was faced with increasing traffic congestion created by tourist activity and a growing downtown. This logistical problem led, in part, to shipping lines opting to reduce or eliminate calls to the Port of San Francisco. In fact, one reason that the Embarcadero was conceived of as a raised freeway was to try to separate through traffic from the remaining working piers. As it turned out, the construction of the Embarcadero Freeway was a harbinger of the northern waterfront's changing role in the decades to come.
The State-Owned Port
The state owned the Port of San Francisco until 1969, when ownership was transferred to the City and County of San Francisco by the Burton Act and accompanying Transfer Agreement. During the 1950s, state ownership had become increasingly controversial, and the state was criticized by San Francisco leaders for its lackadaisical role in port affairs.
State ownership put the Port of San Francisco in a position quite different from any other California port. Most importantly, the budgeting system imposed by state ownership effectively hindered facilities upkeep. Because the port was run by a state agency (the State Board of Harbor Commissioners, later renamed the San Francisco Port Authority), bonds for funding were required to be general obligation bonds. Such bonds were to be placed on a state ballot, but there was a disincentive for voters outside of San Francisco to approve bonds for a port that might be competing with their own. Any other funds had to be obtained directly from state coffers, money sometimes hard to come by. The port's budget was submitted to and had to be approved by the California Legislature. When revenues were disappointing, port management had to defer maintenance. Such was the legacy of state ownership that even in 1978, nearly a decade after ownership had been transferred, city officials sought to deflect blame for continued decline onto the previous stewardship, arguing that "the decrease of useful maritime uses has been caused by obsolescence, since there was a lack of capital reinvestment in the maritime piers on the part of the State of California."
Though San Francisco was not the only Bay Area port that needed improvement and that competed with other West Coast ports, it had the most to lose. From 1947, San Francisco suffered both absolute and relative declines in shipping activity. While the 1950s were relatively stable in terms of the amount of cargo handled in San Francisco, the port's position as a leader in shipping had eroded, and it was struggling to prevent further loss of shipping business. The Port of Oakland succeeded in capturing more of the total tonnage coming through the Golden Gate than it had before the war, and it did so even before developing container terminals.
By 1959, the Port of San Francisco's troubles led consultants to suggest that it begin to reconsider the location and distribution of its facilities, and rethink some of its functions. The consultants concluded that shipping activities should be concentrated south of the Bay Bridge. Their report also suggested that while existing cargo operations in the northern waterfront should be maintained as long as possible, new commercial activities should be encouraged (but not developed by the port itself). Within two years, this strategy solidified into the port's official stance regarding the use and development of its property.
Despite the problems faced by the port, the general feeling in the early part of the 1950s was that with a little work, the port could remain busy and prosperous. The port heavily advertised the completion of its "ultra-modern" Mission Rock Terminal at Pier 50 in 1950, proudly announced an expanded Foreign Trade Zone 3 at Pier 45 in 1953, and continued to make new investments. The port's quixotic optimism during the decade was such that, in order to bolster support for new bonds, it stated: "the Port Authority's plan for future development is based on its conviction that world trade through the Golden Gate will continue its already spectacular growth."
The reality, though, was that the port's financial condition was weak. As early as 1951, the state committee suggested that without the boost provided by World War II, the port, which had been operating at about a break-even level, might have been in even worse shape. The Port's Belt Line railway had been losing money for years and the port was encumbered by debt incurred to fund its various improvements. By the end of the 1950s, the port appeared healthy on paper only because it was leasing land for non-maritime functions, including restaurants, parking, and miscellaneous commercial activities. Though its history of debt repayment was good, the port's existing debt obligation made financing innovation very difficult at the advent of the "container age," when entirely new kinds of facilities would be needed.
The Container Revolution The final, insurmountable decline in San Francisco's shipping activity was heralded in 1958 by the departure of the first containerized freighter from San Francisco Bay. It was not until 1966, however, that the first regularly-scheduled containership was employed in international trade. Even so, Bay Area ports experienced a steady increase containerships in the 1950s, and by the mid-1960s, American President Lines had developed plans for full containership services from the Bay Area to the Far East. The impact of containerization was probably not fully felt by San Francisco until 1969, the year that the Port of Oakland soared ahead of San Francisco in total short tons handled .
The rush to containerization was fueled primarily by three factors. First, expanding levels of trade worldwide and the corollary increase in ship size necessitated increased efficiency in the movement of goods. Second, the cost of time at dock as a percentage of total costs for shipping goods via break-bulk ships increased from 30% in the 1930s to up to 75% in the 1960s-an increase attributed to steadily rising labor costs. Naturally, this created a tremendous economic incentive to find a way to reduce cargo handling time. Break-bulk cargo is generally handled four times: moving the goods to the point of origin, loading them onto the ship, unloading, and moving them from the point of destination. And third, goods had to be hand-sorted and placed. Containers allowed the entire process to be mechanized, which increased loading and unloading rates from 25 tons per hour per gang to up to 600 tons per hour. This dramatically reduced the amount of time spent at port, which lowered dockage and wharfage fees. Of course, not only did this decrease labor costs, but it eventually resulted in the withering away of thousands of stevedoring jobs. Containerization also prevented pilferage and reduced damage and exposure to the elements, both common problems with break-bulk cargo.
The switch to containerization created difficulties for many ports because the economies of scale and efficiency realized by the new transportation technology required significant capital expenditure for cranes and other marshaling equipment. Additionally, because containerships carry a tremendous amount of freight which can be unloaded very quickly, many acres of "backland" are need to sort and stack containers-space many older ports did not have.
Containerization, then, presented several problems for San Francisco. First, San Francisco had extensive shipping-related infrastructure already in place. Containerization necessitated purchasing costly new equipment, as well as altering existing facilities. Finger piers are useless to containerships, and must be removed or substantially enlarged and altered; rail lines and truck access must often be re-configured and improved, and surrounding land, which may be devoted to other uses, must be acquired and the appropriate infrastructure provided to allow for storing, sorting, and stacking, in preparation for moving goods on to their final destinations. San Francisco had few areas where sufficient, flat, backland was available. Of the 7.5 miles of waterfront within the Port's jurisdiction, only the southern section could be used readily. The city was especially vulnerable to loss of business because 70% of the cargo it handled from foreign trade was suitable for containerization.
Several other factors complicated the challenge of maintaining shipping activity for San Francisco. First and foremost, the Port of Oakland had transformed from a minor port of call to what would become by the 1980s one of the busiest ports in the country. The Port of Oakland's metamorphosis was initially due to improvements made as part of the war effort in the 1940s. Later, though, it was Oakland's ability to secure federal economic development grants that made its growth possible. With the promise of jobs that would come with a more active port (along with the redevelopment of derelict land), Oakland acquired $30 million dollars in capital improvement funds in the mid to late 1960s. Between 1968 and 1973, the Port of San Francisco lost at least five major steamship lines to the Port of Oakland. The loss was so significant that San Francisco suggested to federal officials that the decline in shipping from 5.3 million tons in 1964 to 1.7 million in 1977 could be "directly attributable to Federal subsidies to the Port of Oakland." Furthermore, as a result of the Port of Oakland's swift rise to dominance in oceanborne shipping, the number of jobs related to waterborne commerce in San Francisco decreased from 23,000 in 1964 to 11,000 in 1978.
The Port of Oakland had another tremendous advantage over to San Francisco-its geographical setting. Even though by the 1950s trucking had supplanted rail as the primary way to move goods to the interior of the country, rail access was (and still is) an important consideration for steamship lines. At its height, the Port of San Francisco boasted four major rail lines and itself operated the Beltline Railway. Compared to Oakland, though, San Francisco's location at the head of a peninsula added distance and time to distribution routes, making them more costly. To save time, all but one of the private rail lines maintained railroad car ferry service to the East Bay, but even this was a cost difficult for shipping lines to justify, considering that the Port of Oakland's four rail lines all had direct service to the interior.
There was another problem pertaining to rail service in San Francisco. Shipments by rail had been decreasing since the early 1960s as a result of industrial relocation. It became hard for the private rail lines, already experiencing difficulties due to the expansion of trucking, to maintain operations in San Francisco. Thus the port had to contend with yet another pressure on its ability to provide competitive access.
As the port floundered, the issue of state ownership moved into the foreground. In 1968, SPUR published a report entitled " San Francisco Port: Asset or Liability?" The Report summarized some of the problems that plagued shipping operations:
"Traffic congestion, particularly in the northern waterfront, has forced shippers to unproductively tie up material-handling equipment and high-priced labor in unproductive queues. ...Tourist facilities on the northern waterfront are in direct competition with the shipping industry for vitally needed street and rail space. Large marshaling areas, free of private automobile traffic, are necessary for maximum efficiency."
SPUR, along with a growing group of organizations and citizens, concluded that the only way to deal effectively with the port's dilemmas was to transfer port ownership to the city. SPUR's report argued that under city jurisdiction it would be easier to acquire funds and, in areas no longer required for cargo operations, the port would have better use of that land at heart. Under city jurisdiction, for instance, SPUR felt that redevelopment would not be narrowly concerned with uses that would turn a profit, but, rather, with uses more geared to citizens' needs, such as open space and housing. Re-acquiring the port, however, did not have the effect of spurring its immediate revival.
The Long Road to Revitalization
Why has it taken so long for revitalization to transform San Francisco's waterfront-especially the northern waterfront? Part of the answer lies in the conditions for the port's return to the city. Unfortunately, the transfer strapped the port with stultifying fiscal requirements. As part of the transfer agreement, the port acquired $53 million dollars of bonded indebtedness and a requirement to spend $100 million dollars on shipping and cargo-handling improvements. This requirement, later reduced to $25 million, forced the port to look to commercial developments to generate the income that would pay for these improvements. Many proposals were hotly contested. What made this such a predicament were layers of regulation on the one hand and lack of a clear planning vision on the other. Use of port land is subject to restrictions by numerous agencies, including the State Lands Commission (the port owns its land in trust for the people of California), the Bay Conservation and Development Commission (BCDC), and the city Planning Department. The result has been a de facto ban on office and housing development on port property, which other ports around the world tend to have encouraged. The complexity of permit processing and inter-agency coordination has undermined even non-controversial proposals-primarily projects that involve maritime or maritime-related uses.
This jurisdictional morass would have been less confounding had agencies coordinated their plans when the port was transferred, but waterfront planning was only just beginning at that time. The Planning Department's first Northern Waterfront Plan was released in 1969, the same year that BCDC published its San Francisco Bay Plan. As the years have passed since the transfer, old plans have been expanded and amended and new ones have been produced by these and other agencies. This is not to say that such documents have been detrimental – in fact, quite the opposite in many ways. Yet, revitalization has suffered from a profusion of uncoordinated plans, and, until recently, from a lack of any real plan for development from the port itself.
It took the 1989 Loma Prieta earthquake to turn things around. Removal of the Embarcadero Freeway freed a significant amount of land for re-use and provided an opportunity for San Francisco to re-assess the waterfront and its connection to the city. In 1990, San Franciscans passed Proposition H by the slimmest of margins, banning hotel development on the waterfront and requiring the port to come up with a land use plan.
In 1997, nearly 30 years after becoming a city agency, the port released its first comprehensive Waterfront Land Use Plan . The plan has gone a considerable distance in creating consistency between port, planning department, and BCDC land use policies. It remains to be seen, though, whether the plan will successfully guide new development on the waterfront. Regardless, had such an effort been made at the time of the transfer, the city's waterfront might be a much different place now. Though many factors-geographical, technical and logistical-led to the Port of San Francisco's decline, collaborative and forward-looking planning will go a long way in facilitating its revitalization. While the particulars of land use policies may (and should) be debated, the slow pace of progress along the waterfront demonstrates why this kind of planning is so necessary.