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Utah Inland Port Authority pauses ‘all major capital projects,’ as new report outlines flaws

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Shipping containers are moved between trains and trucks at the Union Pacific Intermodal Terminal on the west side of Salt Lake City on Saturday, Sept. 24, 2022.

Spenser Heaps, Deseret News

The Utah Inland Port Authority is taking a timeout as problems related to its future begin to build.

The port authority is already experiencing a shift in leadership and dealing with a state audit that questions its ongoing planning. Now, a report from a California logistics expert is tacking onto the concerns, raising doubts about the inland port's value to the state.

With a lot at stake, Ben Hart, the port authority's newly hired director, says the agency and its board of directors have decided to pause "all major capital projects" until they are able to craft a Northwest Quadrant Master Development Plan.

"If our planning efforts determine a transload facility is right for this market, there will be robust engagement with neighborhoods on the west side of Salt Lake County and the business community," Hart said, in a statement to KSL. "A project of that size would also require a board resolution passed in a public meeting. Until then, we're talking with all our stakeholders to ensure this master plan reflects what best suits Utah and its logistics needs."

Problems at the inland port

The port authority's decision came the same day that a report, completed this month by Robert Leachman — a professor of operations research and industrial engineering at the University of California, Berkeley, and a former manager at Union Pacific — states that a proposed transloading facility near the Union Pacific Railroad's intermodal terminal in Salt Lake City, one of the major capital items proposed by the port authority, would have a "very difficult time attracting enough business" to succeed.

In short, he doesn't believe it's a sustainable business option because of its location and market size.

"It just isn't a business proposition for the regional guys or for the nationwide guys," he said, noting the cost of unloading marine containers is much more expensive for importers than any savings from shorter truck imports.

Leachman explained in an online press briefing Tuesday that one of the problems is that the inland port would be a costly and time-consuming substitute for the services already existing in a port city like Los Angeles, which once goods shipped into the U.S. are unloaded onto trucks, has a significantly higher reach of people in a one-day drive than anywhere in the Intermountain West.

Overall, the cost of opening marine containers about 800 miles from the seaports could result in costs up to six times the amount of any benefits. He adds that it also doesn't result in a "significant reduction in emissions" and that it would have very little, if any, impact on solving any of the global supply chain issues affecting Utah, pushing back against claims made by Utah Inland Port Authority leaders.

For example, he said the supply chain issues were generally caused by consumers staying home and using their money on "things" instead of travel, dining and entertainment at the height of the COVID-19 pandemic in 2020 and 2021, causing an "unsustainable" level of importing. The logistics industry has also been impacted by employee shortages, especially at marine terminals and on the railroad. The mixture of the two leads to a massive workload for the employees at the ports and on the line, which ultimately leads to the backup that consumers have experienced.

"A transloading facility in Salt Lake doesn't address either of those things," Leachman said. "There have been crazy things going on. A lot of the nationwide retailers have shifted imports from the West Coast to the Gulf and East Coast ports to try and get around the congestion but ... all they've been able to do is move the congestion around."

Leachman compiled the report after being approached about it by Stop the Polluting Port Coalition, a group of environmental experts and residents who have opposed the port in Utah since its inception. Members of the group said they wanted a full-scale report that would mirror reports they said the inland port hadn't done.

Though the report was backed by an organization against the inland port, it was completed about a week before a state audit highlighted a few "concerns" with the Utah Inland Port Authority, including any financial commitment "without adequate planning, gaps in organizational structure that reduce internal controls, and the need for stronger procurement and contract management."

State auditors said clearer goals are needed before the Utah Inland Port Authority can spend the $150 million in bonds that it approved last year for projects.

The limited review report also raised questions about Utah Inland Port Authority President Jack Hedge, who auditors say was given "sole discretion" by the agency's original board of directors to make contracting decisions "unilaterally." This included an inland port deal with the vendor Keychain, which was founded by one of Hedge's old co-workers; Brian Dean, a state audit manager said last week that the contract "creates some red flags and some concerns, just on the appearance of it."

Hedge, who was hired as the Utah Inland Port Authority's first executive director in 2019, moved into his current role as president earlier this year. He then announced earlier this month that he plans to step down and retire at the end of October. Ben Hart, the former deputy director for the Utah Governor's Office of Economic Opportunity, was hired in August to take over as the inland port's director.

State leaders also shook up the Utah Inland Port board of directors, as a completely new board was sworn in back in May.

Taking a break

The port's critics, such as members of the Stop the Polluting Port Coalition, say they believe the audit and Leachman's report offer signs that the state should either pull the plug on the Utah Inland Port Authority or at least slow down its plans.

"The inland port has always been a terrific gamble of taxpayer dollars with far too many unknowns," said Katie Pappas, a Salt Lake City resident and founding member of the coalition. "The risks of getting it wrong are too great. Many of us have asked the inland port board repeatedly for studies that would give us important information about the future effects the port would have on our city and all of us. ... There should be a halt to this entire project and those alternatives considered."

Sarah Buck, a member of Stop the Polluting Port Coalition, speaks during a press conference outside of the offices of the Utah Inland Port Authority in Salt Lake City on Monday, Sept. 20, 2021. The group recently commissioned a study of the port that they say the Utah Inland Port Authority had failed to do.

Sarah Buck, a member of Stop the Polluting Port Coalition, speaks during a press conference outside of the offices of the Utah Inland Port Authority in Salt Lake City on Monday, Sept. 20, 2021. The group recently commissioned a study of the port that they say the Utah Inland Port Authority had failed to do.

Shafkat Anowar, Deseret News

The new leadership seems to be willing to listen. Hart and members of the current board wrote that they "wholeheartedly" agreed with all the recommendations brought forward in the audit, in a letter to the Utah Office of the Legislative Auditor General on Sept. 9, ahead of Tuesday's announcement to pause future plans.

Hart told KSL NewsRadio on Tuesday that he hadn't seen Leachman's report but he and the agency's current leadership reviewed all they had and didn't believe they had a "level of comfort" to move forward with some of the previously announced plans.

"Until we have a really good, long-term master plan in place, we want to hold off on any major expenditures," he said. "What (Leachman) is saying, there is definitely some validity to that and we want to just make sure that whatever we're doing makes sense, not only in the marketplace but really has long-term generational impact, as well. ... For us, hitting pause to make sure everything is in place is definitely the best solution."

A master plan will aim to "wrap our heads around" all the possibilities of the 16,000 acres within the inland port, including logistics and nonlogistics business opportunities, he added. There currently isn't a timetable for how long it will take to compile a master plan.

Leachman's report offered some alternatives that he said would be worth considering, such as using the proposed intermodal terminal as a regional distribution center or online fulfillment center for some sort of large retailer to reduce "increased emissions and transportation costs." Another example is using battery-powered or hybrid equipment; while at a higher initial cost, it would also help reduce emissions from the port, he wrote.

Contributing: Becky Bruce