Port of Tucson – A Logistics Gem

05 Jan 2020 by BizDESIGN in FEATURES, WINTER 2020

By Jay Gonzales –

Arizona’s Only Dry Port Distributes Goods Throughout the West

Those who laud Southern Arizona for its growing and increasingly diverse economy have a wide range of businesses and industries that are now part of the discussion.

There’s the growing aerospace industry headed by longtime Tucson resident and top employer Raytheon Missile Systems, along with relative newcomers like World View, a commercial satellite launch provider.

For decades, mining has been huge business in the region – and now one of the world’s biggest mining-related companies, Caterpillar, has planted a flag here with its Surface Mining & Technology division headquarters. Then there are the core standards you find in most peer communities – such as construction, healthcare and, of course, education – which combine to employ tens of thousands.

But did you know that – right off of Interstate 10 with nary a waterway within hundreds of miles – Tucson has a port?

The Port of Tucson sits on a spot where Alan Levin stood more than 20 years ago with a vision that has come to fruition. His efforts have made Tucson a player in the logistics industry – shipping and warehousing goods that pass through the region headed to and from major coastal ports in California and north and south, to and from Canada and Mexico.

“If you want to be part of the world economy, you have to have logistics to make it happen,” Levin said. “I’ll never forget the first time I came out here to look at it, standing out by the railroad tracks, watching the trains go by. That’s when I thought, how can we connect to the rest of the world?

“It’s a world economy and you’ve got to be part of it with transportation. That’s what it was all about.”

Today, the Port of Tucson is 767 acres of land and nearly 2 million square feet of warehouse and distribution space that is essentially an extension of the ocean ports on the West Coast. Shipping containers can come off cargo vessels at, for instance, the Port of Los Angeles or Port of Long Beach in Southern California and be transported directly to the Port of Tucson. Once here, the goods can be warehoused and distributed to their ultimate destinations. Goods can also head the other way on their way to points abroad.

The key is the two miles of Union Pacific Railroad track that fronts the Port of Tucson on the north side of I-10 just west of Kolb Road. It’s a lifeline for goods that come and go from all over the Western Hemisphere.

The concept and location were so uniquely appealing that Amazon, the multi-billion-dollar retail and shipping behemoth, selected the site for an 855,000-square-foot fulfillment center that opened in 2019. The massive facility sits on land that Amazon purchased from the Port of Tucson along Kolb Road.

“We didn’t really see that one coming,” said Alan’s son, Mike, who is the port’s executive VP. “My goal now is to work with the folks at Amazon and Union Pacific to see how we convert a lot of that Los Angeles freight, international freight, and bring it right to the port and service that building and connect those dots.”

That Amazon is even in the picture at the port is the culmination of a story that began in the early 1980s when the Levins, including Mike’s brother, Matt, now the VP of operations at the port, were general contractors building commercial buildings all over Tucson – somewhere in the area of 200 buildings, Mike said.

From there, the Levins ventured into building business parks – starting with their own development on 20 acres on Toole Avenue just outside of downtown. There they built 200,000 square feet of warehouse and cold storage space for a number of customers. One of the first was soft-drink distributor Kalil Bottling owned by the late George Kalil.

Business was going well for the Levins, Mike said. They had built out their business park with a number of warehouses in the 60,000-square-foot range. Kalil was a huge client. When they added large-capacity cold storage to their portfolio, produce and frozen storage became a key aspect of their business.

 “At that point we were developed out. We could have just sat there and been content with the buildings we had and run our freezer,” Mike said. “An opportunity came along to purchase 264 acres out here in 1996, so we took another large risk and came out here.

“As we were walking around doing our due diligence, we’d see those stack trains, the container trains going right by, and we were amazed at how many there were and the length of the trains. We weren’t really planning on the railroad side of it until we saw those trains go by and said, ‘Hey, you know what? This would be an opportunity to build warehouses to support that.’ ”

The Levins were so well established as a reputable and successful business family that they were approached by Citibank, which had taken over the property through a bankruptcy, to purchase the land in a cash deal, said Matt.

After holding the piece of land for more than four years, “they didn’t want to carry any paper on it,” Matt said.

“I wasn’t needing more to do, but it was an opportunity,” Alan said. “And I literally sat out here watching the trains go by and I thought this would be a great place for a rail facility.”

Matt pointed out that with Alan’s family background in farming in Kansas, they were well aware of the importance of transportation to get product – wheat and corn in the Levins’ case – to market.

“In order to get a good price for your product, rail is how it gets from place to place,” Matt said. “You take it to someplace with rail. That was the basis for understanding what rail can bring. That’s the lifeline for a lot of those places.”

The transportation industry defines an inland port – or in the Port of Tucson’s case, a “dry port” – as an operation with three characteristics:

• An intermodal terminal. The Port of Tucson has 52,000 feet of its own railroad track on the property along with locomotives to move rail cars within the property as needed. 

• A connection with a port terminal. The Port of Tucson is directly connected to the major water ports in Southern California by Interstate10 and to Mexico by Interstate 19.

• An array of logistical activities that support and organize freight brought to the site. The Port of Tucson has 2.2 million square feet of manufacturing, warehousing and distribution space and has room to grow. 

The port also is a federally designated and activated Foreign Trade Zone and a State of Arizona Enterprise Zone, meaning there are duty and tax benefits on foreign goods that stop there.

Having the port is a major selling point for the region as it competes for the high-end industries that need port services without the cost, crowding and delays that take place at the California ports.

“There is not another facility like it in the state. This makes it a unique asset we can promote,” said Joe Snell, president and CEO of Sun Corridor Inc., the region’s economic development organization.

“The Port of Tucson is located directly on Union Pacific’s main line and provides international ocean container rail service to and from seaports in California and Mexico,” Snell said. “This allows companies to avoid delays at the Port of Los Angeles and Port of Long Beach and take advantage of lower freight costs by avoiding over-the-road transportation. Those are big benefits to companies transporting goods through Southern Arizona.”

The Levins are on a constant mission to make the Port of Tucson an all-in-one enterprise for anyone moving goods through the region.

They are a complete intermodal facility where trucks come and go – somewhere between 13,000 and 15,000 per year, Mike said – without the need for rail infrastructure.

They have the infrastructure where rail cars come in and their cargo can be unloaded onto trucks that head to their destinations. Those goods just pass through, so warehousing costs aren’t an issue.

And a third component of the port involves providing warehousing and distribution capabilities for goods that come in on rail and need a place to stay for a period of time.

The port’s largest such customer is the Biagi Bros., a California-based logistics company. It brings Modelo-brand beers from Mexico by boxcar and then distributes the merchandise throughout California and the Southwest.

The company learned about the port from the Union Pacific Railroad, said Jose Lopez, operations manager at the local Biagi Bros. facility.

“They recommended the port for their ability to handle our daily boxcar requirements,” Lopez said. “The market in Phoenix could not.”

 “After 14 years here, we could definitely say it was a great move and we have more than quadrupled our business working with the port,” Lopez said. “They provided us with the warehouse space required, especially in times of fluctuation, and the flexibility to adjust to our needs through the years.”

The Levins’ most recent investment is a 230,000-square-foot “cross-dock” facility. Containers on rail can come in on one side, be sorted to appropriate receivers and go out the other side onto trucks. If needed, the merchandise can stay in the large warehouse for a period of time.

“We’ve seen a lot of interest in that,” Mike said. As they did with the port and with their other businesses over the years, the Levins made the investment based on their instinct and sense of where the logistics industry is headed and what it needs. 

“We didn’t really do it completely on speculation – but we did do the building without a true lease in place,” he said.

As one might expect, Mike said, one the biggest challenges for the Port of Tucson is the concept that there even is a port in Tucson. It remains somewhat off the radar for many freight forwarders working out of the major ports, he said. Some forwarders have yet to take advantage of the opportunity the Port of Tucson presents to move goods through the region at a lower cost using rail.

 “They have their model already set up, which was the model before we put in place what we have,” Mike said. “They’re making their money doing what they’re doing by trucking it.

“What we’re always trying to educate the industry about is if there’s any part of their business where they need international transportation – either imports or exports – that we can help them work with Union Pacific, work with the steamship lines, to actually see what type of savings they can potentially get so they can be more competitive globally,” he said. 

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