Wine facility work to start Aug. 3

Ground will be broken on a Railex expansion for wine storage and distribution.

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— Construction on Railex LLC's new $20 million expansion will commence in just over a week, Port of Walla Walla officials said Tuesday.

A groundbreaking ceremony on the shipping company's 500,000-square-foot bon- ded wine storage and distribution center will take place Aug. 3 at 1:30 p.m. Gov. Chris Gregoire is scheduled to attend the celebration of the partnership expected to have a major effect on wine shipping.

The new Railex Wine Services Distribution Center -- nearly 10 times the size of the Plaza Way Safeway store in Walla Walla -- was born from a partnership with Woodinville's Ste. Michelle Wine Estates.

One of Washington's largest and oldest wine companies, Ste. Michelle has been an early winery customer of Railex's transcontinental shipping train.

Ste. Michelle started using the service to get its wines to Railex's connecting East Coast hub in Rotterdam, N.Y., nearly four years ago, said Jim Kleist, who manages the Wallula hub as Railex's senior vice president of West Coast operations.

Right after the company started riding the train, Railex also started storing wine for the company. Railex now ships about 1 million cases for the wine company, whose portfolio includes Chateau Ste. Michelle, Columbia Crest, Northstar and Spring Valley Vineyards.

The new distribution center will allow storage of about 5 million cases of wine, Kleist said. Ste. Michelle will lease about 65 percent of that. The rest of the space could be open to other wineries for storage and potential shipping to the East Coast.

Right now Walla Walla wineries are having much of their product trucked to the west side of the state for shipping to the East Coast, said Duane Wollmuth, executive director of the Walla Walla Valley Wine Alliance.

He said the produce train may be most ideal for local wineries that produce about 10,000 or more cases per year. They would be most likely to meet volume demands for East Coast distribution and be able to benefit from the savings from shipping locally on the temperature-controlled rail cars, Wollmuth said.

Port officials during an Economic Development Advisory Committee meeting Tuesday touted the development for Walla Walla County both as another layer in the innovative shipping operation and as a celebrated private investment expected to build the tax base and bring 25 more jobs to the county. According to projections, Railex's addition is expected to bring another $320,000 in annual property taxes, Port Executive Director Jim Kuntz said.

He believes the new addition, slated for a February 2013 opening, is just the beginning for growth.

"We anticipate within three or four years, (there is) potential to have a 1-million-square-foot distribution warehouse out there for wine," Kuntz told attendees at the meeting.

The Port of Walla Walla has authorized a lease for about 30 acres at its Dodd Road Business Park. The lease allows Railex access to the property while terms of a sale of the land are finalized. Port commissioners have unanimously approved the sale of the land for $15,000 an acre. All rent paid for the lease will be applied to the land purchase, said Commission President Paul Schneidmiller.

The transaction is cause for celebration not just because of the land sale, he said. "That's kind of the minor piece," Schneidmiller explained. "For us it's more about the economic development component."

He believes the expansion could result in a domino effect on business creation. "I think we'll likely see some additional businesses spring up in the area because of this," he said.

Wine is roughly the fourth- or fifth-largest commodity shipped out of the Wallula operation, Kleist said. Apples, potatoes and onions lead the way in volume to New York, where they are then distributed along the Eastern Seaboard.

The additional storage space is a matter of necessity as Railex positions itself for growth in the Southeast. The company has had its eye on Florida for its fourth shipping hub -- there's also one in Delano, Calif. Kleist said a Florida hub was originally expected to be open about a year ago. A little before that, he had to deliver the news to Ste. Michelle: the connection to yet another facility would mean more demand for produce, which would mean more of the existing warehouse space would be needed. But his conversation came with a twist.

"I told them instead of kicking you out, how about I kick you in," Kleist said. "Let us build a facility for your storage."

The latest step is the result not only of a $2.75 million capital allocation from the state secured for infrastructure by area legislators and another roughly $300,000 from the Port for road improvements, but also years of building trust, Kleist said.

"Our damage is incredibly low," he said. "Our accuracy is dead on. We haven't damaged the stuff on the train."

The history of safe transit provides a track record that may make it easier for future growers and producers to jump on board with Railex, he said.

The concept has always been to provide a cleaner and more efficient alternative to trucking. The hub's 2006 opening came just ahead of a recession and has had its challenges at times. "In transportation when you have worldwide goods production down, that means worldwide shipping is down, too," Kleist said.

Nevertheless things are moving in the right direction, he said. "The distribution center is really going to help, I think, stabilize Washington and start opening other people's eyes.

"This is how, at some point in time, long-distance, rubber on asphalt doesn't make as much sense as steel on steel."

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