Construction could start this fall on a massive, climate-controlled warehouse at Port Birmingham.

Port officials say a warehouse is needed to expand operations at the inland port located along the Locust Fork of the Black Warrior River about 22 miles west of downtown Birmingham.

The Birmingham-Jefferson County Port Authority is in discussions with some economic development prospects who can't locate at the port because there is no warehouse, said Scott Phillips, president at STRADA Professional Services, told Birmingham City Council members last week.

STRADA advises the port authority.

Phillips said steel coils that come off barges and trains can't be stored outside.

The port authority is partnering with Watco Companies, a short-line rail company which handles much of the operations on the waterway in the county, on the warehouse project. Watco owns 182 acres with a half-mile of river frontage.

During a port authority meeting on Monday, port officials said they expect to go to the bond market in a few weeks to secure $8 million in financing to build the warehouse. Watco will lease the warehouse from the authority.

Piper Jaffray Companies is underwriter of the bonds. Maynard Cooper in the bond attorney.

Formed by the city of Birmingham and Jefferson County in 2016, with approval by the Alabama State Port Authority, the Birmingham-Jefferson County Port Authority is tasked with helping market the port, secure federal funding for infrastructure and facilitate further development along the Black Warrior River.

Port Birmingham connects to the deep-water Port of Mobile and to the CSX, Norfolk Southern and BNSF railways via the Watco-owned Birmingham Terminal Railway. The port also has direct truck access to Birmingham's six-spoke interstate network: Interstate 65, I-22, I-59/20, I-459 and the under construction Northern Beltline.

Building a warehouse at the port would be the port authority's first major initiative.

The future of the port authority was in jeopardy just a week ago, though, when Birmingham Mayor Randall Woodfin considered pulling the city's $425,000 funding to the group.

A few city councilors, though, spoke out on the economic development potential of the port.

Councilor John Hillard said expanding business at the port could be worthwhile for Ensley and Pratt City. He said the port could create 15,000 jobs over the next 10 years.

Phillips said he was assured by the mayor's office that the city will fund the authority at last year's level.

Woodfin, however, only allocated $300,000, Council President Valerie Abbott said during a Monday afternoon meeting on the city's budget.

The Birmingham City Council is expected to pass the fiscal year 2019 budget on Tuesday. The city's fiscal year starts July 1.

Jefferson County gave $250,000 to the port authority last year. The county's fiscal year starts Oct. 1.

Steel tariffs

Phillips said the exact size and cost of the warehouse hasn't been determined yet. The construction contract on the warehouse will have to be bid out, he said.

The size will be determined based on how the market is affected by a 25 percent tariff on steel imported from the Canada, Mexico and the European Union. Brazil, Argentina and Australia have agreed to limit steel exports to the U.S. to avoid tariffs.

K.R. McKenzie, commercial manager for Watco in Birmingham, said he spoke with key international importers and domestic steel producers over the last two months, and he was told the 25 percent tariff will have a significant impact on the market.

While the tariff is causing imports to decline, domestic steel production is growing, he said.

"The market will bear a warehouse," McKenzie said. "That is not in question."

McKenzie said Port Birmingham is well-positioned to distribute steel for the domestic steel producers, many of which are within 200 miles of the port.

Based on feedback he received, McKenzie said the port authority should consider the warehouse having railroad access.

Updated at 7:11 p.m. with city of Birmingham allocation to the port authority.