The news that Governor Schwarzenegger vetoed Senate Bill 974 seemed to be everywhere this past week. The bill would have imposed a fee on cargo containers moving through the Ports of Long Beach, Los Angeles, and Oakland. The revenue collected would have been used to control port-related emissions and to fund the construction of more efficient infrastructure for goods movement.
This was Senator Alan Lowenthal’s third try for the Governor’s signature on a container fee bill. One earlier attempt was rebuffed because the fee would have applied only to the San Pedro Bay ports – LA and Long Beach – rather than across the state. The Senator had addressed this concern in the current bill. This time the Governor’s primary reason for vetoing was that the funds collected at the three ports would not benefit residents of the San Joaquin Valley, where some port-related cargo travels.
In several venues, I’ve heard disappointment, anger, and outrage over the Governor’s veto, while in other venues I’ve heard relief. Environmental groups, elected officials, and members of the public – and the Senator himself – have expressed the view that the Governor failed to protect the health of Californians by refusing to approve the cargo fee. They point out that the vast majority of impacts occur near the coastal ports, so the fees collected there should stay there instead of being directed to the Central Valley.
Business groups, on the other hand, are relieved that the fee will not be imposed. They point to a number of fees that have been instituted, many of them during the time the Senator has been working to pass his bill. One of the more noteworthy opponents to the bill was the Republican vice-presidential candidate, Alaska Governor Sarah Palin. Residents of her state, she pointed out, would pay more for the many goods that arrive via the San Pedro Bay Ports. In his veto message, our Governor observed that the current economic climate is a poor time to impose additional costs on trade.
The fee under the Lowenthal bill would have been $30 per twenty-foot container ($60 for the most commonly seen forty-foot containers) at Long Beach and Los Angeles. New fees imposed on San Pedro Bay cargo containers in recent years include a $35 dirty truck fee; a $15 infrastructure cargo fee; an Alameda Corridor fee (now about $19); and a PierPASS OffPeak fee of $50 (each of these fee amounts is per twenty-foot equivalent unit or TEU).
A few years ago the Southern California Association of Governments conducted an “elasticity” study to determine what level of cargo fees might cause freight shippers to divert cargo to other ports. The study found that fees could go as high as $100 per TEU without substantial diversion of cargo, as long as the money was used to speed the flow of cargo through Southern California. While the sum total of the fees listed above certainly exceeds $100, not all of them apply to every container, and some are not implemented yet. The infrastructure cargo fee, which takes effect in January, was designed to address near-port infrastructure needs, with the expectation that the Lowenthal fee would be in place to help fund regional infrastructure needs like separating roads from tracks at rail crossings.
Other state laws and funding programs address both infrastructure needs and public health protection through emission controls. For example, portions of state bonds approved by voters in 2006 address both these issues. However, it’s pretty clear that the need is greater than the resources available. Also, there is some likelihood that a national container fee will be adopted. I know of three federal bills that have been introduced to that end, in advance of a broad reauthorization of federal transportation law due in 2009 (though it probably will not be accomplished until 2010 or later). There’s no guarantee, though, that enough of a nationally collected fee would return to do good in Southern California. And we certainly need to be vigilant about the coordinated effects of imposing local, state, and federal fees.
Senator Lowenthal has said that he will not try again with a fee bill. However, there is enough support for the concept of a state or regional cargo fee that local elected officials have discussed seeking another author. So the Governor (or his successor) may find himself yet again faced with a decision whether to fee or not to fee.