California statewide $30-per-TEU fee primed for approval

California State Sen. Alan Lowenthal plans to bring legislation imposing a statewide $30-per-TEU cargo container fee for final approval to the state Legislature by early next week.

Lowenthal, a Long Beach Democrat, has set a goal to pass the bill through the Legislature by June 30. The bill -- which would impose the per-TEU fee on containers moving through the ports of Long Beach, Los Angeles and Oakland -- is projected to raise $400 million to $500 million annually for goods movement infrastructure and environmental projects throughout the state.

The bill now requires only a full Assembly vote and a concurrence vote by the Senate to pass the Legislature and head to Gov. Arnold Schwarzenegger's office. The governor, while opposing Lowenthal's bill in the past, indicated earlier this year that he is now supportive of such a statewide fee and he is expected to sign the bill if it reaches his desk.

Due to legislative procedures, the only date Lowenthal would have to bring the bill up for the two required votes before the end of the month would be Monday. The bill, SB974, has previously passed key votes in the Legislature and is expected to pass both legislative houses easily once Lowenthal calls it to a vote.

Still up in the air are possible amendments that could be written into the bill, including a request by the Port of Oakland to exempt the port from the SB974 fee if Oakland port officials impose their own container fees.

SB974 is the third time Lowenthal has proposed a statewide container fee. The senator's first attempt to pass a similar bill failed on the legislature floor several years ago and a second attempt a year later was vetoed by Schwarzenegger. Lowenthal tabled the third and current version in September 2007 after Schwarzenegger threatened another veto if the bill reached his desk.

State Capitol sources at the time said Schwarzenegger and Lowenthal reached a behind-the-scenes deal where the senator would table the bill during the previous legislative session in exchange for a promise from the governor to sign the bill when it was reintroduced. It was suggested that the governor wanted to hold off on a statewide bill until the Southern California ports could impose their own local container tax, which both have since done.

The current version of SB974 passed the Senate last year and was approaching a final vote in the last hours of the 2007 Assembly when Lowenthal, under the deal with the governor, tabled it to the inactive list. At the start of the current legislative session in February, the bill was removed from the inactive list and placed on the Assembly session agenda, but it was not acted upon. It has appeared on the Assembly session agenda since, awaiting procedural moves from Lowenthal to call for the necessary votes.

Despite fitting the state definition of a ser fee,?transportation industry opponents of the bill generally assert the bill would create an illegal tax by violating the Commerce Clause of the U.S. Constitution. The shipping and logistics industry have also raised concerns that the SB974 fee will increases costs of importing and exporting through the ports.

Supporters of the statewide container fee have typically cited a need for the fee to help the cash-strapped state mitigate the negative port-generated impacts on air quality and certain infrastructure.

Similar arguments on both sides were raised earlier this year when the two Southern California ports of Long Beach and Los Angeles approved a $35-per-TEU container tax and a separate $15-per-TEU tax as part of their plans to reduce negative port impacts on the environment and local communities. Oakland port officials have also approved a container tax in concept, but have yet to set a price.

Under the current version of the bill, half of the collected container fees would be used for goods movement infrastructure projects and half would be used for air quality and environmental programs which offset the negative impacts of goods movement.

Who will receive any SB974 money has remained a main issue with proponents and opponents of the bill alike. In part to address some of these concerns, Lowenthal plans to include a list of specific projects from throughout the state that would qualify for SB974 money. Most of the more than 140 projects identified are flow-improvement projects, such as rail-traffic grade separations that allow freight trains to travel above or below commuters, and not capacity-increasing projects such as highway expansions or bridge replacements.

Lowenthal's office also said earlier this year that many highway and bridge projects, such as the $800 million Gerald Desmond Bridge replacement proposed by Long Beach and Los Angeles port officials, are not a good fit for the SB974 funds because of the dual-use nature of the infrastructure. The aging Gerald Desmond Bridge, which connects Terminal Island to downtown Long Beach, is a primary egress point for drayage trucks moving containers out of the two ports terminals on the island. However, it is also a primary route for commuters heading into southeastern Long Beach from the west.

The list of projects in the plan included virtually every grade separation project on the planning books of the transportation agencies of Orange County, Riverside, San Bernardino, the Alameda Corridor East and San Gabriel Valley.

While the six-year-old $2.4 billion Alameda Corridor rail expressway project eliminated virtually all of the rail-traffic grade crossings between the two Southern California ports and the transcontinental rail yards east of downtown Los Angeles, hundreds of similar crossings in the Inland Empire east of Los Angeles remain a serious speed-limiting factor for trains moving out of Southern California.

Communities east of the original Alameda Corridor have sought funds for an eastern version of the corridor for years, with little success.

Lowenthal's office also said that while many of the infrastructure projects are located in Southern California and will be in part funded by fees from the Oakland port, the Bay Area does not suffer from flow issues, but from capacity issues regarding goods movement.

If implemented, Lowenthal's container fee could have a substantial impact on container volume at the Southern California ports.

An academic study conducted in 2006 showed that container fees above a certain level could spark mass cargo diversions from Long Beach and Los Angeles to other ports. If the fees climb to $100 per TEU or more, the U.C. Berkley study found, the Southern California ports face the potential loss of at least 1 million TEUs each per year.

Adding to the already existing $50-per-TEU PierPass gate fee, a $35-per-TEU and a separate $15-per-TEU tax imposed by the port authorities earlier this year raise the total additional costs for a TEU moving through the two ports to $100 -- the threshold detailed in the study. 

Source: American Shipper