April 18, 2014 - From the May, 2014 issue

Long Beach Mayor Bob Foster Finds ‘Superficial’ LA 2020's Recommendation to Merge Ports

The Los Angeles 2020 Commission—created by City Council President Herb Wesson a year ago—released its second report, “A Time for Action,” in early April. The document offers recommendations for addressing persistent problems facing Los Angeles that the Commission identified in “A Time for Truth,” made public in January. In one of its most controversial suggestions, “A Time for Action” proposes merging the Port of Los Angeles and Port of Long Beach. Long Beach Mayor Bob Foster spoke with TPR to provide his perspective on this recommendation. 


Bob Foster

"It’s easy to dismiss our objections and say, 'They’re just being defensive.' No—I have yet to hear a business reason for consolidation." —Bob Foster

Mayor Foster, the recently released LA 2020 Commission Action Report includes a strong recommendation to merge the Ports of Los Angeles and Long Beach to be more efficient and to win back the 5 percent market share that the ports have lost globally. What are your reactions to such a proposal?

These recommendations, much like the rest of the report, are superficial and more than a little self-serving. LA is having economic difficulties and other issues, and is trying to look for anything to gain economic strength. There was certainly no attempt to be a good partner. No one in Long Beach was contacted—neither the mayor’s office nor the port. I’m not opposed to looking at any reasonable recommendation, but my city is not going to be treated as a second-class citizen. Long Beach is not going to be dismissed and treated as if its interests are irrelevant. If that’s the kind of partnership Los Angeles envisions, I want no part of it, and I don’t think my city does.

Los Angeles is the same city that treated Long Beach and its residents very poorly in siting a huge rail yard—BNSF, the SCIG Project. One of the authors of the report, Mickey Kantor, was the outside counsel for BNSF and was the lead person in Los Angeles to get that rail yard built. Forgive me if I’m just a little suspicious that this may have something to do with influencing or derailing Long Beach’s litigation on that very same rail yard.

Regarding the 5 percent cargo said to have been lost—Long Beach’s cargo has gone up. LA may have lost cargo. Overall, the reason for lost cargo is two fold: We’ve had reduced economic activity, so fewer containers were coming in to either port. Secondly, discretionary cargo has gone up to Prince Rupert because it’s a shorter distance from Asia and the Canadian rail system has been greatly enhanced. It takes almost two fewer days to get to the US Midwest when you count the rail service from Prince Rupert and the shorter distance to Asia.

Rafael Sonenshine, who commented on the 2020 Report, said it best, and more eloquently than I could: Most of these recommendations head in the wrong direction. They go about trying to put another layer between elected officials and their constituents. That’s not what needs to be done. Elected officials need more contact and more direct involvement with their constituents, not less. Putting these commissions and boards in between constituents and elected officials actually makes things less accountable and less transparent.

As far as combining the ports goes, if there were a good business reason to do it, I certainly would entertain it. But, when you look at the real reasons cargo goes elsewhere, the politics in Los Angeles, at the way Long Beach has been treated, and at how, I believe, the governance of our port is superior to Los Angeles’, I don’t think there’s any interest—business or otherwise—for the City of Long Beach to engage in that discussion.

Given that both San Pedro Bay Ports are presently undergoing a transition of leadership, what alternative measures might the two ports, independently or collaboratively, take going forward to better position metropolitan Los Angeles as the largest portal to the nation for goods movement?

There’s no magic bullet here. The simple formula, which we try to implement in Long Beach, is to move cargo in large volumes, at the greatest velocity, at a reasonable price. This is not rocket science. If you have a port that welcomes trade, has the right facilities, and has the right logistics to move cargo in and out quickly, then you’re going to be a port of choice.

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Putting a joint powers agency together and just becoming a larger port doesn’t make you a better port. Much like people claim that the LA Unified School District is too large, I would argue that a merger may create a too large and distant entity. I would rather concentrate on being the world’s best port—being able to handle whatever volume comes in, move it quickly, and do so at a reasonable price. That’s how you attract business.

It’s easy to dismiss our objections and say, “They’re just being defensive.” No—I have yet to hear a business reason for consolidation. Quite frankly, Prince Rupert and Canadian Rail are doing exactly what I’m suggesting—moving volumes in and out quickly. That is what we need to do, and Long Beach is attempting to do just that. We’re going to spend $4.3 billion on new facilities over the next 10 years to become the world’s best port. We don’t need any help from Los Angeles.

Given, by law, you are termed out this year as Mayor of Long Beach and thus have no reason to be politically defensive, would you share how you would address the central challenges discussed in the LA 2020 Report—fiscal stability, transparency, accountability, and job creation? What would be your recommendations for putting Los Angeles and Long Beach on a healthier economic trajectory going forward?

I’m not going to be so presumptuous as to give advice to a city I do not live in. But I can tell you as a person with very lengthy business experience that if you want to attract business and increase employment, you have to look at your tax structure and see if it’s a burden. I don’t know whether Los Angeles’ is or not, but a lot of businesses complain about the gross receipts tax.

You have to look at your processes. You’ve got to be able to provide clear answers to business and accelerate your regulatory process. You need to be not just be business friendly—you have to change the culture of regulation into one of facilitation. We’ve tried to do that in Long Beach. We’ve changed our whole approach to issuing building permits and business licenses. We’ve reduced costs and made a one-stop shop. The process is clear and applicants are guided through the process. People are tasked with getting businesses up and running as soon as possible within all the requirements that are necessary. There’s no real secret to this. You can’t cause businesses huge delays. You can’t continue to increase costs, continue to place delays and obstacles in the path of business and expect jobs to come to your city.

I think the report punted on the really important issues. Those are taxation, regulatory structure, and culture. The culture of regulation includes a lot of overlapping jurisdictions that cause no end of headaches to anyone that wants to build a project or start a business. You can’t do that and expect more jobs. Time is money in business. You need to shorten the time and, more than anything else, provide a clear answer to those seeking to invest. A very quick “no” is much preferred to a very protracted  “maybe.” I don’t see anything in the 2020 Report that really deals with that issue. I think they shied away from tackling the big issues.

Mayor, you have a great deal of experience in your eight-year tenure with respect to the port collaboration, i.e. the Clean Air Action Plan. Could you draw from that experience regarding the merits of the LA 2020 merger recommendation?

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I think that’s a good example. Generally, the ports have worked pretty well together. There’s a little bit of competition, but I think that’s healthy. We worked together on the Clean Air Action Plan. We worked together on all of the things that now have been very successful in cleaning the air in and around both ports.

But one thing we disagreed on was the clean trucks program. The City of LA—in a politically motivated fashion—wanted to require all the drivers coming in and out of the port to be employees. They would be easier to organize if they were employees. I felt that had nothing to do with cleaning the air. My Long Beach port felt it had nothing to do with cleaning the air. In fact, I think it really misunderstood the entire business at the port.

Most of the drivers are owner-operators and contractors. You just can’t wave a magic wand and make them employees all of a sudden. Beyond that, there are many people that don’t want to work for somebody. They want to be contractors. It’s a guy and his brother-in-law who own three or four trucks. They have a nice little business, they’re doing okay, and you want to come in and say, “You’ve got to work for somebody else”? Why, to satisfy someone’s political commitment?  What does driver status have to do with cleaning the air? If it ever happens in America that you can’t go out and buy a set of tools and try to feed your family, that’s an America I never want to experience. That’s where the employee mandate was headed.

We went a different direction. I think it was the right direction, and the courts have agreed. I think that Los Angeles wasted a lot of time, money, and energy on something that had nothing to do with cleaning the air. That’s a great example of why the Harbor Commission in Long Beach and, I believe, the Long Beach City Council do not want to be involved in a partnership with Los Angeles. 

Lastly, the report also recommended a new, independent oversight rate-setting body for DWP. As a past president of Southern California Edison and as the Mayor of Long Beach, which is served by SCE, would you comment on this governance recommendation?

Taking the regulatory responsibility outside of politics and putting it into a professional body is one of the recommendations that makes sense. However, I would never have the regulatory body appoint the general manager. I don’t know why you would do that. It’s a built-in conflict. You’re going to have the same body that appoints the general manager hear that general manager’s rate proposals? That is ludicrous. The mayor ought to appoint the general manager to have clear executive accountability, and the department ought to bring its rate proposals before an independent commission. Hopefully rates will be based on what is necessary and compensatory for the utility to operate, not on any other motive.

© 2014 The Planning Report | David Abel, Publisher, ABL, Inc.