Interim Port of LA Executive Director Bruce Seaton Outlines the Challenges

Bruce, as interim executive director of the Port of LA, give our readers an insight into the challenges that you have assumed when Larry Keller resigned nine months ago.

I took over in September when Larry Keller unexpectedly resigned. That was probably the beginning of the fall congestion. That was the first issue I had to address. The congestion, which affected both the Port of LA and the Port of Long Beach, is really two issues. One is the congestion itself, and the other is the diversion of business to other ports. Since the first of the year, the number of TEUs (twenty foot equivalent container units) we have handled has been virtually flat. I think the congestion had a part to play in diverting some shipping that never came back.

Probably the greatest strategic challenge is that while we've got some great facilities here, we're used to operating them in daylight hours only. If you look at a port like Singapore, which admittedly is a trans-load port, they ship roughly three times the TEUs per acre. Our customers are used to us just expanding the acreage we have in the long term, like we did for Pier 300 and Pier 400. We can't continue to expand in the same way. Now we need to increase the number of TEUs per acre we handle. I think OffPeak, which is a program to encourage customers to use the port after hours, is one important step in moving forward to operating and using this infrastructure we have built more efficiently than we have in the past.

Another critical issue is the fragility of the supply chain. The railroad meltdown of 1998 showed how fragile it could be, and the railroads need to step up and ensure that they have the infrastructure they need to keep cargo moving. Instead, though, they are tweaking some of their operational plans, by establishing a minimum train length of 7,500 feet for trains that leave our terminals. That is great for the efficiency of their system, but it puts a strain on our customers to have put together trains that long. The Alameda Corridor is not at capacity. It is running about 45 trains a day. Its capacity is about 110 trains. It was designed for growth, and it will play a large role in continuing to move containers out of the ports.

I am also concerned about the truckers that feed these terminals. These folks need to be serviced quickly when they come into a terminal. We made a recommendation to our board a couple of months ago to take steps to decrease the amount of time that incoming cargo sits in the terminal to no more than 4 days before it is picked up. For export cargo, the limit is six days, effective July 1st of this year. Those are important facets of keeping cargo moving here.

The residential communities impacted by growth at the Ports of Long Beach and L.A. have voiced that they are overwhelmed by traffic congestion and air pollution. How does one find a balance between the need to ensure the economic vitality of the port and the health and mobility of the communities through which the cargo travels? Is that the chief political challenge?

I wouldn't call that a political challenge. That is a reality of life. When you get on a roadway, you want to be able to move. Whether you're on a port-owned roadway, a Caltrans freeway, or a city street, you want to be able to get where you are going. I think it is a little unfair to point the finger always at the ports. Ports are great targets because the stuff we put on the freeways is usually in a box, which can be identified. We do cause congestion in certain areas, but goods movement is very important for the vitality of the economy. Air quality is also very important, and there is no question that there is a certain amount of pollution caused by trucks and by ships, and we are addressing this. We have conducted studies in order to comply with the No Net Increase program. Those studies have resulted in 68 recommendations from the advisory committee. The challenge is paying for implementation.

LA has taken a leadership role in three areas: security, working with the community and environmental initiatives. Our Alternative Maritime Power (AMP) is the first program of its type. We have the first container terminals to have a container ship plug in to shore power rather than burn fuel. That is very significant. We are setting a standard. We're subsidizing the AMP program to encourage customers to participate.

Some people might suggest that we should just stop growth until we figure out how to solve the problem. But that is like saying we should kill the patient to find out what the cure for the disease is. That is not appropriate. What is appropriate is everybody working together to keep these jobs, to keep this economy moving, to keep this gateway open and make sure we grow responsibly.

I think LA has taken a leadership role in addressing environmental problems. I personally recommended a slowdown zone of 40 miles, instead of the current 20 miles, because that's the influence area of the South Coast Air Quality Management District. We made that part of our RFP proposal for the old Matson terminal.

There are other strategies that we can and will implement to address environmental issues. I'm very happy that we've got a committee to study these issues. There is no silver bullet, but we are asking people to weigh in and we are analyzing these problems.

MIR has interviewd State Senator Lowenthal and Wally Baker of the LAEDC. Both suggested that the metropolis' goods movement problems require the involvement and cooperation of all the stakeholders in the region, and both suggested that this is not happening. Do we have a regional mechanism in place that will allow everyone to collaborate on solutions?

I don't think we do. There have been a number of initiatives by different entities. Mayor Hahn did good work. I think that the vision that Mayor-elect Villaraigosa has for the future is going to continue and extend that work. The governor's Goods Movement Forum is one of a number of interests weighing in.

Here's the real difficulty. We can define the problems. We can define the interests of all those involved, but the solutions are very expensive. The infrastructure costs for new roadways are extremely high. Now everyone is trying to figure out how we pay for the infrastructure. I understand the governor's committee has estimated approximately $27 billion in costs for the five county infrastructure needs. Only $2 billion of that is available from federal and other sources. So, where do we get the money?

One possible source is customs collections. Roughly $5 billion dollars in US Customs collections come from the ports of LA and Long Beach, and none of that money is earmarked to come back to the two ports for either infrastructure or security. Somehow, our California delegation to the US Congress needs to open up those customs collections. Over 40% of the cargo coming into the US enters through these two ports. We take the brunt of the impact, yet we get nothing back from the federal government, unless we go begging for a grant for security, which we don't get our fair share of, or we go begging for Corps of Engineers money for main channel deepening, for which we pay 60% or 70% of the cost. We are not getting our fair share.

In a recemt MIR interview with Senator Lowenthal, he said, "China is currently investing $80 billion in infrastructure. In California, we are not investing anything. As a result, we have to devise innovative solutions for public-private partnerships to fund infrastructure improvements. At the same time, you have to have the state step up, prioritize this and put resources into it and the federal government likewise. They have been doing nothing." Is that consistent with your views?

Let me first say that I would point the finger at the federal government, because you cannot develop the public-private partnerships that Senator Lowenthal mentioned without the public sector being able to contribute significantly more money than it can now. I think if we could access even a portion of the US Customs collections generated by the ports, it would help significantly. Once that is done, then I could see pursuing a public-private partnership, but absent some big money coming back here from the federal government, I think it is going to be difficult for the private sector to participate.

Another approach would be to use legislation to impose new regulations and new requirements on port users. The issue here is, of course, what the effect will be on port business. If cargo is on a boat, it does not have to come here. You've got to look at the business impacts when considering the legislative route. A lot of jobs in Southern California are dependent upon the waterfront. But, again, I would agree with the Senator about the value of public-private partnerships, once the public sector can contribute enough money.

In a past MIR interview with Jim Hankla, who is on the Long Beach Harbor Port Board, he said, "The harbor does not have the authority to enact the No-Net-Increase standards offered by [then] Assemblyman Lowenthal." When asked to respond to that, Gail Feuer with NRDC said, " I think there is no question that the ports have the authority to reduce emissions. They have the jurisdiction they need and they just need to have the will power to exert it. For example, every time the port negotiates a new lease or a new change to a lease, as the landlord the port can require whatever air quality or other mitigation is necessary to keep pollution down." Bruce, do Ports have the authority needed to impose environmental standards?

Let me clarify a little. The regulatory authority for ships rests with an international convention, and the ports have no authority for regulating that international convention. Marpol VI, which would require lower sulfur fuels in ships, has not been approved by the United States yet. But Gail is right in the very important sense that, even though we don't regulate those ships, we do give the permits that allow ships to operate here. Certainly we can put environmental restrictions or requirements in our leases for those ships. That is absolutely true. The question is, again, whether putting restrictions in our leases will drive cargo away.

If I put a restriction in a lease and Long Beach doesn't, everyone is going to want to go to Long Beach. I think the shipping industry has forced the ports into having the least common denominator in terms of regulations and requirements. Somehow we have to set a higher standard, possibly by having common clauses in our leases. If we can do that then-I agree with Gail-we should. I will go one step further and say we should do that.

If you were briefing Mayor-elect Villaraigosa on what the priorities of his administration should be with regard to the port, what would be at the top of the list?

When I took the position as interim executive director, I developed a number of priorities. The first is that we need to work with our customers to see what our customers needs are. There is no question about that. The second is that we must work to achieve the goals of Mayor Hahn's No Net Increase program, which aims to prevent increases in pollution beyond 2001 levels. We've got to be sensitive to the environment as we grow. We have established a task force to look into how we can finance the program. Third, we have to listen to the broad community that we serve and be sensitive to it. Fourth, we have partnerships with our San Pedro and Wilmington communities to build a grand promenade and have access for the community to our waterfront. Fifth, I need to keep my department here working like a well-oiled machine, keep my staff working well.

The budget for the port is currently being reviewed. What's in that budget that justifies a 16 percent increase, and how is the budget likely to change before it is adopted.

I think you are going to see some modifications to that budget. First, let me say that port budgeting is not the same as a tax-supported municipal budget. We have long-term agreements with our customers. And our overall long-term growth as predicted by the Mercer study is that both LA and Long Beach are going to grow by 6 percent to 7percent yearly. We have actually exceeded that in the last five or six years by a wide margin and at the same time, kept our expenses down. This was a catch up year. I held predicted income level for this next year, but we had some expenses catch up with us. If everything goes well, I'll be proposing some cuts in those expenses, and I think that our revenues will increase by the 6% to 7% per year in the long run, and our expenses won't be a problem.

Finally, if MIR comes back to you in a year, what will be driving your agenda? What would the interview be about, most likely?

I think that railroad infrastructure will continue to be an issue, and it's something that I am going to watch very carefully. The results of the OffPEAK program are going to be very important. We are going to be doing a review of that program. I think we need to watch the trucker issue very carefully. Foremost on my mind, though, is how to improve our efficiency by increasing our TEUs per acre. This is a longer-term issue related to the environment and our ability to pay for the No Net Increase program. We are not going to be able to just grow like Rotterdam and add another thousand acres. How are we going to increase from 5,000 to 6,000 TEUs per acre to 8,000 or 10,000 TEUs per acre? That is what we will be talking about.