June 13, 2011

Exit Interview: Port of Long Beach Executive Director Dick Steinke

Port of Long Beach Executive Director Dick Steinke announced his retirement from his leadership position at the port this month. With a 20-plus year career at the Port of Long Beach, starting as director of properties, Steinke counts several critical land acquisitions, environmental upgrades of port facilities and vehicles, and huge capital investments as the significant accomplishments of his tenure. To detail the port's ongoing efforts to "grow green" under his guidance, TPR/MIR is pleased to present the following exclusive interview with Steinke as he prepares to move on from the port.


Dick Steinke

The news has reached Downtown L.A. that you're leaving your position as executive director of the Port of Long Beach, and we wanted to give you an opportunity to recount some of the accomplishments and some of the challenges still on the plate of the Port of Long Beach. What career accomplishments are you most proud of?

There are a couple things that are notable. I started in 1990 as director of properties, when we negotiated the purchase of 725 acres of land and water from Union Pacific Resources Company. They had used the area for oil production, and we converted most the land we purchased into container terminal activity. That was a big acquisition, $405 million, and a good investment for the port. It gave us room to grow, and we remediated all the land.

A few years later we had an opportunity to reuse the closed Navy station and shipyard. That was a difficult time for the city of Long Beach, because it was always known as a Navy town. When the station and shipyard closed, there was a question about how it was going to be reused. The whole city did a great job of redeveloping the former Navy facilities, whether it was in the harbor area, which we redeveloped, or in the city, which the city redeveloped. That became a model for base reuse and one of our showcase container terminals.

A third accomplishment is the environmental stewardship that we've been able to carry out over the last five or six years, where we've really stepped up and shown that we can grow green, responding not only the community but our customers at the same time.

In TPR/MIR's last interview with Robert Kanter, he shared that the port has a substantial capital investment program. What is now being planned and built?

Another thing that will be going on over the next ten years is our capital improvement program. We have about $4 billion to be spent over the next ten years for a couple of notable developments that have environmental clearances. One is our Middle Harbor project, which will consolidate two older, inefficient terminals into a very large, technically advanced, and environmentally friendly facility. That's about a $1.1 billion project. It's going to take about 10 years to complete all of the phases. We'll basically double the cargo handling capability while cutting pollution in half.

We've been working on the replacement of the Gerald Desmond Bridge for a long time. That's a $950 million project, where we're going to completely rebuild a bridge just north of the existing Gerald Desmond Bridge. The new bridge will be wider and higher. That project will break ground early next year or late next year and will take four years to complete. We've got all the financing put together for that, and the environmental clearances have all been given.

Those two projects are about half of that $4 billion. A number of other projects would support cargo movement and cargo growth. The next ten years will see a lot of dirt flying around and a lot of progress in improving cargo flow.

TPR/MIR also discussed the financing of these capital projects in our interview with Robert Kanter. At the time, utilizing public private partnership (P3) to fund the Gerald Desmond Bridge seemed unlikely. How have the port's projects been financed?

We have worked out the financing without the traditional tolling or other P3 types of programs. We are in partnership with CalTrans, Metro, and the federal government to provide funding for the project. Our board agreed to put in another $114 million, so between federal, state, regional, and local money, we've been able to come up with all the money that we need to build that project.

TPR/MIR has diligently covered the San Pedro Bay Port Clean Air Action Plan developments over the years, and has noted a division between the Port of Long Beach and the Port of Los Angeles over some of it's provisions. Give us an update on the evolution of the Clean Air Action Plan.

The ports are very, very proud of that. Both ports have worked aggressively on the Clean Air Action Plan. The Clean Trucks Program probably got the most notoriety, and you correctly recounted that there have been some differences between L.A.'s plan and ours.

The bottom line is that the clean trucks fee will be phased out January on 1, 2012, which we're very, very close to. We already have about 85 percent of the truck fleet converted to 2007 or newer EPA compliant vehicles. If you come down to the harbor now, it's rare that you see what we could consider a "dirty" truck. It is a really new fleet. Obviously, a new truck doesn't pay the fee, and it didn't take people long to catch on that if they converted their truck, they'd see the benefits in the program instead of paying the fee.

At last count there were over 9,500 clean trucks entering terminals here in Long Beach and Los Angeles. It's been an unqualified success. Other ports in the country are implementing portions of the Clean Trucks Program as their needs require. The program has become a model, where there was no template when we started. We did it by the seat of our pants, and we've obviously made some changes and revisions to the program as we've moved on. By any measure, it's been a great program. Emissions have been reduced by 80 percent.

The Clean Air Action Plan is a good example of putting your money where your mouth is, delivering on promises, and reporting successes back to the community. One thing that is encouraging is that we get a quarterly report showing the metrics, and anybody from the community can see how we're doing. We've delivered on the promises that we made when we started out with the Clean Air Action Plan in 2000.

Are you suggesting that the facts on the ground suggest that the litigation regarding the Clean Trucks Program is unnecessary?

That's where the ports diverge a little bit on the model to the programs. The fact of the matter is that you can operate clean trucks in the Clean Trucks Program much like the two ports of have done. The Port of Los Angeles has moved forward with their employee-only mandate, with time schedules for that. Our program doesn't require an employee mandate-they can be an independent owner-operator or an employee driver. The courts will decide the legality of that requirement, but it hasn't diminished the effectiveness of the program.

Port container traffic appears to be improving. Is port traffic likely to increase in coming years?

We obviously had a great rebound in 2010, and the first couple months of 2011 were good for us also. We saw a little dip in March, which doesn't indicate a trend. If we're in the mid-single digits this year in terms of cargo growth-anywhere in the 4-6 percent increase range over 2010-we'll be very happy. We keep seeing indicators that we're climbing out. We've had 15 straight months of increases over the same month in the previous year until we dipped a little bit in March, but we're hoping that that picks up.

Indications are that trans-pacific trade will stay strong, possibly putting some downward pressure on freight rates, but the fact is that it looks like loadings of vessels by the end of the year will be pretty good. Now obviously, world issues like the price of oil and natural events like what took place in Japan might apply downward pressure. But retailers and truckers and shippers all feel that we should have a decent 2011.

Of course, with every up-tick in port traffic, there's pressure on the regional transportation grid that supports ingress and egress at the port. Could you address what progress, if any, that has been made to alleviate road congestion?

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We're trying to make sure that the federal government looks at the importance of the goods movement infrastructure to the United States, not just Southern California, not just Long Beach or Los Angeles, but the entire system. Hopefully they'll be adding some priority on intermodal connectors, the areas between ports and highways, and dedicating resources to that. One thing that I've been concerned about is the tradition for the federal government to give everybody a little bit, but nobody gets enough to do the projects they need. With pressure on budgets, especially at the state level, at municipal and ports all around America, wheels are spinning.

That's why projects like the Gerald Desmond Bridge and some of our rail infrastructure projects are so critical, because as volume continues to grow we've got to move this cargo without delay throughout the system. The railroads, BNSF and UP, for their part have made the investment in up the line infrastructure. We still need to do some things within our terminals and have some near-dock capability that encourages discretionary cargo to come through the Southern California ports.

That's an important aspect that sometimes goes without discussion: we'll always have the captive cargo here in Southern California to service this local population, which includes Phoenix and Las Vegas, because it is still more economical to load trucks to Vegas and Phoenix than it is to put it on trains. Beyond that you've got this huge discretionary market. That cargo could go to Canada, or it could go to the Pacific Northwest, at Seattle/Tacoma. It could go to Mexico or through the Panama Canal. We want that discretionary cargo to continue to come here through Southern California ports, because it means jobs on the wharfs and warehouses for truckers and all the work that moves discretionary cargo through the system. We need to continue to a strong push for goods movement infrastructure that supports that discretionary cargo.

Have the goods movement infrastructure bonds that the state of California voters passed a couple of years ago been wisely invested?

Prop 1B money has been issued. The ports have used some of that Prop 1B money. Other regional planning organizations and municipalities have used some of that money. It's been used, but the money hasn't been fully issued. Some of that money has helped a number of our projects here at the port.

You've been pretty bullish in this interview. Given that you're retiring, are there any clouds overhead that are a challenge to the port, i.e., the state's financial difficulties, the federal government's fiscal challenges, or tensions between the city and the port?

There are always challenges. The key is to make sure that customers want to bring their cargo through Southern California. When the port becomes unreliable, Wal-Mart, K-Mart, Home Depot, Costco, or Target-you name it-won't hesitate. They can move that cargo tomorrow. That is always a challenge. As we get to the labor negotiations in 2014, as we get to the Panama Canal opening in 2014, those are things that need to be addressed. From the business development side of things, there are always challenges. For infrastructure, we're building. Hopefully we're going to be well positioned in the future, and we want that cargo to continue. We've done a very good job on the environmental front, but we can't rest on our laurels.

For my retirement, looking at the future, I want to make sure to leave this port when things look good, as opposed to the downhill side. Fiscally, we've been very fortunate to have the financial resources to do a lot of needed improvements. I'm leaving at a good time, but there are always challenges, especially with challenges to city budgets and the state budget. We're fortunate that as an enterprise fund, we derive our revenue from the wharfage and dockage charges by our customers. We don't have to rely on federal or state money for day-to-day operations, but they certainly have come in handy when we're looking at projects like the Gerald Desmond Bridge replacement project. Without the state and federal money, that bridge simply wouldn't get built. For the terminal development, for example the Middle Harbor, we'll bond for a good portion of that project, expecting that the revenues of the port will support the debt on that project.

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Could you also comment on the evolution of the logistics industry as it relates to the ports in Southern California?

That's going to continue to evolve. Evolution is the proper term, as opposed to revolution. You're going to start to see that within our terminals we will continue to build smarter infrastructure that takes advantage of technology. We'll probably end up stacking higher and densifying the facility, using more electric equipment that reduces emissions. The technology is there, in other ports around the world, to automate a lot of what is done by big pieces of equipment with lots of labor. The key will be to continue to evolve the infrastructure.

We're even looking at technologies to move cargo with a zero-emissions footprint, whether with electric or hydrogen trucks, magnetic levitation, or something that would move these containers away from these docks, to near-dock or off-dock facilities around the Southern California area. We're going to continue to look at technologies that move cargo smarter and with less environmental impact.

What is your opinion of the port's Water Resources Action Plan?

My plans right now are to stay connected with the industry in some way. After 20 years, with the previous 12 years on the airport side, the industry gets in your blood. I'd like to find something on the private side to stay connected. I've done 34 years of public sector work, and it's time to change gears to something on the private side.

The board is going to do a national search for my successor. I've promised the board that I am happy to work with them until they have selected my successor, and then I will work with that successor to the extent that the board would like me to, to ensure a seamless transition and that all of our customers know that the leadership that I had here during my 14 years will not be interrupted or changed at all. The new executive director will have much the same philosophy toward our customers that I did.

Built on the success of the Clean Air Action Plan, both ports got together and looked at the Water Resources Action Plan, which will work to improve water quality, whether through stormwater management, other types of runoff, making sure we have very good water management practices. The tests that we've done over many, many years show the health of the harbor. We have a green port fest every year, and one of the things that we also do is we set up a number of small aquariums, where people go out, we actually get some divers to go out, and pick up all kinds of aquatic life and put them in these aquariums, so people can see the health of the harbor. You've got eel grass growing, you've got all kinds of things going on. The waters probably haven't been this clean in the last 60-80 years. We want to make sure that we continue to make sure that the water here in the harbor is as clean as possible.

Lastly, what are your plans post retirement, and what is the port's process and timeline for choosing your successor?

My plans right now are to stay connected with the industry in some way. After 20 years, with the previous 12 years on the airport side, the industry gets in your blood. I'd like to find something on the private side to stay connected. I've done 34 years of public sector work, and it's time to change gears to something on the private side.

The board is going to do a national search for my successor. I've promised the board that I am happy to work with them until they have selected my successor, and then I will work with that successor to the extent that the board would like me to, to ensure a seamless transition and that all of our customers know that the leadership that I had here during my 14 years will not be interrupted or changed at all. The new executive director will have much the same philosophy toward our customers that I did.

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