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Thursday, November 4, 2010

Long Beach Voters Okay Taking More Funds From Port

Long Beach voters on Tuesday passed a city charter amendment that will shift an estimated 20 percent of the Port of Long Beach's annual profits to the control of City Hall.

Measure D passed by a 55.6 percent to 44.4 percent margin. Authored by Long Beach Mayor Bob Foster and Councilmember Gary DeLong, the measure alters the formula for calculating an annual port-to-city transfer from 10 percent of port net income to 5 percent of port net and turns control of all port oil property over to City Hall.

While no analysis was conducted by City Hall before placing the measure on the ballot, an estimate by port financial staff concluded that the measure would transfer an additional $133 million to City Hall over the next five years, or about 20 percent of the port's annual net income.

Under Measure D, the city will receive an added $6.6 million per year due to the transfer formula change – in addition to the estimated $12.4 million the port will already transfer. The port will also see an estimated $20 million a year in port oil revenue head to the City Hall-controlled Tidelands Fund. The port paid roughly $55 million for the mineral rights to the oil property in question back in 1994 and will not be compensated for the loss.

The measure was opposed by nearly the entire Southern California shipping and trade industry. The California State Lands Commission – the state watchdogs overseeing port authorities – was also highly critical of the way the measure was crafted and placed on the ballot with no economic impact study.

“While we are disappointed with the election results this morning, we are pleased that such a large percentage of the voters of Long Beach agreed that Measure D is an ill-fated attempt to further burden the Port and is the wrong way to address City Hall’s budget challenges," said John McLaurin, president of the Pacific Merchant Shipping Association, in a post-election statement. "Thousands of voters joined with the chorus of voices that view Measure D as a deceptive measure that was rushed on to the ballot literally in the dark of night in order to pass.”

The actual ballot tally was 39,135 votes for Measure D and 31,492 opposed. Voter turnout was just over 32 percent.

Measure author Councilmember Gary DeLong told LBReport.com that voters were sending two messages with the passage of Measure D.

"First, while Long Beach residents value the many contributions the Port makes to our local economy, residents also are willing to invest in improving our beaches and coastal area," said DeLong. "Secondly, don’t mess with the City Auditor."

City Auditor Laura Doud, while never conducting an economic impact study of Measure D on the port, concluded that the transfer formula would only result in an additional $1 million to $1.5 million in port revenue heading to the city each year.

The PMSA's McLaurin said his organization and others in the shipping and trade industry would "hold the City to this estimate and fight any transfers of property or money as a consequence of Measure D over and above the amounts that were the basis on which this measure was sold to the voters.”

Key SoCal Bridge Replacement Project Gets Final Go Ahead

After nearly ten years of planning, development and scraping together numerous funding sources to replace an aging and under-capacity bridge serving as a key arterial roadway for Southern California port cargo, officials at the Port of Long Beach received the final go ahead Wednesday from government officials to begin the bridge replacement project.

Members of the California Transportation Commission approved the funding and building plans for the $950 million Gerald Desmond Bridge Replacement Project, clearing the way for the port and Caltrans to solicit bids for the design and construction of the new bridge.

The CTC's unanimous approval, the final governmental approval needed to start the project, authorizes a design-build contracting process that will accelerate the start of construction. The port plans to issue a solicitation for design-build firms that can handle the project as soon as Friday. Port officials estimate that actual construction could begin as early as 2012. Preliminary estimates indicate that the project will take five years to complete.

“The Transportation Commission’s approval is a major milestone for this project,” said Nick Sramek, President of the Long Beach Board of Harbor Commissioners. “It allows us to embark upon one of the biggest construction projects in the state and to replace an obsolete bridge with a new one built to handle the traffic and cargo needs of the region.”

The port began working to replace the bridge nearly a decade ago, but a lack of funding sources has stalled the project several times.

The current funding package put together by the port includes: $500 million from California state highway and transportation bond funds; $3400 million from federal sources; $114 million from the port; and, #28 million from Los Angeles County.

The Gerald Desmond Bridge replacement has been described as one of the port-area's most critical infrastructure needs. The new bridge will be taller, wider and safer than the current bridge, according to port officials.

The existing 156-foot-tall Gerald Desmond Bridge, which is named after a former City official, links the port-area Terminal Island to Long Beach proper. The 40-year-old steel and concrete structure is a main ingress and egress point for trucks into the port. Upwards of 60,000 vehicles a day cross it's five-lane, 1,200-foot-long span over the port's main channel.

According to port officials, more than 15 percent of the nation's seaborne cargo moves over the bridge each year.

In addition to lacking adequate capacity and having insufficient height to allow the newest container vessels to pass underneath, the current bridge is deteriorating rapidly – a situation that has led to more frequent and costly repairs.

The International Longshore and Warehouse Workers Union Locals 13, 63 and 94, which provide labor for the Southern California ports, and the Pacific Merchant Shipping Association, which represents roughly 90 percent of the shipping and terminal operator firms on the West Coast, lobbied the CTC to approve the bridge project.

"Replacing the bridge is critical to maintaining California’s dominant position in international trade and keeping the San Pedro Bay ports competitive with container ports throughout North America," the groups said in a joint letter to the CTC. "A new bridge will ensure that our ports can both accommodate the newer, cleaner and larger container vessels while also accommodating more clean trucks on our roads."

Matson Profits Surge on China Success

Ocean carrier Matson Navigation reported a 67 percent upswing in third quarter operating profit, citing "higher yields and improved cargo mix" in an earning statement released this week.

The Oakland, Calif.-based carrier reported operating profits of $40.4 million on $267.5 million in revenue for the third quarter. While the carrier's domestic cargo volumes were down or flat across the board, a 14 percent increase in revenue on the carrier's China routes buoyed the firm's earnings.

Hawaii container volume was down 2 percent in the third quarter, Hawaii automobile volume dipped 10 percent and Guam container volume remained flat compared to the third quarter in 2009.

According to the carrier, growth was “principally due to a $24.8 million increase resulting from higher yields and improved cargo mix, principally in the China trade.”
While primarily a Jones Act domestic carrier servicing Hawaii and Guam from the West Coast, Matson has seen recent success in its several trans-Pacific China routes.

Matson officials cited the commencement of a second South China route as a main reason behind a 29 percent increase in the carrier's China container volumes during the third quarter.

Matson's surging profits also contributed to a doubling of parent firm Alexander & Baldwin's net profit and a 20 percent rise in A&B's third quarter revenue.

San Mateo County Voters Elect First Non-Incumbent to Harbor Board in 12 Years

Voters on Tuesday elected two members to the five-member San Mateo County Harbor District board including a veteran incumbent and the board's first new commissioner in 12 years.

Jim Tucker, a three-term commissioner first elected in 1998 and currently treasurer of the board, was re-elected to a fourth term.

Joining Tucker will be first-time board member Robert Bernardo, a former San Francisco planning commission member and current manager at the Port of Oakland.
The harbor district, located in Northern California, oversees the Pillar Point Harbor at the northern end of Half Moon Bay and Oyster Bay Marina Park in southwestern Bay Area.

The election was highlighted by veteran Commissioner Ken Lundie's noble gesture to save the district the $500,000 to $700,000 in county election fees for the election that instead led to more filings to run for the office and guaranteed a need for the election.

Earlier this year Tucker and Lundie announced they would run for re-election on the November ballot. Non-incumbent Bill Klear filed to run against them.

The day before the closing of the candidate filing period for the ballot, Lundie, who was running for his fourth four-year term on the board, tried to save the Harbor District the election costs by withdrawing his name from the ballot. This would have left Jim Tucker and newcomer Klear to take the Harbor Commission seats.
It would have except for a law stating that when an incumbent fails to file or withdraws, the filing period is extended – in this case by five-days.

During this five-day extension, and with three-term incumbent Lundie no longer in the race, Sabrina Brennan and Robert Bernardo filed to run – forcing the issue back on to the ballot.

On the agenda for Bernardo, Tucker and the rest of the board is the opening next year of a $53 million ferry terminal at Oyster Point, as well as ongoing redevelopment projects at Pillar Point, home to numerous commercial fishing vessels.

The district also faces the ongoing task of whittling down state debt built up years ago--a debt which now stands at $10 million.

Tuesday, November 2, 2010

FIDLEY WATCH: Sending Business North

Chris Philips, Managing Editor

At press time it’s a beautiful fall day in the Pacific Northwest. The leaves are beginning to turn but the days are still warm enough to stroll without a jacket. The Seattle Times tells us the economy is improving, and the upcoming elections promise to bring a welcome change to Washington DC.

We live in an amazing country, which spans an entire continent and boasts warm-water, year-round ports on three coasts. We have a vibrant commercial maritime and shipbuilding sector, especially on the West Coast. It’s hard not to be optimistic. And yet…

On page 8 of this issue we discuss a civil complaint filed by the US Department of Justice on behalf of the Environmental Protection Agency against San Diego’s NASSCO shipyard. The yard is accused of installing engines in 46 commercial and military vessels that did not have a “certificate of conformity” showing that the power plants meet US emission standards.

The suit, which is the first federal court action brought by the United States under marine diesel engine rules, doesn’t allege that the powerplants do not meet emissions standards – only that they lack the required documentation claiming they meet the standard.

The DOJ and EPA hope to collect fines of at least $1.5 million from the San Diego yard.

While our government is working to make US-built vessels more expensive, another story in this issue, also on page 8, reveals that Canada has waived its 25 percent import tariff on general cargo vessels and tankers, as well as ferries longer than 129 meters. The story notes that the move is expected to save Canadian shipowners some C$25 million (US$24.8 million) per year over the next decade.

Canada’s Minister of Transport, Infrastructure and Communities, says the move will accelerate the modernization of the Canadian fleet by replacing aging vessels with cleaner, safer and more efficient ships.

Recent new deliveries to Canada from West Coast shipyards include tugboats for Seaspan and Minette Bay Shipdocking. The removal of Canada’s import tariff combined with the relative strength of the Canadian dollar could make the sale of larger vessels from US yards a possibility as well.

Meanwhile, the largest CMA CGM vessel ever to call at a Canadian port, the 8,500-TEU CMA CGM Figaro, arrived last month in Vancouver. The ship is deployed on the Columbus loop, a pendulum service linking China and Korea to Pacific Northwest and Canada as well as the US East Coast via the Suez Canal.

The vessel boasts environmental features including equipment to plug into shore power and a “fast oil recovery system,” which enables bunkers to be recovered from the vessel’s fuel tanks without having to open a hole in the vessel’s hull. The ship also features an electronically controlled engine, reducing oil and fuel consumption by respectively 25 percent and 3 percent.

Unlike ships built in San Diego, the CMA CGM Figaro, delivered in April of this year, was built in Korea by Samsung Heavy Industry and therefore can deliver freight from Asia to British Columbia without having to hold an EPA-issued certificate of conformity.

The relaxing of Canadian tariffs could present US shipbuilders a unique opportunity to compete with Asian and European builders for the Canadian market, but the EPA’s suit against NASSCO acts to restrain commerce, rather than promote it.

With the US economy as fragile as it is, rather than saddling American companies with ever more restrictive standards, shouldn’t the Federal Government be removing barriers to trade?

Oakland Port's Truck Registry Passes 5,000 Sign-Ups

The Northern California Port of Oakland's ongoing truck registry program has now registered more than 5,000 port-servicing trucks since registration began in April, according to an announcement issued by port officials last week.

Known as the Secure Truck Management Program, the program includes a web-based truck registry and a truck asset management that monitors truck movements at the port. The STEP system is designed to: help law enforcement identify vehicles authorized to pick up and drop off cargo at the port; help port officials assure that only trucks compliant with environmental regulations are servicing the port; and, provide a means for the port and trucking firms to exchange information.

Trucks have until Jan. 1, 2011 to sign up for the registry. Registered vehicles receive a certificate and a compliance decal. A radio frequency identification device is also provided for registered trucks. When affixed to a truck, the RFID will communicate with the STEP system through readers at marine terminals gates.

“The Port’s truck registry is a user-friendly database so that it’s easy for us to find the contact information we need and work collaboratively with local law enforcement if we have a report of suspicious behavior,” said Port of Oakland Facilities Security Officer Mike O’Brien. “We now have a fully-functional and centralized trucker database at the Port of Oakland. This new capability adds another significant layer to both maritime and supply chain security here at our Port.”

The port contracted with SAIC, Inc. to implement the port registry, which is being funded through California voter approve Proposition 1B funds.

Los Angeles Port Extends Truck Program Legal Contract

The attorneys representing the Port of Los Angeles in their ongoing litigation with the American Trucking Associations continue to prove the old adage about lawyers being the only winners in protracted lawsuits.

Los Angeles Harbor Commissioners have approved a two-year extension of a contract with the law firm of Kaye Scholer LLP. The firm's current contract, first approved in January 2007, allows for a maximum of just over $7.5 million in compensation for the firm's work representing the port. The contract covers the development and defense of the port's omnibus environmental Clean Air Action Plan, of which the truck program is a major component.

The two-year extension approved on Oct. 26 was the fifth amendment to the original contract with Kaye Scholer, which also includes subcontracting with the law firm of Troutman Sanders LLP. The extension, which runs through January 2013, does not include further compensation beyond the already approved $7.55 million.

The new extension also notes that Kaye Scholer is no longer representing the Port of Long Beach, which settled its portion of the truck program court case in Oct. 2009. The Long Beach port paid out more than $2.5 million under a separate Kaye Scholer contract for representation by subcontractor Troutman Sanders during the truck program case.

The ATA sued the two ports in late 2008 over the two ports' individual versions of a jointly developed truck program. The trucking group has argued that portions of the truck program, which bars older trucks and establishes an access license scheme to restrict which trucks can and can not enter the ports' terminals, violates federal interstate commerce laws. The case is currently awaiting a hearing before the Ninth Circuit Court of Appeals.

Firm Envisioning Shipyard Warns Los Angeles Port

A Long Beach firm seeking to convert an abandoned Port of Los Angeles shipyard into a modern ship repair facility has threatened possible legal action against the port claiming port officials have been undermining the firm's $50 million project.

Gambol Industries, Inc. has been working for more than a year to move forward with the $50 million plan to re-develop the shuttered South West Marine shipyard along the main channel of the port into a modern ship repair facility. The firm, which claims it has a solid business plan that would create hundreds of jobs at the proposed facility, has faced stiff criticism from the port, shipping industry, and longshore unions. However, under pressure from Los Angeles City Hall, the port signed a memorandum of understanding with Gambol last year to consider the development of the ship repair facility.

Despite the MOU, the Port of Los Angeles has maintained that the Gambol plan could seriously delay an Army Corps of Engineers channel deepening project and ongoing terminal development at the port. The port wishes to use the existing shipyard slip to deposit dredge material from the Army Corps project.

However, Gambol has proposed that the dredge material be sent to the neighboring Port of Long Beach's Middle Harbor project as landfill. This would save Los Angeles the $30 million cost to build a retaining dike at the shipyard, according to Gambol, and free up the shipyard for development into the ship repair facility.

Long Beach port officials shot down the idea last month, stating in an Oct. 18 memo that Los Angeles port officials had failed to respond to a Long Beach port request for design plan for the reuse of the Los Angeles fill material in Long Beach.

In an Oct. 27 letter to officials at both ports, a Gambol attorney claims that Los Angeles port officials purposely failed to submit the design plan to Long Beach in an effort to undermine the Gambol project.

The Gambol letter goes on to claim that the firm has lost million of dollars in development costs due to the port's actions and warns that Gambol will seek all "available remedies" for what the firm's attorney describes as "the port's conduct, actions and/or inactions, and numerous violations of the MOU."