Author: John R. McLaurin

Congratulations are in order to members of the California Legislature, California Air Resources Board, no growth advocates and others. According to a study released this week, the tourism industry is Los Angeles County’s number one job generator. This follows news of earlier this week from the Milkin Institute about the continuing loss of manufacturing jobs in California.

According to the Los Angeles Times, “Trade and manufacturing generally pay higher wages than tourism” and that “…economists have long worried that the region’s employment base is in danger of getting too many low-paying jobs.’ But don’t fret, in addition to the good news about California’s newest growth industry (prior to the closure of all state parks), it should be noted that sweeping up garbage at Southern California amusement parks can be classified as some of the “green jobs” we have all been promised.

With apologies to my Psych 1 professor at UC Davis.

The California Environmental Quality Act (CEQA) is well known to those pursuing projects in California. At our commercial ports, the CEQA process for a marine terminal project is taking up to ten years to complete – not including the subsequent litigation. With term limits at the local level, the environmental impact review (EIR) process currently outlasts the political lives of mayors, city council members and harbor commissioners. Combined, the last two EIR’s at the Ports of Los Angeles and Long Beach were approximately 6,000 pages in length. Both projects were appealed before their respective City Councils – and both still face years of litigation, a reflection of the "can do" spirit of California.

While listening to a local public official lamenting the fact that EIR’s have become a multigenerational process in which people are married, have children, divorce, wars declared and ended, pandemic’s (or at least pandemic panic) come and go – it struck me. For those pursuing a construction project in California, the CEQA process has become something similar to the five stages of grief. Tell me if you agree.

Back in 2007, after the Long Beach and Los Angeles port commissioners unveiled their Clean Truck Program, they stated repeatedly that the “finest legal minds in the nation” had reviewed the program. In a strongly worded opinion issued last Friday by a unanimous three judge panel of the Ninth Circuit Court of Appeals, it appears the ports plan was so off-base even the best of attorney’s couldn’t save it.

The Ninth Circuit ruled in favor of the American Trucking Association (ATA) in an action they brought against the two ports for their attempts to regulate the trucking industry. The Court focused on the ports “concession agreements” and did not address the environmental components of the program – something never challenged by the American Trucking Association.

Events leading up to the Ninth Circuit decision highlighted some of the worst and most vicious qualities about California’s political process. Proponents of the truck program vilified the ATA for filing their lawsuit – calling the action “immoral.” Full page ads were taken out in local newspapers by a coalition of labor and environmental groups, attacking the Mayor of Long Beach for not including an “employee mandate” provision in the Long Beach plan. Readers were provided the phone number of the Mayor’s office, urging them to call and tell the Mayor to “Get Back on Track.” In light of the Ninth Circuit ruling, perhaps those folks will call back to apologize to the Mayor.

The situation at California’s ports remains grim. Cargo volumes continue to drop at alarming rates. The Port of Long Beach reported the other day a 43% decline of imported cargo for February when compared to the same time period last year. The Port of Los Angeles experienced a similar decrease, continuing their downward spiral with a reported decline for imports of 36%.

The declines in volume translate into a massive drop off in work for longshoremen, truckers, railroads, warehouse workers and others in the supply chain. With close to 500 container ships now idle and not in use, predictions for cargo volumes for the rest of 2009 remain extremely pessimistic.

In addition to the negative impacts of the worldwide recession, Southern California ports have been experiencing a backlash from cargo owners for the development of container fee proposals along with attempts at re-regulating the port trucking industry. This rejection has manifested itself in the diversion of cargo from California ports prior to the economic collapse – something which continues to this day.

No water for showers. Government in chaos and broke. Schools being shut down. Roads and bridges falling apart and in disrepair. All that is missing in California is an occupying force.

The bleak political news out of Sacramento is only surpassed by the continued worsening of the global economy and massive decreases in cargo volumes through California’s ports. The Port of Long Beach suffered an incredible 25% drop in volume for the month of December – and the numbers look like they will be worse in 2009. One shipowner recently took delivery of six new containerships – and immediately parked them off the coast of China. Layoffs continue. Longshoremen are without work. Over 200 vessels are idle around the world and at anchor due to the recession and the lack of cargo. For more information about the dire condition at California’s ports, take a look at CalTrade for a complete picture.

To put it politely, Sacramento is dysfunctional. It is something that everyone agrees upon. For over a decade the State has enacted budgets that didn’t make any sense. But since we are a State that is governed by media events as opposed to policy, everyone declared victory. This self induced euphoria usually faded by late summer. And now, with a worldwide recession in full force, the penalty for avoiding their responsibilities as elected officials is coming due – and our elected leaders are paralyzed, impotent and afraid to act (some would say govern).

So how do we change things?

Lots of ideas have been thrown out for discussion recently. Some folks want to eliminate our bicameral system of government and narrow it down to a unicameral system. I would argue that despite having two legislative houses, the operational and political reality is that we already have a unicameral system – but unlike a unicameral system it just takes a bit longer for bills to move through our current system. Given the gracious and courteous practice of not killing bad bills (or any bills for that matter unless you are a Republican), we have in effect a unicameral system in place today. Why mess with perfection?

With all of the talk of political dysfunction and Constitutional Conventions amidst a gathering budget storm and deepening recession, there is at least one good deed from 2008 for which Governor Schwarzenegger should be applauded – with one stroke of a pen, he stopped a multi-million dollar backdoor raid on the General Fund and local government revenues in September when he vetoed SB 974, the Container Tax.

For those unfamiliar with the current state of California’s trade economy, here are a few statistics that may help clarify the current challenges we face – and the "robbing Peter to pay Paul" raid on the General Fund that would have resulted to the current year budget if the latest container tax had been implemented.

International trade moving through California’s ports is in a state of freefall. Cargo volumes continue to decrease. Car imports are being held at the dock with no place to go. Exports, the last bright spot for California’s trade community, are rapidly disappearing. Waste paper and scrap metal, once shipped to countries like China, were recycled and sent back to the United States in the form of product packaging or finished goods. Now that material is headed for landfills. Just a couple of months ago, agricultural exporters couldn’t find enough containers to ship goods overseas because of excess demand for containers.

In the space of two weeks, one ocean carrier saw 38,000 export bookings evaporate – gone. As a result, highly paid longshore jobs are drying up. Dozens of new container ships sit idle in ports like Singapore – a commercial mothball fleet in the making. One ocean carrier recently announced the layoffs of 1,000 people in their North America operations and the closing of their corporate office in Oakland – ending a presence in California that dates back to the Gold Rush era. And it’s only the beginning and it’s going to get worse.

Public officials at all levels of government like to go oversees to promote international trade in California. Cynic’s call them “junkets”. Policy makers call them “trade missions.” Economists have found that the logistics industry fostered by international trade has replaced California’s long lost manufacturing base in terms of providing good paying jobs.

Unfortunately, because of regulatory infighting and competing political agendas, California is unable to develop port projects or the supporting inland infrastructure needed to meet the future growth trends of international trade and the modernization that will improve efficiency and environmental protection.

The international trade community is finding willing partners and moving ahead with development projects in states like Virginia, the Carolina’s, Georgia, Florida, Alabama and Texas. We have seen the development of projects and expansion of facilities in Canada and Mexico – all in an effort to provide alternative gateways to California. The investments in these other locations are being made now.