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The scheme is ''virtually silent'' on the movement of air cargo, says analyst

SAN FRANCISCO - 03/01/06 - Governor Arnold's Schwarenegger's transportation infrastructure plan has come under fire for placing too much emphasis on projects that benefit California importers, rather than those that better serve companies in the state that sell their products in overseas markets.

"With the US trade deficit hitting a record high of more than $725 billion in 2005, why is California poised to spend tens of billions of dollars on transportation projects specifically designed to facilitate shipments of imported goods through our major seaports, while all but ignoring the transport needs of the state's exporters?," asks Jock O'Connell, principal consultant at The ClarkStreetGroup, an economic analysis firm in Sacramento.

O'Connell, who also serves as a member of the California Economic Strategy Panel's Technical Advisory Group, laid out his analysis of the governor's plan in a recent edition of the San Francisco Chronicle.

"In recent months, Gov. Arnold Schwarzenegger and top legislative Democrats have been conducting what amounts to an extended policy seance as they seek to channel the spirits of former governors Earl Warren and Pat Brown, the now mythic master-builders of the Golden State's once-vaunted infrastructure," asserts O'Connell.

"Unfortunately, looking to the past for inspiration can sometimes result in remedies more appropriate to an earlier, much different era," he said.

That "seems to be the case with the governor's bodacious scheme to invest huge sums upgrading the state's so-called "Gateway Corridors" - those highways and rail systems linking the state's three largest seaports (the neighboring Ports of Los Angeles and Long Beach and the Port of Oakland) with inland markets," he said.

The governor's plan "is almost reflexive in its assumption that international trade is pretty much confined to the waterfront or land borders," said O'Connell. "That may have been true when Pat Brown was governor. It is far from true today, when more of California's export trade moves by air than by sea and land combined, according to the Foreign Trade Division of the US Census Bureau."

Yet, he added, "On the role of airports in transporting anything besides passengers, the Schwarzenegger Administration is virtually silent."

According to O'Connell, there is "no question the cargo-handling capacity of maritime facilities such as the ports of Los Angeles, Long Beach and Oakland need bolstering."

As a nation of consumers "who increasingly find employment in service industries, we have grown reliant on Asian factories to stock the shelves of our stores. Most of those goods come through West Coast seaports, where tens of thousands of Californians find gainful employment in moving goods made elsewhere to consumers who live elsewhere," he said.

Sitting astride major world trade routes "has its disadvantages as well," wrote O'Connell. "Air quality suffers, traffic congestion grows more acute, and highway safety is imperiled, as private motorists vie with more big rigs for limited space," he wrote.

"With many trade economists predicting that volumes of trade may triple by 2020, earmarking a substantial share of new transportation spending for expanding our capacity for handling epic amounts of waterborne freight seems like a classic no-brainer."

But, asks O"Connell, "What about similarly investing in the transportation facilities more commonly used to export goods produced by California companies employing Californians and paying taxes in California?"

Regrettably, he said, "the governor's emphasis on maritime trade ignores one very important reality: Little more than one-fifth of California's exports go anywhere near a seaport."

 In 2005, for example, "just 20% of California's $116 billion export trade was waterborne, Census data show. Another 26% went via truck or rail to Canada and Mexico. The balance - indeed , a majority - of California merchandise export trade moved by plane."

Last year "was no anomaly," said O'Connell. "In every year since state-of-origin export data first became available in 1987, air cargo has consistently handled the majority of our exports."

Yet, he said, "Even with nearly 20 years of data at hand, state officials continue to see foreign trade as largely a maritime issue. State government's "myopia when it comes to the role of airplanes in transporting goods is not a trivial issue for California industry."

Items shipped by air "typically have high value-to-weight ratios, a characteristic that describes much of what is produced by sophisticated, advanced technology companies of the sort that have long clustered in California," he said.

One clear indication of high-tech's reliance on air cargo, he asserts, is that the value of goods exported via San Francisco International Airport is nearly three times higher than the value of exports shipped through the sprawling Port of Oakland.

"Our reliance on air cargo is not limited to exports," said O'Connell. "According to the US Census Bureau's 2002 Commodity Flow Survey, California firms shipped more goods by air to domestic destinations than did companies in New York, New Jersey, Connecticut, Pennsylvania, Ohio, Illinois, Michigan, Florida and Texas combined."

The ability of California's airports to cope with projected increases in the volume of airborne international trade, he said, "is by no means assured."

Last year, 98% of the state's airborne imports and 93% of its airborne exports went through just two airports - Los Angeles International (LAX) and San Francisco International (SFO).

Yet, "both airfields are hemmed in, physically and politically," adding neither "has much room for expansion. Both face intense political opposition from neighboring communities to any increase in flight operations. Ground access to both facilities requires truckers to negotiate some of the state's most congested roadways," he said.

"Perhaps even more critically," said O'Connell, "Neither SFO nor LAX is well-situated to serve the air-transport needs of businesses in the state's fastest-growing regions - the Inland Empire and the Central Valley."

In today's global economy, "Anyone building a better mousetrap will not find the world beating a path to his or her door unless there happens to be either a deep-water port or a runway two miles long in the front yard," he wrote.

"There is no question that the challenges faced by California's seaports must be addressed," concluded O'Connell. "But if California's political leadership is serious about devising a truly comprehensive goods-movement strategy - one that serves the interests of the state's exporters and not just the nation's importers - it  would do well to start fretting about the state's air-transport capacity."

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