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Schwarzenegger sinks Senate bill opposed by transportation, retail, and industry groups

SACRAMENTO – 09/23/06 – California Governor Arnold Schwarzenegger has vetoed a controversial State Senate bill that would have levied a user fee on every container cargo discharged at the ports of Los Angeles and Long Beach.

The wording of the legislation stipulated that revenues generated by the bill would have been used only “to fund rail system improvements, pollution mitigation measures, and port security enhancements.”

The bill – SB 927 – was originally authored by Democratic State Senator Alan Lowenthal, whose 27th Senate District encompasses the Port of Long Beach and several adjacent communities. 

The Los Angeles Area Chamber of Commerce (LAACOC) strongly opposed the bill, saying in a statement following the Governor’s veto that "SB 927, which applied only to our region's two ports, was an unfair tax. It would have placed Southern California at a significant
economic disadvantage and potentially cost hundreds of jobs."

Joining the LAACOC in campaigning against the legislation was a litany of trade and industry groups including the National Retail Federation, the Retail Industry Leaders Association, the California Manufacturers and Technology Association, the Waterfront Coalition, the Wine Institute, the California Chamber of Commerce, the California Farm Bureau, the California Trade Coalition, and the Pacific Merchant Shipping Association (PMSA).

According to the San Francisco-based PMSA, the legislation “would have caused anti-competitive and unfair impacts across the California goods movement industry.”

The group represents US and foreign-flag ocean carriers and marine terminal operators responsible for handling 90% of the international cargo that moves through West Coast ports.

"The container tax proposal was a terribly flawed, unconstitutional and discriminatory approach," said PMSA President John McLaurin, who praised the governor’s action.

"The shipping and goods movement industry strongly supports efforts to address environmental and infrastructure issues around the ports and we are committed to real public-private partnerships to address these challenges,” he said.

California's ports, said McLaurin, “are already financed by user fee revenues which raise approximately $800 million a year for port operations, rail facilities, security projects and environmental programs, including the most ambitious and aggressive air quality control programs in the world.” 

The cargo tax proposal – which the industry group called “illegal” – “raised serious legal questions as it was not a traditional fee for service.”

The imposition of such fees "is contrary to the United States Constitution and would violate US obligations under international treaties,” said McLaurin.

In addition, he said, “SB 927 would have had other anti-competitive impacts on exporters and importers and would - if it were legal - actually result in increased diversion of cargo from the ports of Los Angeles and Long Beach to other, lower-cost ports.”

According to the official language of the bill, the legislation was “intended to address the enormous growth that is occurring at the ports of Los Angeles and Long Beach and
the effects of that growth and the ports' operations on the surrounding communities and region.”

In an earlier statement, Lowenthal’s office said that “the ports are the single largest
source of pollution in the South Coast Air Basin, and the existing port-related infrastructure is already strained and ill-equipped to handle the growth in cargo shipments that is occurring and will continue to occur.”

SB927 would have established two funds within the State Treasury for the deposit of revenues generated by the container fee of $30 on every 20-foot equivalent unit (TEU) container discharged at either port.

It called for each port to create a fee notification and collection process fee to go into effect January 1, 2007 and notify, no later than June 1, 2007, cargo owners that a “maximum” and  “modest” $30 per TEU  user fee would be assessed beginning September 1, 2008 and collected at least twice per year.

The ports of Los Angeles and Long Beach rank, respectively, as the first and second busiest container ports in the US. Combined, they form one of the most active “load center” port complexes in the world.

Last year, the Port of Los Angeles handled some 7.5 million TEUs, while the adjacent Port of Long Beach saw 6.7 million TEUs’ move through its terminal facilities.

Several telephone calls from the CalTrade Report to Sen. Lowenthal’s office seeking comment on the veto were not immediately answered.

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