American Shipper

Schwarzenegger now supports Lowenthal statewide container tax

Schwarzenegger now supports Lowenthal statewide container tax

The logistics industry in California may want to take a last look at their profit columns before 2007 ends, because 2008 is shaping up as the 'Year of the Container Taxes.'

   At least three new container taxes are likely to be imposed next year, two in the Southern California ports and one throughout the state. The new taxes are likely to add more than $180 to the cost of moving a typical 40-foot container through the ports of Long Beach and Los Angeles and at least $60 per FEU for containers moving though the Oakland port.

   Just days after the Port of Long Beach passed a precedent-setting $70-per-FEU tax on all loaded containers moving through the port's facilities, and a day before the neighboring Los Angeles port was set to approve the same tax, Gov. Arnold Schwarzenegger said he now supports a similar statewide version.

   “I think fees are good, we just have to work it out with the various stakeholders,” Schwarzenegger said Wednesday in Long Beach. “It’s extremely important that we find a way to create economic development and increase trade, but at the same time take care of our environment.”

   This signals a significant policy shift for Schwarzenegger, who last year vetoed a $60-per-FEU tax on containers moving through Los Angeles, Long Beach and Oakland. Earlier this year, the governor also said he would veto a slightly altered version of the tax bill that was moving through the legislature. Schwarzenegger and the two bills' author, State Sen. Alan Lowenthal, D-Long Beach, agreed to shelve the bill and work on it during the legislative recess. Pulling the bill was also seen as a way to allow the Southern California ports to fast track implementation of their own container taxes.

   Since the shelved Lowenthal bill has already worked its way through both houses of the state legislature, it could be moved forward again anytime before the next legislative session's deadline in late August or early September 2008.

   The proposed tax would be collected on all containers moving through the ports of Long Beach, Los Angeles and Oakland. The funds would be used to pay for infrastructure and air quality programs in the port areas.

   The Los Angeles-Long Beach ports' container tax is set to take effect June 1, 2008 and be collected through 2012. The estimated $1.6 billion to be collected will be used to replace or retrofit nearly 17,000 diesel trucks in the ports' drayage fleet. The replacement plan is part of a larger $1.8 billion truck re-regulation plan the ports are attempting to impose on the local trucking industry. The end goal, according to port officials, is to consolidate the trucking industry into a handful of large trucking firms with 'deep pockets' and do away with the independent owner-operator drivers that now represent more than 80 percent of the fleet.

   In addition to the Lowenthal and ports' tax involving their truck plan, the two Southern California ports are likely to implement an additional container tax next year. In July, officials for the ports of Long Beach and Los Angeles proposed an eight-year 'Infrastructure and Environmental Cargo Fee' that would impose a $52-per-FEU charge on containers moving in an out of the two ports. The plan states that it intends to make cargo owners pay 'their fair share' of development at the ports. The plan, which requires the ports to approve changes to their tariffs, was originally scheduled for approval at a joint port commission meeting in September, but has since been postponed. It is expected to be revisited by the ports next year.

   Port documents reveal that as part of the IECF plan the ports have identified $8.1 billion in road and rail projects considered by port officials as “critical” to keeping the two ports growing. According to the documents, the ports are willing to pay $267 million, or 3.3 percent, of the total cost of the projects. Under the port IECF funding scheme detailed in the documents, taxpayer funds from federal, state and local sources would pay for $3.7 billion of the total. The remaining $4.1 billion would be passed along to importers, exporters and the railroads through port-imposed fees and taxes. Economic experts have said these companies would not absorb these costs, but pass them along to consumers in the form of higher prices.

   Despite the ports and Lowenthal labeling the taxes as 'user' or 'special' fees, industry and business groups had been formulating legal action against the different proposals as illegal taxes. Industry insiders earlier this year said some cargo owners, the end users of all the containers, began to shift the focus of their legal arguments to the ports' container tax immediately following the shelving of the Lowenthal bill.