BILL ANALYSIS
SB 974
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Date of Hearing: August 22, 2007
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mark Leno, Chair
SB 974 (Lowenthal) - As Amended: May 24, 2007
Policy Committee: Natural Resources
Vote: 5-3
Transportation 8-6
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill imposes, starting January 1, 2009, a fee on
containerized cargo passing through the Ports of Los Angeles,
Long Beach and Oakland, the revenue from which would fund
projects that improve the movement of containerized cargo to and
from these ports and projects that mitigate pollution caused by
the movement of all cargo to and from these ports.
Specifically, this bill:
1)Requires the Ports of Los Angeles and Long Beach to impose a
maximum $30 fee per 20-foot equivalent unit (TEU) on the owner
of containerized cargo moving through the ports, and earmarks
50% of revenue generated by the fee to the California
Transportation Commission (CTC) to fund projects that improve
the movement of containerized cargo in southern California,
and 50% to the Air Resources Board (ARB) to fund projects that
mitigate pollution caused by the movement of all cargo in
southern California.
2)Requires the Port of Oakland to impose the same fee on
containerized cargo it handles and earmarks the revenue
generated in the same manner as #1 above, only for projects in
northern California.
3)Requires the CTC and the ARB, by September 1, 2008, to develop
separate lists of containerized cargo movement improvement
projects and pollution mitigation projects for southern
California and northern California, respectively.
4)Allows the Infrastructure and Economic Development Bank
SB 974
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(I-Bank) to enter into agreements, including the issuance of
revenue bonds backed by fee revenue, to finance the above
projects.
FISCAL EFFECT
1)Substantial revenue, in the range of $100 million in 2008-09
and $340 million annually thereafter, generated by the maximum
$30 per TEU fee on containerized cargo imposed by the Ports of
Los Angeles and Long Beach. This revenue, after paying for
related administrative costs, is earmarked 50% for projects
that improve the movement of containerized cargo in the
region, and 50% for projects that mitigate pollution caused by
cargo movement in the region.
2)Substantial revenue, in the range of $17 million in 2008-09
and $54 million annually thereafter, generated by the maximum
$30 per TEU fee on containerized cargo imposed by the Port of
Oakland. This revenue, after paying for related
administrative costs, is earmarked 50% for projects that
improve the movement of containerized cargo in the region, and
50% for projects that mitigate pollution caused by the cargo
movement in the region.
3)Substantial revenue bond debt, up to $5 billion outstanding
principal at any one time, resulting from the issuance and
sale of revenue bonds secured by revenue generated by the
containerized cargo fee.
4)Minor one-time costs, in the range of $300,000, primarily in
2007-08, for the CTC and the ARB to develop the list of
projects eligible to be funded from containerized cargo fee
revenue. These costs are covered by fee revenue.
COMMENTS
1)Rationale . The author contends that substantial resources are
needed to upgrade rail facilities related to ports, improve
the movement of cargo to and from ports, and mitigate
pollution associated with cargo movement. The author argues
that imposing a maximum $30 fee on containerized cargo
processed at the Ports of Los Angeles, Long Beach, and Oakland
- currently about 12 million loaded containers annually - is
an appropriate mechanism for generating the revenue necessary
to fund these projects and activities.
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2)Background . In recent years, the volume and value of cargo
moving through the ports has expanded dramatically. While
this has contributed to strong commercial activity in several
regions, it has also stressed transportation networks and
contributed significantly to emissions of air pollutants in
air basins already plagued by air pollution.
There are 11 commercial ports in California: Humboldt Bay,
Hueneme, Long Beach, Los Angeles, Oakland, Redwood City,
Sacramento, San Diego, San Francisco, and Stockton. In 2006,
the Port of Los Angeles handled 5.3 million loaded TEUs, the
Port of Long Beach handled 5 million loaded TEUs, and the Port
of Oakland handled 1.7 million loaded TEUs.
3)Fee . The bill imposes a maximum fee of $30 on the cargo in
each 20-foot equivalent unit (TEU) container. Since many
shipping containers are now 40 feet in length, the maximum fee
imposed on the cargo inside would presumably be $60. The fee
must be paid by the owner of the cargo in the container to the
port where the container is being handled. If a container is
empty, as millions of containers are that pass through the
state's ports, no fee is charged.
The revenue generated by the containerized cargo fee can be
used to fund eligible projects on a pay-as-you-go basis or it
can be dedicated to pay off the holders of multi-year revenue
bonds issued by the I-Bank to finance these projects. If fee
revenue is dedicated to revenue bond repayment, the fee is
more likely to be "locked-in" at a certain level for a longer
period of time, since bondholders would have to be assured
that there is a predictable and sufficient revenue source for
repaying the bonds.
4)Prop 1B . The Highway Safety, Traffic Reduction, Air Quality,
and Port Security Bond Act (Prop 1B) approved by voters at the
November 2006 statewide election, authorizes the issuance and
sale of $19.925 billion of state general obligation bonds for
a variety of transportation-related projects. Several
portions of Prop 1B are earmarked to fund projects related to
California's ports, as follows:
a) Projects to enhance the capacity and efficiency of ports
are eligible for an allocation from the $2 billion of bond
proceeds set aside for trade corridor improvement.
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b) Port, harbor and ferry terminal security improvements
are eligible for a $100 million allocation of bond
proceeds.
c) Emission reductions from activities related to the
movement of freight along California's trade corridors,
including trade corridors that originate at the state's
seaports, are eligible for $1 billion of bond proceeds set
aside for distribution by the ARB.
Analysis Prepared by : Steve Archibald / APPR. / (916)
319-2081