Divergent Costs & Growth Lessons from Californias Intermodal - - PowerPoint PPT Presentation

Divergent Costs & Growth

Lessons from California’s Intermodal Seaports

Energy Foundation China – Webinar January 22, 2018

Mike Jacob Vice President & General Counsel Oakland, CA

U.S. Seaport Infrastructure Requires Local, State, Private Financing

• There is no substantial central government

funding sources for Intermodal Facilities in the United States. State and local ports, private marine terminals, and railroads directly fund/finance trade infrastructure.

• Exception: truck user fees/taxes which are

collected nationally for highways.

• Public or private, nearly all non-highway &

non-transit infrastructure is financed on revenues and volume growth projections. 2

States, Local Governments and Business Invest in Ports: Jobs, economic benefits, and tax revenues grow along with volumes

• Marine Terminal Operations at the Port of LA in

2007 yielded an average of $240.42 per container in State and Local tax revenues, $2,127.67 in personal income per container, and 0.23 jobs per container.

• Marine Terminal Operations at the Port of

Oakland in 2010 yielded an average of $180.22 in State and Local Taxes per container, $1,716.56 in personal income per container, and 0.37 jobs per container.

States & Local Governments Rely on Growth for Intermodal Seaports’ Success:

• Supports existing Port and Intermodal

Facility Financing

• Grows jobs, economic benefits, and tax

revenues along with volumes

• Pays for Environmental and other costs

which are in excess of original financing baselines or expectations

• Lowers Average Cost & Marginal Cost for

Cargo Owners per box

• Leads to Virtuous Cycle of Re-investment

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What California Growth Looked Like to Transportation Planners, Air Quality Regulators, and Underwriters:

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What California Growth Looked Like to Transportation Planners, Air Quality Regulators, and Underwriters:

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New Outstanding Costs on the Horizon Are Immense – State and Ports of LA/LB

• LA/LB Clean Air Action

Plan (CAAP) Update: New goals: 100% ZE CHE in 2030 100% ZE trucks in 2035 Estimated costs*: Up to $14 billion (LA/LB)

Up to $32 billion (M&N)

• CARB Reg Amends:

Ships At-Berth: Every vessel/Every visit/ Every port CHE: 100% ZE by 2030

• SLC Reg Amends:

Ballast Water: 100% exchange, $100k / call

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California’s Average Cost Equation

Base Supply Chain Costs + California Only Costs Container Volumes

• Unique concentration of “California Only Costs”

Drive up the Numerator

• Container Diversion Reduces the Denominator.
• Result: Average Cost per Box Increases

Demand for California Intermodal Service

• Opposite of the Virtuous Cycle of Reinvestment

Relative to Competitors and Volumes Go Down

• Financing New Infrastructure and New

Environmental Upgrades Gets More Difficult

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AC =

Without growth in volumes it is hard to reinvest in new, more expensive ports.

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• Current Challenge: Lower cargo volumes than

anticipated by private sector underwriting the existing infrastructure, and with higher environmental/equipment costs, leads to losses.

• Future Challenge: Underwriting even greater levels
• f capital for new environmental

infrastructure/equipment costs that are not associated with new revenue streams.

Dedicate Public Investment to Trade Infrastructure Which Incentivizes More Efficient ZE Port Operations

• Challenge: Limited new private revenues to

finance the development of new infrastructure and equipment with lower container volumes, and with higher per unit operating costs.

• Answer: Use Public Subsidies for Financing.

Encourage greater, accelerated adoption of Economies of Scale at Ports by Making Marine Terminals More Efficient and Denser Operations

• Lower Operating Costs per Container per Acre is

the Only Currently Available ZE Path Forward

Freight Policy Can Yield Greater Investments in a Low Growth Market, If Incentives Support Port Efficiency

• Integrate growth and financing goals with air

quality-friendly infrastructure so the investments themselves align economic and environmental goals with higher volumes

• Prioritize public subsidies & incentive funding

for new infrastructure and environmental mitigation programs without imposition of new regulatory mandates or facility caps

• Incentivize MTOs with Public Funds to Meet

Long-term 2050 Zero-Emissions Goals

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