A Jury of Our Piers
In Article 21 of this Volume, which we posted on August 18th – and even before that on November 3rd, 2004 – we reminisced about the times we spent with Mr. Shapiro when he owned and operated National Steel in San Pedro. That was in the 1970s B.C. (Before Containeryards).
In that commentary on the 18th we referred to a story appearing in the Los Angeles Times that same day, captioned: “Ports wary of stunted holiday rush”.
Here are some of the statements that caught our attention in that story:
– “‘The traditional peak season may be melting away.’ – Ben Hackett, Hacker Associates”
– “But some industry experts pointed out that … as trade dried up in 2009, cargo containers stacked where they were last delivered. Shipping lines had to move record numbers of those empty containers back across the Pacific to factories in Asia.
“‘There have been container ships that have sailed with nothing but empty containers.’ – Jock O’Connell, Clark Street Group”
– “At Los Angeles, the number of empty containers moved in July was up 62% compared with a year earlier. In Long Beach, the number of empty containers moved in July was up 63% compared with a year earlier.” –
Another story caught our attention on the 18th, and this one was in the Long Beach Press Telegram under the headline; “Harbor Commission approves plan to replace Gerald Desmond Bridge”
We quoted much of that story in our Article 21, and because it’s only a few pages back there’s no point in doing it again. Note, however,
– … that the big spenders out there have just authorized an expenditure of $ 1.1 billion (at least) to replace the aforementioned bridge – in spite of the fact that most of what is being shipped in containers nowadays is “air”, as shipping line CEOs have recently stated, and as the analysts quoted above have verified,
– … and note also that “Plans to replace the Gerald Desmond Bridge began around 2000, when steep increases in annual cargo volumes began causing gridlock and wear-and-tear to the bridge, which opened in 1968.”
Further verification can be seen in today’s Los Angeles Times story; “Debt load weighs on Alameda Corridor”. You remember the Alameda Corridor. That’s the $ 2.4 billion stretch of track referred to as an “engineering marvel” that allows freight trains to travel the 20 miles from the two Southern California ports to the transcontinental yards in LA.
“With the help of the rail expressway,” the story begins, “the twin ports moved nearly 16 million containers at the height of the international trade boom in 2006, up from 9.7 million in 2001, the last full year before the corridor opened. …
“But for all its prowess in speeding up the flow of the nation’s Asian imports, the rail route may become a financial burden for the ports it was supposed to help.
“The corridor was intended to pay for itself through user fees on each shipping container, and for many years the setup worked, even generating a financial surplus. But cargo is down sharply from its 2006 peak because of the worldwide recession, and the payments on debt that was taken on to build the route will rise – sometimes steeply – through 2033.
“‘Until two years ago, we were on track, no pun intended, to have the traffic we needed,’ said Los Angeles City Councilwoman Janice Hahn, who also serves as chairperson of the seven-member Alameda Corridor Transportation Authority Board, which oversees the rail route.
“‘We were going to triple the amount of cargo we received. We weren’t going to be able to handle the growth. My, how a few years have changed the outlook.’…
“‘This will put pressure on the budgets of the ports at least until the recession is finally over and done with, and that is taking a lot longer than anyone thought,’ said John Husing, an international trade expert …
“At the time it was built, they were expected to comfortably meet the debt-service requirements with natural cargo growth’, said Baye B. Larsen, a Moody’s public finance analyst who tracks the Alameda Corridor. ‘They are now going into a period of debt-service growth from a much-lower-than-expected revenue level.’
“John T. Doherty, the corridor authority’s chief executive, said the ports would have to experience annual cargo growth of 15% to 17% ‘to make all this go away …. That’s not going to happen’…
“The Corridor’s woes are just one of the problems weighing on Southern California ports.” –
“My, how a few years have changed the outlook,” Ms. Hahn remarked. Well, not really. After determining (guessing?) that they “were going to triple the amount of cargo” they received, the powers-that-be decided to commit (cuff?) $ 2.4 billion for the construction of the Alameda Corridor. Don’t these authorities realize that they should look before they leap? Unfortunately, hindsight is what they possess, and foresight is what they lack.
In our November 3rd, 2004 commentary, “A Bridge Too Far”, we cautioned authorities about their haste to replace the Gerald Desmond Bridge. We wrote; “But with respect to (and for) the Bridge, let’s wait a bit. Let the jury sit a bit. There are a few things to be considered that might sway them”.
Now that cargo is down, maybe the “jury” will take a look at the woes besetting the Alameda Corridor – and maybe this time they’ll look before they leap. Long live the Gerald Desmond Bridge!