8:32

Mr. Arian begins his speech, thanking Mr. La Barbera and the panel and passing along the Mayor’s regrets for his absence. He says that he will do his best to “channel” the Mayor. If the Mayor were here, he would assure us that the transformation of L.A.’s port is the most far-reaching political debate in Southern California.

Cities have stepped up in the absence of federal action, in particular on the environment and climate change. The ports of L.A. and Long Beach receive 44% of all containerized goods. 1 in 25 jobs in the California region depends on the ports. $373 billion in trade are generated each year by the ports. But the ports have begun to choke the region. 2400 lives are lost to the pollution created by the ports. 1 million school days are lost when students stay home because of asthma. But also at stake is whether we are willing to rise to the challenge. Will we allow the big box producers to add pennies of profit for the sake of our health?

L.A. has switched to plug-in electric power on port docks; switched to low-sulfur fuel; instituted benchmarks for 16,000 dirty trucks that will now have to abide by cleaner standards.

But the enactment of the plan to clean up the port proved difficult because multi-billion dollar corporations have left the work of moving cargo to independent owner-operators. This is an unstable workforce because port service does not pay much [Ed.note: The drivers make about $29,000 a year]. Drivers cannot afford new equipment or health insurance. So how could we ask these drivers to support new, expensive, environmentally safe equipment?

We have Licensed Motor Carriers in L.A. These LMCs have relationships with businesses (e.g. Target) and with independent owner-operators. There are about 1300 in L.A. The LMCs have few assets and own very little. They contract with independent owner-operators who are paid by the load and are very competitive, resulting in thin profit margins. Imagine Home Depot on one side and the independent owner-operators on the other.

Costs are externalized, both environmental and social.

Dirty trucks are just a symptom of the problem. We needed to get to the root of the problem. L.A. met with a coalition of environmentalists and drivers. We put in clean truck program that consisted of five elements:

1) dirty truck ban: by 2012, all trucks must meet 2007 level standards or can’t enter the port; we banned all pre-1989 trucks

2) environmental cargo fee: $35 per container with a set of exemptions for good behavior; fees expensive on dirty trucks going through, but exemptions for environmentally safe trucks

3) port security: background checks for port workers

4) concession program: contract between port and trucking companies to set rules of game for coming into port of L.A.; for example, the companies must have off-port parking and an established place of business

5) financing program: fund clean trucks in port; the port will pay up to 80% of the cost of a new, environmentally friendly truck; also must turn in old trucks so that they are not reintroduced elsewhere

Mr. Arian notes that if money to incentivize clean trucks was provided directly to independent owner-operators, these independent owner-operators would still not be able to afford new trucks, let alone the maintenance, and they would be in danger of defaulting on loan assistance for clean trucks. L.A. thus needed to institute a more asset-based program that relied on larger, well-capitalized corporations rather than independent owner-operators.

The challenges were numerous and there were many naysayers. But the institution of the plan was smooth – they just “kept on trucking”.

8:59

Andrea thanks Mr. Arian and introduces Rep. Nadler. Andrea wonders about the situation at the ports that caused the current difficulties. Was it the result of deregulation?

Rep. Nadler does not know the history of the port exactly. The free market is the best way to generate wealth, but without proper regulation it results in all kinds of catastrophes. The free market cannot deal with externalities. When independent owner-operators are competing, they cannot clean up their trucks without a level playing field and without environmental costs being internalized.

The change occurred with taxi drivers in NYC. Taxi drivers went from being union-organized to being independent owner-operators. Their wages decreased.

9:04

Andrea introduces Chris Ward. Could he talk about the challenges facing NYC?

Mr. Ward notes that L.A.’s port is much larger than that of NY/NJ. The volume is over double, which is an important reality that must be part of any plan that is put together. The Port Authority began looking at the very issues that L.A. did. Currently, New York's plan is not as comprehensive, but the Port Authority is looking at NOx, Sox, and particulate matter [Ed. Note: Nitrous oxide (NOx), sulfur oxide (SOx), and particulate matter are the primary causes of pollution at ports.]. The Port Authority is currently looking at volume, capacity, growth, and the impact on highways.

New York has about 9,000 trucks versus 16,000 in L.A. New York competes with other ports up and down the East Coast, unlike L.A., which dominates the market. So the feasibility of fee assessment to maintain competitiveness is important to consider.

Need to change the economic model so that the independent owner-operators are not the ones bearing the costs of environmental externalities.

9:09

Andrea introduces Ms. Thompson-Gaddy. This issue unites environmental and social justice. Why are you, as an environmental activist, hanging out with Teamsters and other social justice advocates?

Ms. Thompson-Gaddy talks about her personal health experiences and emphasizes the significant health impacts of port emissions and other pollution.

9:12

Andrea notes that L.A.’s neighboring port, Long Beach, has not instituted the Clean Truck component in the same way as L.A. Long Beach. Long Beach has not required employment of drivers, instead of independent owner-operators.

Mr. Arian says that L.A. wanted to make sure that their plan worked economically, was sustainable, and would attract responsible companies to the ports. L.A. brought in economists to study the plan and, after the research, found that the system they instituted was the only one that would work. Employee-based, highly capitalized firms, instead of independent owner-operators, were necessary to make sure the plan was sustainable. Because of the already very high cost for truck maintenance and already thin profit margins, independent owner-operators were at high risk of default on clean truck loans. "It's the risk equivalent of a subprime system for truckers."

Though people thought that Long Beach, without the Clean Truck component, would attract more concessionaires, that has not turned out to be the case.

Employing drivers can help increase the ratio of trucks to drivers.

9:19

Andrea wonders how the conditions for truckers actually improve. Why does the movement from being independent owner-operators to employees improve working conditions?

Mr. Arian responds that independent owner-operators in the port – because of the large companies they were negotiating with – were making less than independent owner-operators elsewhere in L.A. L.A. researched drayage companies who employed workers outside the port and these workers made more and tended to get benefits. L.A. asked: why does the drayage system in the ports not look like that outside of the ports?

9:21

Andrea asks whether L.A.’s plan is right for New York.

Mr. Ward responds that, ultimately, yes it is.

If you don’t throw money at problems, what do you throw at them? New York will need to find ways to impose a fee similar to L.A.’s. We need to look at the exact same components and put together a program. The history of ports in this region, the reason why the ports moved to Brooklyn and then to New Jersey, they moved because of the externalities. But now there is nowhere else to move. We are in a very constrained, high-demand situation in which we need to balance environmental, economic, and social concerns.

Mr. Arian notes that L.A.’s ports are constrained by their community. "We have no growth without green in Los Angeles." Port expansions have been blocked in the past by environmentalists. But port expansion is an important economic engine for Southern California. After the Clean Air Action plan, Los Angeles had a buy-in from environmentalists.

Rep. Nadler says that New York is behind L.A. New York must build a rail freight tunnel under New York Harbor to take trucks off the roads. New York must build another major port in Brooklyn. Because of the increase in the price of oil, there will be a diversion of shipping from Asia to New York, away from the West Coast and then by rail across the country. A rail freight tunnel and a new port must be accomplished, and then the other components that the other panelists have talked about. The federal government should step in to assess the port fee and ensure that all ports are on an equal playing field.

Rep. Nadler says, "A crisis is a terrible thing to waste." Things are now possible that were never possible before. You can start thinking about radical – or, really, not so radical – ideas. You must use this crisis to expand the notion of what government can do.

9:33

Andrea asks: In all of the talk about creating green jobs, is the environmental justice community as concerned about those who are laboring now in dirty jobs as it is with creating new green jobs?

Ms. Thompson-Gaddy responds in the affirmative. A clean ports program would be an important first step. We want our residents to have jobs at the ports and to have green jobs at the port. We do not have time to waste and we need to take this problem seriously because lives are at risk. L.A.’s 5-year program would be great for New York and New Jersey. We should connect health and the environment to port growth. Our health must come first.

9:38

A questioner who is an independent owner-operator driver in New York/New Jersey’s port wonders what it will take to implement L.A.'s plan in New York/New Jersey?

Mr. Ward says that the Port Authority is committed to enacting a similar program, but needs to find the program that works for the port. But without a similar program, the port will not be able to grow.

9:40

A questioner wonders about feedback from independent drivers. Also, is there any movement for truck drivers to form cooperatives?

Mr. Arian says that on October 1st, first 2,000 trucks were removed. L.A. is finding that as companies come into the port, they look for new truckers. It is difficult to count the independent owner-operators. But the city has heard stories from truckers who turn in their old trucks who used to be independent owner-operators who are now employed by the Licensed Motor Carriers. And there is a long history of the independent owner-operators making their voices heard. Even though there is no complete evidence, L.A. would expect to know if there were major objections. Plus, operations have continued smoothly.

9:45

A questioner asks about clean tech manufacturing centers to create green jobs.

Mr. Arian notes the popularity of clean tech centers and says that there will be such centers directly related to the ports. One example is a company that makes electric trucks with zero emissions. The trucks weren’t modified for port service, but the city invested a half million dollars to develop a prototype for port service. It also helped the company through the regulatory process. The city then purchased the first trucks that were modified for port service. The company got the Port of L.A. as a partner and got good publicity. L.A. got companies to provide R&D for their clean port initiatives, a royalty on future truck purchases, and jobs by requiring that the company locate in Los Angeles.

9:50

An economist questioner notes that without independent owner-operators, unionization is more likely. Has L.A. put in any measures to ensure “fair” unionization? In New York, the questioner wonders whether anti-racketeering regulations need to be extended to drivers at the port?

Mr. Arian responds that the L.A. plan is unfairly accused of favoring big companies. The Port of L.A. does not believe that it has done anything to favor unionization, as long as the companies that come into the port are responsible. Los Angeles is, Mr. Arian says, agnostic on the size of companies that come into the port.

Mr. Ward notes that unionization is a process that occurs within the marketplace, whereas racketeering results from crime penetrating the market. The Waterfront Commission has been effective in eliminating organized crime on the waterfront.

9:57

Andrea emphasizes that DMI is excited by the nexus that the Clean Air Action plan represents between achievement of environmental goals and potential encouragement of unionization.

Rep. Nadler echoes the point and laments that we have forgotten that unionization has been supported historically for its economic benefits.

9:59

A questioner asks about electric trains in a rail freight tunnel.

Rep. Nadler says that New York’s port is the only in the U.S. without a rail freight tunnel or bridge, though plans have been in place since 1910. The rail freight tunnel would have a massive impact on congestion and the environment. There should be funding for the tunnel in the reauthorization of the federal transportation bill.

Rep. Nadler talks about the relationship of asthma to the location of trucking routes.

In 1979, Congress passed a bill for studies of electrified rail lines. We should return to this concept. Rail is three to four times as energy efficient as the use of highways.

Ms. Thompson-Gaddy says that retrofitting trucks in New Jersey is very important to reduce the amount of particulate matter in the air.

Rep. Nadler emphasizes that in the New York region, much more freight comes in by truck than by rail, especially through New Jersey. The rail freight tunnel would eliminate much of this traffic.

10:08

A questioner commends the land-use initiatives in Los Angeles and requests comment on the coordination between a land-use agenda and an economic development agenda.

Mr. Arian says that the economic crisis has made developers of condos more willing to leave land industrial. Mr. Arian says Mayor Villaraigosa has been fundamental in keeping land industrial and attracting manufacturing.

L.A. has many manufacturing jobs (more than in Michigan). But land needs to be repositioned. Jobs can’t be built in residentially zoned areas. Creating middle-class jobs requires development of industrial land.

Rep. Nadler hopes that in the next mayoral election the candidates will be asked about policies to retain industrial and manufacturing jobs through land use because every mayoral administration in the past has deliberately chased out industrial jobs. New York’s land-use policies have been backwards. The kinds of considerations offered by Mr. Arian are refreshing to hear.

10:14

Andrea asks a final question: where does the panel see New York and America’s ports in 25 years?

Mr. Arian says that in 25 years the Port of Los Angeles will be moving toward zero emissions and being an economic cluster. More broadly, other ports are already thinking about measures similar to those in L.A., so he expects ports to change and innovate to lead the way in green collar jobs. Cleaning up the environment is going to be big business.

Mr. Ward notes the unknowns 25 years from now. You will see zero emissions with some sort of market-based regulation for distribution. Trucks will be meeting environmental standards. There will be a re-imagining of what a city does.

Ms. Thompson-Gaddy says that port modernization is necessary, with living-wages to support communities. If proactive measures are taken, negative health impacts and environmental injustices will be reduced, urban economies will be revitalized, and port expansion will benefit all.

Rep. Nadler thinks that some things may or may not happen based on political decisions and others are going to happen because of inevitable trends. We should not put all our eggs in one basket, as we have done with the financial industry. Because of the cost of transportation and shipping, it is going to be much more profitable to bring more manufacturing back to the United States. We should make sure to encourage that manufacturing jobs come back to New York. How much we will bring to New York depends on the Mayor and on the willingness to change land-use regulations. The inclusion of community benefits will depend on politics.

Andrea thanks the panel and reminds the audience of the next Marketplace of Ideas Series on “say on pay” executive compensation.

Resources:

Clean Air Action Plan, from San Pedro Bay Ports

San Pedro Bay Port Clean Truck Program Options Analysis, from the Boston Consulting Group

Clean Truck Program Overview and Benefits, from the Port of Los Angeles

Port of Los Angeles

Port Authority of New York & New Jersey