Newsom, Buttigieg announce $5 billion in loans for California’s clogged ports

Gov. Gavin Newsom, U.S. Transportation Secretary Pete Buttigieg, and the Governor of California moved to inject $5 billion to finance modernization of California’s seaports.

While the money will not unclog the seaport chaos that exists at the moment, the two men claim that modernizing ports and the rail and truck systems that support them can help prevent future logistics disasters.

For the record:

2: 43 p.m. Oct. 28, 2021An earlier version of this article misspelled the last name of John D. Porcari.

“Our supply chains are being put to the test, with unprecedented consumer demand and pandemic-driven disruptions combining with the results of decades-long underinvestment in our infrastructure,” Buttigieg said in a statement. “Today’s announcement marks an innovative partnership with California that will help modernize our infrastructure, confront climate change, speed the movement of goods and grow our economy.”

What the money would be spent on remains vague. CalSTA’s California State Transportation Agency (CalSTA) listed several possibilities for the money, including port upgrades, increased freight rail capacity, warehouse storage, truck and railroad electrification, and highway upgrades. At a news conference Thursday, John D. Porcari, President Biden’s point person for addressing supply chain problems, and CalSTA Secretary David S. Kim each likened the program to “a hunting license.”

The loan money would come from existing U.S. Transportation Department programs that offer easy terms, including low rates of interest, loan guarantees and long payback periods, as well as some state money and public-private financing.

CalSTA said Thursday that the agreement “allows California to expedite work on a network of related projects — rather than using a piecemeal approach — that collectively will help grow the economy, improve the environment, facilitate the movement of imports and exports, and strengthen supply chain resilience throughout the U.S. and California’s critical trade corridors, including around San Pedro Bay and the Inland Empire.”

No details were offered on what constitutes that network, nor was it clear how the loans will be disbursed, or to whom.

This month, Newsom ordered state agencies to develop longer-term proposals to support port operations and movement of goods, to be considered for his January 2022 budget proposal.

This year, the state budget includes $250 million for ports, $280 million for infrastructure projects at and around the Port of Oakland, and $1.3 billion over three years for zero-emission transit buses, school buses and trucks, including more than 1,000 port drayage trucks. The current logistics tie-ups don’t just affect California. Ports around the world clogged as demand surged for shipped products over the last year, in large part because of the availability of COVID-19 vaccinations that pushed economic activity back toward normal. But, the longer-term problems plaguing California ports are not only threatening the state but also the entire U.S. economic system. The San Pedro Bay ports — Los Angeles and Long Beach — move about 40% of all containerized cargo entering the U.S. each year and about 30% of containerized exports.

The ports are under tremendous strain as overall container traffic in the nation’s largest ports has increased by 47% since 2010, according to Logistics Management magazine.

Meanwhile, delays at the ports of Los Angeles and Long Beach have been increasing at least since 2014, according to data from the Harbor Trucking Assn.

California’s ports face increasing competition from southern and eastern U.S. ports, some of which are making big investments in port modernization, prompted by an expansion of the Panama Canal in 2016 that widened capacity and boosted import traffic from China and other Asian nations. The Port of Houston recently expanded its channels and installed taller cranes. It also added new automation systems to route containers and manage inventory.

The word “automation”, however, was not mentioned in Thursday’s official announcement. California’s port automation topic is controversial. It has been fought by the local International Longshore and Warehouse Union for many decades.

In 2019, the union marched against implementation of an automation project at Pier 400 and showed up en masse at harbor commission meetings to protest. In May, the union announced its opposition to a plan to automate Long Beach’s largest terminal.

Last year, the state Legislature passed a bill that created a 10-member commission to study ways “to mitigate the employment impacts of automation” at the Los Angeles and Long Beach ports.

A 2018 report by the consulting firm McKinsey & Co. reviewed automation projects at ports around the world and concluded that many projects turned out less productive than expected, in part because outmoded manual practices were automated, rather than new systems and work processes being designed from scratch to take full advantage of the benefits of automation. According to the report, data standardization has been a problem in the industry.

McKinsey noted that the same problems sank auto industry automation efforts in the 1980s until unions and management joined forces to increase use of robotics and modern data systems. Porcari, the Biden administration’s spokesperson, said that the administration will employ a two-pronged strategy. First, it will try to reduce congestion at ports, which has caused cargo ships to sit idle off the coast California. The second step is to lay the foundation for future improvements. This latest announcement falls under the second category. The benefits of this strategy may not be evident for many years.

Porcari stated that the strain of the pandemic has shown how much the country’s infrastructure has suffered over the years.

” The problem is that we are using the infrastructure investments of our grandparents,” he stated. “It just doesn’t work.”

Read More