Union Pacific’s Stance Could Derail Alameda Corridor

There’s more trouble ahead for the Southland’s biggest public works project--the proposed $1.8-billion Alameda Corridor high-speed freight line between the harbor and Downtown Los Angeles that backers say will create thousands of jobs.

Jobs are badly needed here after a long recession and defense cutbacks. The corridor project would generate them by greatly increasing the capacity of the L.A. and Long Beach harbors just as trade with the Far East is taking off. Much of the new work would be at the harbors. More would be created by new export/import, manufacturing and service businesses expected to move to the presently moribund industrial strip between Downtown and the L.A. and Long Beach ports.

But new trouble for this endeavor is coming from a railroad involved in the project, the Union Pacific. UP objects to the amount of money its trains will be charged for using the high-speed rail line.

When I looked in on the Alameda Corridor last year, it was being threatened by another railroad, the Southern Pacific, a company once known as the Octopus for the immense power it wielded in California at the turn of the century.

SP wanted $260 million for land needed to build the rail line. This was more than the publicly owned ports of Los Angeles and Long Beach, the main sponsors of the Alameda Corridor, wanted to pay.

But three state Assembly members from the area, Martha Escutia of Huntington Park, Betty Karnette of Long Beach and Juanita M. McDonald of Carson, worked to turn public opinion against SP. Los Angeles Mayor Richard Riordan subjected SP to hard bargaining. Finally, SP, no longer possessing the Octopus’ power, agreed to drop its selling price by $20 million.

The Union Pacific doesn’t have a nickname as colorful as the Octopus. Nor does it have as big a place in California history as the SP, which once owned the governor, the Legislature and countless mayors and judges.

But Union Pacific’s current maneuver is right in line with the way railroads have always thrown their weight around.

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If the Alameda Corridor is built, Union Pacific, Southern Pacific and Santa Fe would send freight trains along the high-speed tracks. At present, the three railroads use their own, older tracks, which block surface street intersections. But Union Pacific does not want to pay the $30-per-container fee that the Alameda Corridor authorities intend to charge the railroads for using the new line. Union Pacific offered to pay slightly more than $2 a container.

“We are perfectly willing to use the Alameda Corridor but we have to utilize it at a price structure that is reasonable,” said Michael Kelley, Union Pacific’s vice president for marketing services.

Last week, I went over to City Hall and talked about the project with Deputy Mayor Michael F. Keeley.

Keeley is one of Riordan’s most trusted aides. He’s in charge of important Administration economic development initiatives, a role that requires him to deal with industry and the many layers of Southland government.

The Alameda Corridor is a perfect example of that. The city of L.A. is just one of the parties involved, although it is the major player because of its size and clout. But Keeley must also talk to the three railroads and the other corridor supporters--California’s two senators, the county’s congressional and legislative delegations, and the other cities along the corridor.

The morning we talked, Keeley seemed confident, even cheerful, about the task ahead. He gave me the financing plan for the Alameda Corridor, done in graphics, straight from a Mac, easy to understand.

It looked tenuous. The L.A. and Long Beach harbor would contribute $400 million. The state and federal governments would put in $135 million more. Bonds, supported by the fees paid by the railroads, would bring in $600 million.

That leaves the project $700 million short, which the Alameda team hopes to lobby from Washington. And chances for getting that are not great because the federal government, short of money, must also provide Southern California with earthquake relief and other aid.

Alameda Corridor backers cannot begin to lobby Washington until all three railroads--Southern Pacific, Santa Fe and Union Pacific--sign an agreement to use the corridor. Keeley said he is optimistic about Southern Pacific and Santa Fe. It’s Union Pacific that is the big question mark--and the major threat to the project at present.

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Keeley said he thinks the railroads can afford to pay the fees, and will profit from the Alameda Corridor and the Far East trade that will feed it. “We’ve had a rail revolution in our country,” he said. “Rail has gotten a lot more competitive. So it’s just cheaper when you are sending cargo from the Far East to (the East and Midwest) to send it to our port and put it on rail than it is go through the Panama Canal. That wasn’t true (a few years ago) because of the economics of rail.”

The Union Pacific’s Kelley told me negotiations will resume this week. If the railroad and the local authorities don’t get together, it could stall the corridor project. With so many jobs at stake, that would be a real loss.