THE STATE : Why Southern California May Be Unprepared for Its Destiny

In back-to-the-future fashion, Southern California is reinventing itself with ambitious infrastructure projects. Rebounding from the worst economic downturn since the Depression, the region is planning to dramatically expand its global gateways--its international ports and airports--to ensure its future as one of the world’s great trade and transshipment centers. But there are serious obstacles ahead that could frustrate the region’s promise of becoming an American Singapore or Hong Kong.

Public spending to nurture growth is a long-hallowed Southern California tradition. More than a century ago, voters paid a king’s ransom to bring the railroad here. Later, water and power projects supplied additional underpinnings for growth and industrialization. More recently, because of the challenges of the global marketplace, investment priorities have shifted to trade and transportation.

Twenty years ago, leaders like former Mayor Tom Bradley envisioned the region as the Pacific Rim gateway and strenuously pushed port and airport expansion. Billions were spent to modernize and expand the ports of Los Angeles and Long Beach, and to build an international terminal and air-cargo facilities at Los Angeles International Airport.

To date, this investment has paid off handsomely. The San Pedro Bay ports have become the world’s third-largest container facility, handling more than 25% of the nation’s international water-borne commerce; LAX is now the world’s third-largest cargo airport. With a superior import/export infrastructure capturing a major share of Pacific Rim trade, Los Angeles has surpassed New York as the nation’s leading trade center.

Today, about 30% of Greater Los Angeles’s $400-billion economy--the world’s 11th largest--depends upon global trade, up from 13% in 1972. The San Pedro Bay ports and LAX have become our most important public engines of this growth.

But the region may become a victim of its own success. Unprecedented congestion threatens its ports, airports, rail and highway systems--and the problem could worsen. Asia, our chief trading partner, is the world’s fastest-growing region. As a result, already crowded ports and airports face a doubling, even tripling, of demand by 2015.

To meet this rising demand, and head off West Coast rivals eager to capitalize on the region’s inability to manage it, expansion plans have been prepared. Over the next 25 years, Los Angeles and Long Beach plan to spend $4 billion on port expansion, nearly $2 billion on the Alameda Corridor rail project, which links the ports to the downtown railheads, and at least $3 billion for new international-passenger and air-cargo facilities at LAX. This represents the largest trade-infrastructure program in the nation.

The ports face two challenges--pressures to transfer sizable port revenues to municipal coffers and a growing transportation bottleneck. The Port of Los Angeles, for example, was recently billed $68 million for alleged underpayment of city services dating back to 1977.

Such revenue transfers constrain port development. They increase project costs by reducing pay-as-you-go financing and forcing greater reliance on debt. While the state Lands Commission, overseeing the Tidelands Trust, has demanded that Los Angeles repay the port for inflated billings, transfer pressures will persist due to budget deficits and funding priorities like police. If hefty transfers continue, the ocean carriers, fearing fee hikes, may divert discretionary cargo--more than 40% of imports are shipped east--to other West Coast ports.

The more intractable problem is rail and highway congestion. The Alameda Corridor project, to be completed by 2001, is designed to channel the port’s train traffic onto a single, 20-mile, high-speed, grade-separated rail system. Financing is its biggest challenge. While the ports, shippers and railroads have pledged to contribute about $1 billion, a $700-million shortfall remains.

Finding that money will not be easy. Washington’s budget-cutting mood limits federal help. State transportation dollars are scarce, and there are competing earthquake-related priorities. The Metropolitan Transit Authority, a promising funding source, is beset with leadership problems and pressures to help ease the county’s cash crunch. As for private dollars, user fees can only be raised so much to leverage financing.

Yet, failure to complete the corridor on schedule could seriously damage the region’s economic health. As many as 700,000 regional trade and transportation jobs--nearly 20% of the area’s estimated 25-year job growth--depend upon expanding the ports and completing the corridor. Anticipating corridor delays, the small niche ports of San Diego and Ensenada are drawing up expansion plans to divert cargo south.

Airports, however, are the region’s real Achilles’ heel. Measured by the value of exports (cargo and services), international airports contribute more to the economy than do ports. The problem is that all the region’s international eggs, both cargo and passenger traffic, are in one basket--LAX.

That basket is nearly full. LAX expansion plans are a case of too little, too late, and at too great a financial and environmental cost. LAX has intractable, long-term capacity constraints: air space, land, runways, taxiways and ground transportation. While the airport plans to consider adding runways on landfill in Santa Monica Bay, these would be expensive and arouse environmental opposition.

All LAX expansion plans encounter a bottleneck: ground transportation. While LAX forecasts serving 98 million annual passengers by 2015, growth greater than 65 million--versus today’s 51 million--threatens gridlock on an already-overcrowded freeway system. The completion of the LAX master plan has been delayed, to 1997, with facility shortfalls soon coming. If the airport decides not to accept federal improvement dollars--so that LAX concession monies can go to the general fund--local expansion costs will soar, making LAX an expensive airport.

While LAX requires some near-term expansion, long-term alternatives must be developed. Existing commercial airports will not do, however. Ontario, Burbank and John Wayne airports are either physically constrained or have operations ceilings imposed by state air-quality regulators. Palmdale, once touted as the new international airport, is destined to remain a small regional facility because high-speed access to populated areas is too expensive.

Yet, the peace dividend offers Southern California a windfall opportunity to solve its pressing international and cargo-airport needs. Five military air bases are set to close or be revamped for joint military/civilian use: El Toro, Norton, March, George and Point Mugu.

These military bases enjoy substantial advantages as potential commercial airports. They are efficient and inexpensive because runways and infrastructure already exist. March and Point Mugu, for example, could be placed in service within two to three years. They enjoy good freeway and rail access. Because they are generally located away from densely populated areas, their environmental impact can be minimized.

The time to cash in on the airport peace dividend is now. With longer-range aircraft being built, Las Vegas and Phoenix airports are vying with LAX as West Coast hubs. San Francisco International Airport, with an ambitious expansion program already underway, is challenging LAX’s global supremacy. San Francisco now surpasses Los Angeles in global air-cargo value.

One-third of Southern California’s job growth for the next 25 years--in trade, transportation, export services and tourism--depends upon building a superior 21st-century international port, rail and airport system. Finding ways to expedite this expansion should be the region’s top development priority.*