The City Council decided Tuesday not to immediately abandon its partnership in a coal export terminal at the Port of Los Angeles, despite warnings that the operation could fall into bankruptcy unless the city helps restructure it.
City Councilwoman Janice Hahn, who represents the harbor area, opposed the restructuring plan, under which the city would have recovered $11 million in back rent but given up its interest in the Los Angeles Export Terminal joint venture. That would have meant forfeiting $19 million it had invested and $94 million in projected rental revenue and transferring operation of the facility to a private partner for 12 1/2 years.
Acting on Hahn's recommendation, the council rejected the plan.
Hahn said she will seek an alternative proposal that would get the city out of the partnership and close down the Los Angeles Export Terminal, known as LAXT, within five years. She favors converting the land to a cleaner, cargo container operation.
The councilwoman said she was not worried about the threat of a bankruptcy filing and of greater financial losses for the city if that happens.
"It was a bad business decision from the very beginning," Hahn said of the city's investment. "That company is already bankrupt. They just haven't declared it yet. For them to declare bankruptcy gets us to take possession of that property and our assets sooner than later."
Gerald Swan, president of Los Angeles Export Terminal Inc., said he was disappointed by the council action, which came after a last-minute attempt by Swan to pull the proposed agreement back for further consideration by his board.
Swan said he would now go back to his board to consider alternatives, which he warned might not be to Hahn's liking.
One option, he said, is for LAXT to continue operating the petroleum coke terminal for the remaining 29 years of its agreement with the city, converting 81 acres of the 117-acre site to another profitable use.
"We have an absolute unequivocal right to operate it for 29 years," Swan said. "We thought this [rejected proposal] was an excellent plan. We will look at other options now."
Hahn said she would vigorously oppose any plan to continue the terminal's operation for 29 years.
In an effort to encourage business use of surplus land, the Port of Los Angeles, a city agency, agreed in 1993 to provide $19 million and 117 acres at Pier 300 to create LAXT with 36 private petrochemical, coal and export firms.
For its investment, the city agency received a 13% interest in the corporation. But the coal-export market has soured, so the terminal has stopped coal exports, focusing instead on exports of petroleum coke, and the corporation has been unable to pay its rent to the city.
The LAXT and a City Council panel had recommended a deal in which the city would immediately pull out of the partnership, write off its $19-million investment, forego $94 million in future rent and turn the terminal over to one of the private partners, Oxbow Carbon & Mineral Inc. In exchange, Oxbow offered to pay the city the $11 million in back rent, help clean up 81 acres that would immediately revert to the city, and clean up the remaining site when the operation shuts down in 12 1/2 years.
The council vote to reject the deal was unanimous, with some previous supporters of the plan changing their positions.
By killing the deal, the city gives up recovering the money offered by Oxbow, and bankruptcy could result in greater losses by making it difficult for the city to quickly recover its land and other assets, according to Roy Morrow Bell, an Oxbow attorney.
Oxbow officials charged that Hahn killed the proposal to keep the terminal operating for 12 1/2 years so that she could help a competing petroleum coke terminal in Long Beach, which would benefit if the Los Angeles facility is shut down within five years.
A large number of lobbyists were hired by both sides, including a Hahn pollster and a political supporter who were working for the Long Beach terminal.
There was also testimony from residents of San Pedro and Wilmington on both sides of the issue, including some who want the terminal closed quickly because they fear it contributes to air pollution, even though the enclosed coke stacks have been found to be in compliance with clean-air rules.
"Besides the obvious air pollution issues, there are the issues of visual blight," said James Cross, past president of the San Pedro Chamber of Commerce. "Closing this facility will have a direct and positive impact on tourism."