Schwarzenegger Vetoes Fee on Cargo Containers

Siding with business and the shipping industry, Gov. Arnold Schwarzenegger vetoed a bill Friday that would have provided $500 million a year to improve security, expand rail networks and reduce air pollution at the ports of Los Angeles and Long Beach.

The legislation by state Sen. Alan Lowenthal (D-Long Beach) called for a fee on shipping containers that pass through the ports. Had the bill been approved, owners of cargo, such as retailers and manufacturers, would have been assessed $60 for a typical 40-foot container.

Environmentalists, state regulators and local government officials viewed the measure as an effective way to fund much-needed security, transportation and air-quality improvements for the fifth-largest harbor complex in the world. Revenue from the export and import of containerized cargo would have been divided equally among the three areas.

Shipping companies and businesses that rely on marine transportation opposed the bill, contending that it was unconstitutional, difficult to implement and a tax that would discourage companies from sending their cargo through the state’s ports. The California Chamber of Commerce included the legislation on its list of “job killer” bills.

Schwarzenegger said he vetoed the container fee because it could have hurt U.S. exports by raising shipping costs and did not provide for public-private partnerships that could boost funding for port and transportation projects.

“It is very important,” the governor said, “that any measure to increase fees that impact exporters not have the unintended consequence of negatively impacting the sale and delivery of goods grown and manufactured in California.”

Schwarzenegger said he was committed to improving the state’s ports and the transportation system through an infrastructure bond issue his office had developed for the November election.

The ballot measure calls for $100 million for port security; $1 billion for improving air quality in California, which could benefit local harbors; $1 billion to solve port environmental problems; and $2.1 billion for trade infrastructure such as harbors, roads and railways.

Shipping industry groups and trade associations representing some of the nation’s largest retailers praised the governor’s veto Friday. More than 50 business organizations, shipping companies, marine terminal operators and retailers opposed the container fee.

Opponents said companies already paid billions of dollars in customs duties a year on goods imported through the maritime transportation system.

“Mandating additional cargo fees for the ports of Los Angeles and Long Beach could have resulted in cargo being directed to other West Coast ports or even outside the U.S. altogether, damaging local communities surrounding the ports that depend on the jobs and tax revenue that the ports generate,” said Sandy Kennedy, president of the Retail Industry Leaders Assn.

Lowenthal and container-fee supporters said the measure was necessary to help raise the billions of dollars needed to protect the ports, reduce air pollution in the harbor and relieve growing railway congestion throughout Southern California.

“The veto does nothing to help us,” said Long Beach Mayor Bob Foster. “We still have all the problems we had before: three times the state rate of asthma, more heart disease and more respiratory disease. My constituents are paying with their health. Our kids are getting asthma so someone in Nebraska can get a cheaper TV.”

Supporters of the cargo fee had said the charge was so small that it would add only pennies to the price of goods shipped by container through Los Angeles and Long Beach. Officials for the Los Angeles County Economic Development Corp. had said the diversion of cargo to other ports would be insignificant.

Lowenthal said other funding sources, such as container fees, would be required because Schwarzenegger’s bond measure would not provide enough money. He said it could also fail at the polls.

State studies indicate that California’s major ports -- Los Angeles, Long Beach and Oakland -- will need at least $20 billion in improvements in the decades ahead.

“The bond money is just a down payment,” said Lowenthal, who vowed to reintroduce the container fee next year. “This is not the end of the fight.... The governor is protecting foreign factory owners at the expense of California residents.”

However, Barry Sedlik, undersecretary of the state Business, Transportation and Housing Agency, said the governor was addressing long-term funding needs for goods-movement projects, including an action plan that would go before the California Transportation Commission by the end of the year.

“We are trying to come up with an overall funding plan for goods movement statewide,” Sedlik said.

“We need a comprehensive solution, not a piecemeal approach that involves only two ports. We don’t want to create any competitive disadvantages.”

dan.weikel@latimes.com