Shippers Shun Alameda Corridor Over Costs

By DAVID GREENBERG

Staff Reporter

The $2.4 billion Alameda Corridor, which opened to considerable fanfare a year ago for being on time and on budget, is falling short of its traffic goals because shippers are unwilling to pay to use the rail service for short hauls.

Instead of paying the equivalent of $30 per container to get shipments from the ports of Los Angeles and Long Beach to rail yards east of downtown L.A., shippers are instead placing their cargo on trucks and sending it to warehouses in the Inland Empire.

Transportation officials now say the only hope of reaching the corridor’s original projection of a 50 percent share of the ports’ container traffic is to build two new terminals in the Inland Empire and create a rail shuttle system to get the cargo there. Currently, the corridor is drawing a 36 percent share of port traffic.

“I seriously doubt that we will achieve 50 percent market share without a shuttle train concept,” said Jim Hankla, chief executive of the Alameda Corridor Transportation Authority. The corridor is not convenient for shippers to do what they want to with the cargo, Hankla said. “The only solution for them is to take cargo on trucks.”

The lack of traffic has also created a revenue shortfall that will force the ports to kick in $3.5 million each in October to help the transportation authority make bond payments. The ports are obligated for the bonds under the use and operating agreement between the two railroads serving the corridor, the Alameda Corridor Transportation Authority and the ports.

The cost of adding an Inland Empire spur hasn’t been determined. Richard Nordahl, chief of Caltrans offices of goods movement, estimated the bill could ultimately be more than $100 million.

“(But) it would be providing a service that does not exist at this time,” he said. “The short haul hasn’t been there.”

Early stages

Tracks already exist that shoot off the main eastbound rail that begins at the rail yards east of downtown. But transportation officials haven’t determined whether those tracks would be used for a shuttle. If so, they likely would have to be upgraded to handle the increased usage.

Also missing are at least two large Inland Empire terminals where the cargo would be transferred to trucks for a short haul to distribution centers.

One location under consideration is the former George Air Force Base in Victorville. Union Pacific already has a giant switching yard in Colton, but using it is out of the question.

“It’s already at capacity with our current operations,” said Jerry Wilmoth, the railroad’s general manager of network infrastructure. “And it’s not designed to be a storage and loading yard.”

The new project would be funded through new bonds issued in addition to the original $1.2 billion bond debt. The corridor also is paying back $400 million lent by the U.S. Department of Transportation to fund construction.

Payments on the corridor’s debt currently total $63 million annually, payable in April and October. In 2005, the bond payments are scheduled to rise substantially. Any new debt would add to that burden.

The ports also loaned the project $394 million, with the understanding that they would be paid back after all other debts are repaid. (Those are scheduled for 2037.)

Devil in detours

Alameda Corridor officials thought they were shielded from the bypass problem under the operating agreement, which dictates that the authority will be paid $15 for every 20 feet of container space that uses the corridor and/or leaves the region by rail. (A typical container is 40 feet long.)

The agreement precluded the possibility that shippers would use trucks to haul cargo from the ports to the downtown rail yards to avoid the user fees, before transferring the goods onto a train.

What corridor officials underestimated was the extent that shippers would “trans-load” truck the cargo to the 300 or so warehouses in the Inland Empire, or destinations in Arizona and Nevada, where the goods are reloaded into 48- or 53-foot containers before being placed on eastbound railroads.

The process allows shippers, which operate under just-in-time delivery systems, to wait until the last moment before deciding which goods should go in which containers and where those containers will ultimately be sent.

Torrance-based Toyota Motor Sales USA Inc., for instance, uses only trucks to haul more than $1 billion in parts from the ports to its 750,000-square-foot warehouse in Ontario each year.

That approach saves corridor fees and cuts the hauling time to two to four hours (depending on traffic), from the day or more it would take to move the goods to the rail yards, only to then load them on trucks for the drive to Ontario.

“We’ve never considered the Alameda Corridor because the length of the haul is so short,” said Tony Minyon, Toyota’s national manager of parts logistics. “You need to get outside a 500-mile radius for rail to be cost-efficient.”

Alameda Corridor officials hope the 75-mile shuttle system will be ready in 2005, with more specific plans in place later this year.

Even then, it’s not certain the railroads will go along. Preliminary talks with Union Pacific Railroad and the Burlington Northern & Santa Fe Railway the two operators that use the corridor began shortly before the corridor opened.

“The concept of a shuttle is something we are thinking about,” said John Bromley, a Union Pacific spokesman. “It’s one of the possible ways we can increase our capacity in the Los Angeles basin and grow our business.”

Should the railroads balk, Hankla said it is possible another company could form a new railroad operation, although that would be an unusual occurrence in an industry prone to consolidation.

Combined user fees for the corridor and shuttle rail are expected to be higher than existing rates. But Hankla vowed to keep the overall charges low enough to make it worthwhile for shippers to forego trucks.

“There’s no secret that the biggest challenge with short haul has been the cost associated with moving it by truck versus rail,” said Lena Kent, a spokeswoman for Burlington Northern.

The corridor certainly could absorb the traffic. The congested Long Beach (710) Freeway, the main access road to the ports, currently handles 17,500 truck trips per day, while the corridor hosts 35 to 40 daily trips by train each pulling dozens of cargo cars.

It’s been relatively efficient as well. After eliminating 200 grade crossings, what used to be a two- to three-hour train trip at an average of 10 miles per hour from the ports to the rail yards is now a 40-minute excursion at 40 mph.

“We could handle more capacity on our existing rail,” said Kent.