The need to invest in California's infrastructure is readily apparent to anyone who drives on the state's roads and highways. We all know the only certainty ahead is a growing population, increased consumer demands, more automobile registrations, and more suburban growth across California.
So why is it that that we don't have a formula for these critical public projects other than a one-time borrowing plan on the November ballot?
One problem is that there is a huge disconnect between how we actually fund infrastructure and how people think we fund infrastructure. In truth, there are only a few examples of "user fees" that actually fund infrastructure investments. Real user fees are revenues that are generated by those who use the infrastructure, such as tolls or other charges for use of roads, bridges, rails, or ports. California's ports are already a model of success as virtually all of the infrastructure at the state's major ports has been funded by private dollars.
Our ports are funded with private sector investments in the billions of dollars (more than $7.4 billion on marine terminals alone in 2003), financed primarily through port revenue bonds. These bonds are paid off through the collection of user fees and tariff charges paid to the ports by terminal operators leasing the port facilities and the shipping companies whose vessels call at our ports.
Port investments have supported ever-increasing levels of international trade and jobs. Their strong financial performance and the consistent operating record of their tenants U.S. and foreign-owned terminal operators enable our ports to be locally-accountable public agencies yet pose no financial risk to taxpayers. This operational partnership has improved port cash flow and alleviated liquidity constraints on the basis of legal, clearly-defined user fees.
Despite or perhaps because of their record in paying their way some in Sacramento continue to call for more and more fees around port operations. One current proposal, SB 760, would impose a $30 tax on every standard 20-foot container or its equivalent that moves through the San Pedro Bay Ports. The dollar amount is arbitrary and should simply be called a container tax. Supporters of the container tax know full-well that these fees will be passed through the supply chain until the consumer pays, so it is simply a consumption tax under a false and misleading label.
"Container fees" seem to be the default solution of choice for some politicians. However, these "fees" are commercially problematic and legally indefensible. Various container "fee" mechanisms have already been found to be unconstitutional. So the new round of thinly masked container taxes will simply enrich a cadre of attorneys for years to come proving that the "fee" itself was never more than an exercise in political expediency.
Given the fact that California's domestic commerce far surpasses international trade in terms of value ($1.3 trillion vs. $300 billion, respectively) we should realistically assess the infrastructure impacts of the state's domestic intrastate trucking industry. Investment in new toll lanes some that might even be dedicated to trucking should be seriously considered as a possible funding mechanism for infrastructure improvements.
Tolls and other direct charges are a funding mechanism that connect the user directly with a service or project. True user fees are easy to track: You use it, you pay for it. True "user fees" do not discriminate based on point of origin, or mode of transportation. Containers don't deliver themselves. Without a vessel, truck or ship to do it, intermodal freight simply doesn't move.
Why should a container be taxed if it arrives in California via ship, but not taxed if it comes on a truck from Nevada? And how might a container be treated if it arrives by land from Mexico? How does the state propose to contend with the International Conventions on Containers or the U.S. Constitution? None of these questions has been answered satisfactorily by the container tax advocates.
If we are to finally stop the ebb and flow of talk and actually get to the task of funding California's infrastructure needs, we should be honest about how we are paying for these needed projects. If it continues to be a debate that relies on political expediency, then we have once again doomed ourselves to an endless loop that offers little in the way of real progress.
John McLaurin is president of the Pacific Merchant Shipping Association, which represents the owners and operators of marine terminals and U.S. and foreign vessels operating in the Pacific Basin.
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