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Sunday, September 20, 2020

Maritime Logistics Professional

Ports Turn Into Cash Cows

Posted to Martin Rushmere (by on July 29, 2010

Long Beach city sets a risky precedent

It was probably inevitable, but Long Beach city council is setting the way and opening up new, unfriendly dimensions (for ports and shipping lines at least) with its treatment of the city's port.
 Though a final vote has still to be taken, the city wants to take 5 percent of GROSS REVENUE, as opposed to the traditional 10 percent of NET.
This follows the port telling the local pols to take a running jump at themselves, by refusing to dish out what amounted to a double payment this year. (The port did agree to make the payment three months earlier than normal, rather than the six months that was asked for.)
According to news reports, the port had gross revenues of $311 million in the last financial year and a net income of $124 million – which would mean a 26 percent increase.
There is very little doubt that other cities, not just in California, think this is a splendid idea. But, as with all new ideas, others will come up with improvements. Given the current fervor in Washington to bring in retroactive laws over the BP saga, it will not be long before a city wants to backdate payments.
As has been pointed out repeatedly over the years, the legal and administrative connections between ports and cities need to be overhauled. Critics say there is a clash of interests between what City Hall tells a port to do – act as a private corporation and make a profit – and what it actually expects, which is a handy cash cow when times get tough.
And, no matter what the container volumes might say, times are still a tad way short of being good. Long Beach's budget this year is down almost 20 percent, to $715 million. Significantly, staffing levels will be the same, while other expenses will be cut. Development projects will take up $475 million and $230 million will be taken out of reserve funds to help balance the books.
Whether the city council will follow suit in being prudent about its own expenditure is a moot point. Most people are not holding their breath.    

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