1. A Short & Long Term Look At California’s Ports & Related Issues John E. Husing, Ph.D. Economics & Politics, Inc.

2. CA Port Competitive Advantages

3. On West Coast Near Asia Los Angeles Long Beach Oakland

4. Container Ship Size & Port Requirements Panamax Post - Panamax Way Post - Panamax

5. 8,000-Container Post-Panamax Ships CA Deep Water Ports Can Serve Ships Needing 50 feet of Water Oakland Less Certain Due To SF Bay Silting

6. Great Infrastructure, So Far Issue: Constant Law Suits Have Prevented Upgrades

7. Off-Port Infrastructure Congested Issue: Lack of Agreement on Expansion Routes Issue: Lack of Funding, Particularly Federal

8. Down Since Peaks Share of U.S. Imported Container Trade Down Since Peaks 8.4% 8.0% 8.4% 9.5% 9.0% 9.2% 43.7% 44.4% 43.9%43.6% 43.4% 42.0% 44.2% 43.5% 42.2% 200020012002200320042005200620072008 Southern CaliforniaNorthern California Source: Port Import Export Reporting Service (PIERS) Share of U.S. Imported Containers (teus) Southern & Northern California Ports, 2000-2008 Issue: Is It The Economy Or Trade Diversion?

9. 20002001200220032004200520062007200820092010 Source: U.S. Federal Reserve Board Value of Dollar vs. Major Currencies, 2000-2010 100.073.1112.0 76.7 Dollar Down In Value: U.S. Goods Cheaper

10. 8.5% 8.1% 7.4% 7.5% 7.3%7.1% 6.5% 6.0%5.9% 23.4%23.9% 23.2% 23.8% 23.0% 24.1% 25.5% 25.4% 27.0% 200020012002200320042005200620072008 Southern CaliforniaNorthern California Source: Port Import Export Reporting Service (PIERS) Share of U.S. Exported Containers (teus) Southern & Northern California Ports, 2000-2008 Decline in North, Grow In South Share of U.S. Exported Container Trade Decline in North, Grow In South

11. Share of California Import Trade Oakland Machinery 27.4% Electric Mach. 11.5% Furniture & Bedding 5.8% Beverages 5.5% Knit Apparel 4.8% Top Five 50.0% L.A. Harbor Furniture 10.3% Apparel 9.0% Auto Parts 7.7% Consumer Electr, 6.3% Footware 3.3% Top Five 36.7%

12. Share of California Export Trade Oakland Fruits & Nuts 17.5% Meat 13.5% Machinery 5.8% Beverages 5.3% Chemicals/Rare Earth 4.8% Top Five 47.6% L.A. Harbor Paper 17.5% Scrap Metal 13.5% Fabrics, Raw Cotton 5.8% Pet, Animal Feed 5.3% Resins 4.8% Top Five 42.9% Issue: Why Doesn’t CA Export More Manufactured Goods? Interviews: Regulatory Instability

13. Import Container Volume Down 0.500.49 0.55 0.60 0.69 0.84 0.880.87 080 0.70 4.8 5.0 5.7 6.0 6.8 7.2 8.2 8.0 7.0 6.1 2000200120022003200420052006200720082009 0.81 7.0 2010e 2010=National Retail Institute Forecast 28% for 6-month, Year Assumed at 16%. Source: Port Import Export Reporting Service (PIERS), collected from Vessel, LA-LB 2009 & Oakland for 2000-2009 Imported Container Volume, 2000-2010e Ports of Los Angeles & Long Beach; Oakland (mil. teus) L.A.-L.B.Oakland -25.9% -20.0%

14. Export Container Volume Up 90.9% 32.3% Issue: Port Exports Give Little Help to California’s Economy

15. Concentrate On Southern California Impacts

16. L.A.-L.B. Economic Impact on Southern California (10.5%) 2005740,103 jobs of 7,082,100 (10.5%) Husing (12.2%) 2007 886,000 jobs of 7,258,200 (12.2%) ACTA “Give Me A One-Armed Economist” President Harry Truman

17. San Pedro Bay Total TEU Volume Imports, Exports, Empties -25.0%

18. Industrial Vacancy Rate Up Almost Everywhere! 2009 2005/2006 2009 12.8% Inland Empire 2.7% 12.8% 12.0% San Diego 7.0% 12.0% 6.5% Orange County 5.4%6.5% 3.2% Los Angeles County 2.1%3.2% 12.3% Sacramento10.5% 12.3% 8.9% Oakland 6.0% 8.9% 13.9% Silicon Valley 14.4% 13.9% Valuation Falling Issue: Fall in Value of Warehouses Means Local Banks Taking Back Facilities … Hurting Their Ability to Lend

19. Logistics Joined Blue Collar Job Losses 19901991199219931994199519961997199819992000200120022003200420052006200720082009 200,000 400,000 600,000 800,000 1,000,000 1,200,000 ManufacturingLOGISTICS Construction Source: CA Employment Development Department Manufacturing & Logistics Employment Southern California, 1990-2009e

21. Gold Mine Theory Primary Tier Secondary Tier - 40,463 1.09 x - 40,463 = - 44,306 - 84,769 Logistic Affected So. CA Job Loss = - 84,769 24% of - 353,183 Total 2009 Job Loses or 24%

22. Slowdown Why The Short Term Port Slowdown ?

23. U.S. Economy Has Shrunk -8,425,000 Jobs

24. Who Cares If We Lose Dirty Blue Collar Jobs? Policy Conflict: Environment vs. Blue Collar Jobs

25. Worst in nation since 1982 Trucks & Traffic Congestion Slows Movement of Goods, Lowers Competitiveness, Adds To Air Quality Difficulties

26. Lack of Rail Grade Separations Dividing Cities

27. Logistics Operations Bring Rising Asthma & Cancer Risk From Airborne Toxics Source: SCAQMD, Multiple Air Toxics Exposure Study II, March 2000 Cancers per million

28. But Also...

29. Few Training Barriers Sectors With Few Training Barriers To Beginning Employment Mining ($96,996) Manufacturing ($47,933) Logistics ($46,665) Construction ($41,453) Retail Trade($28,840) Gaming($28,385) Hotel/Motel($24,019) Agriculture ($22,793) Eating & Drinking($15,132) Blue Collar With Part Time Workers & Owner – Operator Drivers

30. Badly Need So. CA Modestly Educated Inland Adults Badly Need Blue Collar Job Growth Inland Not Coastal

31. Less Need No. CA Less Need For Blue Collar Job Growth Except Inland Inland Not Coastal

32. Who Was Hurt By The Recession Least Hurt = 12 Most Hurt = 72 4. So. California 1. Central Coast 2. Bay Area 3. Northern 6. Sacramento I-80 45 28 30 52 41 5. Central Valley 48 CA’s East – West Divide Environmental Issues Take Precedence Job Worries Take Precedence Issue: Blue Collar Job Creation Has Not Been A CA Priority

33. BUT … Soaring Numbers of Unemployed 528,022 Avg. Jan-2000 to Jun- 2007 1,273,700 July 2009 2.41 Multiple: Increase Source: CA Employment Development Department Number of Unemployed, Southern California Avg. Jan-2000 to Jun-2007 v. July 2009 Unemployment & Poverty Are Also Health Issues … Particularly Along California’s Central Spine

34. Threatened Longer Term Look At Port Growth Potential … Threatened

35. 3.7 3.84.1 4.4 5.1 5.4 5.8 6.5 7.5 8.2 9.59.6 10.6 11.8 13.1 14.2 15.815.7 14.3 11.8 1990 1991 199219931994199519961997199819992000 2001 20022003200420052006200720082009 42.5 2025e 42.5 2035 TEU=20 foot equivalent container units Source: Ports of Los Angeles & Long Beach; Forecast: Moffatt & Nichol Engineers Port Container Traffic Ports of Los Angeles & Long Beach, 1990-2009 & Long Term (million TEUs) San Pedro Bay Volumes

36. 33.2 Million2/3 of Capacity Growth At 33.2 Million TEUs: 1,303,490 jobs (2/3 of Capacity Growth) 563,388 Job Gain Potential: 563,388 Jobs Not Gained: -297,368 At 14.2 Million TEUs: 740,103 jobs supported in 2005 42.5 Million At 42.5 Million TEUs: 1,601,476 job supported at capacity 861,374 Job Gain Potential: 861,374 What Happens If The Ports Don’t Fill Potential New Capacity? 23.5 Million1/3 of Capacity Growth At 23.5 Million TEUs: 1,103,211 jobs (1/3 of Capacity Growth) 272,998 Job Gain Potential: 272,998 Jobs Not Gained: -588,376 Issues: Competition & Reliability

37. Seattle Vancouver CA Ports Had Only Two Major Competitors

38. Now... Port of Prince Rupert

39. Soon … Expansion of the Panama Canal Panamax Ship Issue: Increasing Competition

40. Issue: CA Ports Increasingly Regarded As Unreliable By BCOs 1996 UP Buys SP, Trains Can’t Move 2002 ILWU-PMSA Lockout/Strike 2004 93 Ships Can’t Be Unloaded: Not Enough Labor 2005 Rains Wash-Out Rail Track 2007 Clean Truck & Infrastructure Fees 2008 Employee Truck Mandate & Lawsuits 2009 Riverside Suing Ports to Stop Expansion 2009 LA-Oak Congressional Lobby-Employee Driver

41. Issue: Diversion & 4-Corners Strategy Panama & Suez Loss of Market Share?

42. 2009 v. 2010 Container Volumes: First 6 Weeks 2008 v. 2009 Container Volumes Last Week Last Four Weeks Last Year Is Diversion Starting to Occur?

43. California Has Competitive Advantage For International Trade … Unless Issues Are Addressed It Can Lose Them … Hurting Its Blue Collar Labor Force!

44. Issue: Constant Law Suits Have Prevented On-Port Upgrades Issue: Lack of Agreement on Off-Port Route Expansion Issue: Lack of Funding for Infrastructure, Particularly Federal Issue: Why Doesn’t CA Export Manufactured Goods? Regulatory Instability. Issue: Port Exports Give Little Help to California’s Economy Issue: Fall in Warehouses Values Mean Local Banks Taking Back Facilities … Hurting Their Ability to Lend Issue: Policy Conflict: Environment vs. Blue Collar Jobs Issue: Blue Collar Job Creation Has Not Been A CA Priority Issue: Unemployment & Poverty Are Also Health Issues … Particularly Along California’s Central Spine Issue: Increasing Competition Issue: CA Ports Increasingly Regarded As Unreliable By BCO Issue: Diversion & 4-Corners Strategy

45. john@johnhusing.com