Clean Air Industry Situation
Port of Seattle Clean Truck Prograni Industry Situation February 5, 2009 THE INDUSTRY 1. Industry prefers Southern California as a gateway and the Pacific Northwest's niarket share has steadily declined. 2. PMSA comment, 1/27/09: Canadian gateways have gained. 'The Panama Canal expansion is due to be complete in 2014 and there are serious concerns about cargo diversion then. Mexico is still planning to develop west coast ports to attract cargo for entry into the U.S. market. 3. PMSA comment, 1/27/09: 60% to 70% of Seattle and Tacoma's container cargo is headed inland to the Midwest (combined domestic and international). If segregated by international and domestic, the discretionary percentage is likely higher. 4. Ships landing Seattle or Tacoma also discharge local cargo; if the ships land elsewhere our local cargo would require expensive trucking to our region, an economic disadvantage. 5. Seattle and Tacoma offer good export opportunities to cargo carriers but requires empty containers (from the imports) to carry that cargo. 6. Seattle and Tacoma are a discretionary cargo ports. 7. Ocean Beauty Seafoods comment 1/9/09: Shippers will support the goal of reducing emissions to improve air quality; however, the shipper community needs a dependable and cost effective drayage resource to support continuing volunies through the Port 8. Seattle, Tacoma and Vancouver Canada established a clean air program for the region with specific goals and dates for reducing emissions from container trucks; this plan was adopted in January 2008. 9. Because many of the trucks serving Seattle also serve Tacoma, any program seeking to clean trucks must be consistent between Seattle and Tacoma; otherwise the dirtier trucks will be driven to the port not cooperating. Revised: 2/5/2009 10. Recently 'the Southern California gateway has added several per-container fees to cargo there, with others under consideration, to help pay for their clean truck program, which is also supported by a large public commitment through bonds. The Ports of Los Angeles and Long Beach are implementing the Clean Truck Fees in February, per approval by the FMC. PMSA comment 1/27/09: POLA is currently offering incentives or a "cargo bounty" for new cargo coming to the port, reducing fees and Port of NY/NJ is now offering a bounty as well. Ocean Beauty Seafoods comment 1/9/09: Shippers will not support imposition of user fees as many well managed carriers have already made the capital investment necessary to meet or exceed existing standards 11. 'Those fees have not yet diverted cargo although they now total nearly $100 per container. Recently additional fees have been delayed because of the economic downturn and a feared loss of cargo through Southern California. PMSA comment 1/27/09: Ports of Los Angeles and Long Beach are far less discretionary than PNW ports because of population density. Additionally, many would argue that there has been diversion of cargo already given the reduction and market share losses and cargo routing looking to avoid the costs and uncertainties surrounding California gateways particularly LAJLB. 12. A 2007 Economic Study found that the container cargo sector in Seattle supported over 9,000 direct, indirect and induced jobs (which include 1,600-2,000 trucks serving the ports of Seattle and Tacoma). "FINAL DRAFT 2007 Economic Impacts of the Port of Seattle, Martin Associates, January 12 2009." 13. A diversion study found that raising the cost in Seattle only $30 per full container would send 30% of Seattle's cargo elsewhere; raising the cost $100 would divert up to 50% of Seattle's cargo. "Draft Port and Modal Elasticity of Containerized Asian Imports via ,the Seattle-Tacoma Ports" Jan 3, 2008; page 14 Figure S-2 "Final Review of Dr. Leachman's Port and Modal Elasticity Report", by BST Associates, January 4, 2008; Memorandum to JTC Staff from Christopher Wornum, Cambridge Systematics, Inc, January 7,2008 PMSA comment 1/27/09: The Leachman study was unable to measure diversionary impacts under the $30 per TEU threshold. When results were submitted to the legislature ,theJoint Transportation Committee decided to not take a chance on cargo diversion and abandon the container tax. Coalition for Clean and Safe Ports comment 1/27/09: On page 16 of that study, Dr. Leach man observes "[ilnstitutionof container fees without offsetting fees at other West Coast ports seems unwise. However, as fees are instituted at the California ports, they may be matched at Puget Sound in order to create a revenue source for infrastructure improvement and environmental impact mitigation without loss of market share..."Since Dr. Leachman's study more than a year ago, the Southern California ports - which handled 69% of containers moving through the West Coast in 2007 - have instituted fees of up to $236 per FEU. Revised: 2/5/2009 14. There are no barriers to entry to the truck fleet There were 1,600 - 2,000 trucks serving ports of Seattle and Tacoma before the recent economic downturn 400 of these trucks were pre-1994 based on an August 2008 analysis. PMSA comment 1/27/09: The reduction of cargo throughput may very well have made this number lower but another inventory will tell. Also TWlC implementation at the end of February will lead to the loss of some drivers though it is uncertain how many of those will be owners of pre-1994 trucks. Since 2004 the numbers of truckers increased 40% with cargo growth Today the fleet of trucks has 15% less business available than in 2004-2005 because cargo volumes through Seattle have declined 15% (with an additional 10% decline expected in 2009) If 400 trucks left the population the remair~i~igtrucks would have available, per truck, the business volume they had pre cargo decline With cargo declines expected further in 2009 (10%) up to 400 trucks may leave the fleet because of insufficient work Today we have too niany trucks chasing declining volumes PMSA comment 1/27/09: ILWU shifts have declined 10% from 2007 to 2008. Shipping sources expect further declines in 2009 and at least part or 2010. 15. Trucker incomes vary The Washington Trucking Associations reports a median net income after all expenses for drayage trucks of $ 50,000 a year, with a range of $25,000 - $85,000 Proformas based on tripslday consistent with the driver survey conducted fall 2008 indicate net incomes after all expenses of $45,000 - $85,000. Source: data from Port of Seattle trucking companies. The driver survey conducted fall 2008 (56 answers) reported average net income of $34,00O/year- owner/operators $36,00O/year and employees $23,00O/year 16. Coalition for Clean and Safe Ports comment 1/27/09: The document presents data from a survey of drivers conducted by port staff and terminal operators last fall. The results, though, are unrepresentative. Port staff working on truck parking issues this fall identified over twenty compar~iesproviding drayage services in Seattle, including all of the largest. None provided free parking facilities and only one used employees for a portion of its drayage business. If, in fact, 44% of drivers were employees or 51% parked in companyowned lots, the Port would not be facing many of the industry-related problems it is now seeking to address. 17. Truck replacement availability Newer trucks (post 1994) can be purchased for $20,000-25,000. Some loan programs are available. It is expected that by 2015 post 2007 trucks will be available for $30,000-35,000. New trucks cost $100,000-$140,000 18.Truck impacts Truck emissions are less than 1% of DPM (diesel particulate matter) in Puget Sound. Drayage trucks represent 3% of DPM portion of maritime emissions and less than 1% total DPM emissions in Puget Sound Airshed Revised: 2/5/2009 Drayage trucks represent 3% of total heavy duty trucks operating in Puget Sound Airshed Coalition for Clean and Safe Ports comment 1/27/09: The document minimizes the impacts of truck emissions by reporting those emissions only within the context of the very large Puget Sound air shed. Concentrated neighborhood impacts need to be addressed. The great bulk of truck traffic servicing the port, however, occurs along major arteries around SODO, Georgetown and South Park, a roughly six square mile area and between the Port and the Green River Valley warehouse district, a roughly 14 square mile area. Ocean Beauty Seafoods comment 1/9/09: Most carriers engaged in pier drayage activities operate company-owned equipment that meet higher emission standards than called for in the plan. Those same carriers also require owner-operators to have equipment that meet or exceed emissions called for in the plan. Shippers insist that carrier vendors operate in a safe manner and operate equipment that is in full compliance with State and Federal reg~~lations. Ocean Beauty Seafoods comment 1/9/09: Those carriers operating old equipment (company owned or owner-operator) typically handle rail shuttles, shuttles to drop yards or trans-load facilities or local dray to shippers in the adjacent areas to the port. 19. Fee impacts The concession/employee model imposed at Los Angeles will add at least 40. percent to the cost of a dray according to Dr. John Husingls "Economic Analysis of Proposed Clean Truck Program." Other reports ("Daily Breeze" 911 112007)state that motor carriers would have to increase their prices $75 to $150 per move. The cost of a dray in Seattle is $65 for a rail transfer and about $160 for a trip to a distribution center. Increasi~gthese costs 40% adds a minimum of $26 to the cost of handling a Seattle container to the rail ramp and $64 to a distributioncenter. These added fees will divert 30 percent of Seattle's containers based on available studies (Leachman Study) If there is a direct link between container volume and family wage jobs, the job impact of cargo diversion will be 30% of the 9,000 container jobs linked to the Port of Seattle - 2,700 jobs will be lost. Coalition for Clean and Safe Ports comment 1/27/09: Husing did predict cost increases for drays once a trucks program was adopted. But, contrary to the document's claims, Husing predicted increases under both "independent owneroperators" and employee models. Those projections were, moreover, due to several factors in addition to a contemplated trucks program, among them TWlC requirements, the tight labor market for skilled truckers, and huge projected increases in cargo volumes. This combination of factors is obviously unique to the indigenous circumstances of the twin mega-ports of Southern California and has only limited application to the situation in Seattle. 20. In the opinion of the Port of Seattle Legal team, the Port does not have regulatory authority to turn back trucks at the gate without state law changes. Coalition for Clean and Safe Ports comment 1/27/09: The document restates the staff position that the Port lacks authority to set conditions on the use of Port property. As has been presented to the commission before, this unconditional Revised: 2/5/2009 assertion is an inaccurate assessment of the Port's legal rights. Minimally, ,the Commission and the public need a full assessment of the legal opportunities and risks presented by the full range of trucks programs l~nderconsideration. Ocean Beauty Seafoods comment 1/9/09: Pier to rail drayage services are typically contracted for by ocean carriers, intermodal contractors (IMC's) or 3PL operators, not necessarily the cargo owners. Implementation of emission standards could perhaps be written into the equipment interchange agreements (UIIA or ocean SIA) thereby avoiding risk of legal action. Revised: 2/5/2009 Sources: Economic Impact Study 2007 and Impacts of Jobforce 5,000 direct container jobs 3,000 induced jobs (proportion from table p. 16) 1.000 indirect jobs (proportion from table p.16) 9,000 jobs Assumption that container cargo increaseldecreasepercentage causes equal impact on jobs at the most. To be conservative let's say that jobs decline one half as much as container volume. Leachman Study $30TrEU charge = 30% loss of cargo Assumption: Any per-box charge will divert cargo Job loss compared to cargo diversion if equal 10% 20% 30% 900 jobs 1,800jobs 2,700jobs Job loss compared to cargo diversion if one-half 10% 20% 30% 450 jobs 900 jobs 1,350 jobs Cargo Diversion Study, Dr. Robert C. Leachman, January 3, 2008 p. 64 "Fees in the range of $30-$90 per TEU provide incentive to shift to other ports 30% of imports currently routed via Puget Sound." Moffat & Nichol, Container Diversion and Economic Impact Study, p. 4 BST Associates portion: "Dr. John Husivg,Economic Analysis of Proposed Clean Truck Program, recently estimated that truck routes could increase up to 80% after implementation of the Clean Truck Program. However, if the effect of TWIC...are excluded, the increase in trucking costs relative to trucking costs at other ports is actually closer to 40%." Daily Breeze, Sept 11, 2007: "Husing's study suggests that to cover increased business costs, motor carriers would have to increase their prices by $ 75 to $ 150 per move." Revised: 2/5/2009 Port Drivers Performa Example Source of data: Port of Seattle Trucking Firms 5 day work week (many work six dayslweek) 9 hour day 48 weekslyear 240 days Fuel $2.50/gallon 5 mileslgallon Maintenance = $151day Truck paymentlyear $12,000 per workday $50 Truck insurancelyear $ 8,100 $24 #I Rail Drayage Monday-Friday work week Turnslworkday 6 Mileslturn 4 Mileslday 2415 = 4.8 gallons Net to driverlday $50.00 Fuel $2.50 x 4.8 gallons 12.00 Insurance 34.00 Truck payment 50.00 Maintenance 15.00 Daily Expense $111.OO Revenue to driver 6 days x $50/day 300.00 Net revenuelday 189.00 Annual net pay: 240 days x $189/day $45,360.00 If work 6 dayslweek: 288 days x $189/day $54,432.00 May be more if no need for truck payment, insurance, fuels #2 Rail Drayage Friday-Tuesday work week Revised: 2/5/2009 Turnslworkday 7.6 3 days @ 6+1 day; 2 days @ 10+1day Mileslturn 4 Mileslday 30.415 6 gallons Net to driverlday $50.00 Fuel $2.50 x 6 15.00 Insurance 34.00 Truck payment 50.00 Maintenance 15.00 Daily Expense $114.00 Revenue to driverlday 7.6 days x $50/day $380.00 Net revenuelday 266.00 Annual.netpay: 240 days x $266/day $63,840.00 If work 6 dayslweek: 288 days x $266lday $76,608.00 May be more if no need for truck payment, insurance although average drayslday will drop due to lower average with one more 6 dray day added. #3 Summer average @ 3 RTlday(3 RT = 180 miles = 36 gallons) Fuel 36 gallons x $2.50lgallon $90.00 lnsurance 34.00 Truck payment 50.00 Maintenance 15.00 Daily Expense $189.00 Revenue @ $143lday 428.00 Net revenuelday 239.00 Annual net pay 240 days x $239lday $57,360.00 Revised: 2/5/2009 #4 Summer average 4 RTlday (4 RT = 240 miles = 48 gallons) Fuel 48 gallons x $2.501gallon $120.00 Insurance 34.00 Truck payment 50.00 Maintenance 15.00 Daily Expense $21 9.00 Revenue 4 turns @ $143/day $572.00 Net revenuelday 353.00 Annual net pay: 240 days x $3531day $84,720.00 Revised: 2/5/2009 Coalition for Clean and Safe Ports comment 1/27/09 Source: Interviews with port truck drivers from Pacer Cartage, Western Ports, Roadlink and Shippers Express on 1/22/09 SEATTLZ PORT TRUCK DRIVER ESTIRUTED INCOME Net Houdy Income* 3.00/hl-- 11.18hr Net Amlttal Income* 18.250 - 30.7501yr Taxes Hipliway tax 56Sh Federal taxes (*.IS) 5653 - 4528:'yr Net Take Home Pa!; 15,031 - 25,64&'1~ \I-eeklg Ilico~ne= $40icontaineris the standard rate for rail and sho~t&stance hauls; 20 - 30 haulsii\veek is an overestiuiate under the elm-eut ecoiiolrric condrtions. For longer distances,drivers are paicl$50 - $1 5Okontahier but make fewer turns and are paid more for fuel. Divers are paid tle same for huliug two 20' contailax or one 40' codmer. altllough tn~kifq?conyanies are p dIllore by shrypers. Fuel = I?.SO/gallon.Mleage mid fuel efficiency vary. T~uckingcompanies often keep most of the he1 sus.clmgrts charged to shppers and do riot pass the nmney on to the drivels, who must absorb the h&er fuel costs. Insnra~~ce= Driverspay trucking col~ipanies01- brokers for weekly ~ coyera_= of the containerduring~ ~ c e transit. That insurance does not cover "bobtail" ~irheilthe truck is parked or traveling without.a co~ltainer. Reportedly. some truckille; conlyanieskeep these payments and only illsure part of their fleets at a time. h h h t e ~ l s ~ ~ c e= Drivers are 1~spomibl2for all repairs, includingreplacement of cont,Wler chassis,which ;zle nipplied by the sl~ippers,md ofleu break. Many port trucks are in disrepair with broken ligllts, bald tim,and frequent e n p efailures. Truck payment = The Port of Seattle proposes to charge drive15$200 - .S00per moiltl~to lease a ~'etrofittt-uck h mCascade Sieira Solutions, a private non-profith. Palking = Drivers are responsible for parkuig. Some fnlcklng coqames: such as Roadlink,charge driversfor pahngm their lots. &lost driverelr park along the streets in local ne~ghborhoods Health Insninuce = Most divers do not luve health innuance and a-enot eligbk for LGLT (wo~ker's compensatioi~)becat~sethyare rnisclassified as independent mntracto~x.Drivers are exposed to dangerous wolkiug conditions whle moving heavy co~itainsrs,breathing diesel fumes, and divmg poorly maintained tnicks. Houi-ly Income = Assumes a 55 horu work week, ~vllichis uudwestinlate. Many drivers line up for assigm~cntsat ltun and end work at 5pm for a total of 65 hotw'week in a 5-day work week. Ani~ualIncome = Assumes 50 full Wdmg~veeksi';'year.Because of holibaysand other' polt closures this is an overestimate. Source: Intei~iemswith port mrck drivers from Pacer Cartage: Westelm Ports, Rondlink and Shippers Express 011 1,'22109 Revised: 2/5/2009
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