PORTS' PLAN TO OFFER RAIL SERVICE SPARKS DEBATE IN CALIFORNIA

PORTS' PLAN TO OFFER RAIL SERVICE SPARKS DEBATE IN CALIFORNIA

The ports of Los Angeles and Long Beach may be getting into the railroad business. What's more, they may be getting into it together.

The neighboring ports are on the verge of forming a non-profit corporation to provide double-stack rail service for their tenants, especially ocean carriers that do not generate enough container volume to warrant their own dedicated stack trains.Although the ports are quite enthused about the proposed service, the Southern California transportation community is not unanimously behind the project.

The Los Angeles Steamship Association, which represents many of the ocean carriers calling at the ports, questions whether public agencies should compete with the private sector for intermodal traffic. The Southern Pacific Transportation Co. does not feel the ports will attract new business to the region. (See story, Page 10B).

The ports have not yet determined the exact structure of the non-profit corporation, to be called Score (Southern California Overland Rail Express), and they feel such concerns will be answered as Score is formed.

All the ports are doing at this time is appropriating funds to organize and structure Score. There will be ample opportunity for everyone to address our commissions, said Steven Paul Resnick, director of marketing at the Port of Los Angeles.

He said Score might take the form of a shippers association and simply negotiate volume rates with the railroads, or it may buy or lease its own railcars for double-stack services.

Whatever form Score takes, Mr. Resnick said, it will not compete with existing intermodal operators. Its purpose is to maintain the competitive posture of tenants already at the two ports by offering favorable inland rates to all shipping companies, no matter what their size, and to attract new ocean carriers to Southern California.

Intermodal cargo is extremely valuable cargo to any port or region and yet it is the hardest to capture and hold. Intermodal cargo is both valuable and vulnerable, Mr. Resnick said, referring to the intense competition that the Southern California ports face from Oakland, San Francisco, Seattle and Tacoma.

Last week, the Los Angeles Board of Harbor Commissioners appropriated $100,000 for the formation of Score, and the Long Beach Harbor Commission will consider appropriating the same amount when it meets next week.

Tom Underhill, marketing manager at the Port of Long Beach, agreed that the ports have no intention of competing with established intermodal operators, especially in high-volume corridors such as Chicago or New York.

We are looking to provide a service for small and middle-size ocean carriers to the second and third-tier markets, he said.

Neither Mr. Underhill nor Mr. Resnick wished to specify which destinations would be served by Score. A consulting firm hired by the ports has apparently cited various markets, but that information is considered proprietary because it involves marketing plans of individual shipping companies.

Futhermore, Mr. Underhill stated, Score will be a flexible service that serves new destinations as shipper demand dictates. This demand will change all the time, he noted.

The ports hope to secure for smaller shipping companies the same type of competitive inland rates that larger carriers get from railroads because of the volume of containers they generate. The ports plan do this by consolidating shipments from smaller ocean carriers.

Two of the three railroads serving the Los Angeles area have expressed interest in the project. The Union Pacific and Santa Fe railroads say that if the double-stack service will attract new shipping lines or expanded services to Southern California, it also will benefit their operations.

We support any organization that enhances our ability to bring trainload volume to our railroad, said James Jackson, Chicago spokesman for the Atchison, Topeka & Santa Fe Railway Co.

The Southern Pacific does not support the Score project, which would conceivably compete with its own service. We as a railroad offer single-car stack service to smaller lines. We feel we are adequately covering the smaller carriers, said James L. Brady, vice president, intermodal, in the railroad's San Francisco headquarters.

Double-stack service offers operational savings of 30 percent over conventional trains. There are now more than 40 double-stack trains leaving Southern California each week.

Mr. Resnick said that West Coast ports today handle about 80 percent of the intermodal containerized imports in the trans-Pacific trade. He added that the rapid growth in this area has been due in large part to the cost savings inherent in double-stack service.

According to Mr. Resnick, a significant portion of the growth in intermodal cargo has been due to diversion from all-water services. The diversion of cargo has been at the expense of Gulf and East Coast U.S. ports, he said.

Double-stack service has been especially good to the ports of Los Angeles and Long Beach. The Southern California port complex last year handled more than 3 million 20-foot containers, or about 60 percent of all containers moving through West Coast ports.

Of the containers arriving in Southern California, 45 percent move east of the Rocky Mountains. It is this discretionary cargo the ports are attempting to protect.

This intermodal or discretionary cargo can easily shift between port regions through pricing policies of both the maritime (ports and ocean carriers) industry and the railroads, he noted.