July 13, 2007

Container Tax Disguised as Fee Passes
Assembly Committee

A California Chamber of Commerce-opposed “job killer” bill that assesses an illegal tax on containerized cargo coming through the state’s three largest ports passed the Assembly Transportation Committee this week.

SB 974 (Lowenthal; D-Long Beach) increases the cost of shipping goods and makes California less competitive by imposing an illegal per-container tax in the ports of Long Beach, Los Angeles and Oakland.

The CalChamber believes SB 974 is imposing an illegal tax because it would pay for infrastructure that also is used by citizens in the course of their normal lives, as well as other trucks and trains in the course of intrastate commerce. A fee is defined as benefiting those who pay the fee, which is not the case in SB 974.

The CalChamber is leading a coalition of more than 200 members, including companies and associations in the retail, high technology, shipping, food and agriculture industries, local chambers of commerce, manufacturers and business and industry organizations, in the drive against this bill.

Problems with SB 974

Among its many problems, SB 974 threatens to:
● Put port economic benefits at risk;
● Divert cargo;
● Hurt the state’s agricultural industry;
● Make California’s manufacturing industry less competitive;
● Compromise recycling;
● Enact an illegal tax;
● Violate the commerce clause;
● Violate numerous trade agreements;
● Prompt litigation; and
● Freeze private investment in port infrastructure.

Other Solutions Exist

The claimed purpose of this bill is to finance infrastructure improvements and environmental mitigation projects. Despite suggestions to the contrary, acceptable alternatives to this illegal solution do exist:

● Ports are financed with billions of dollars in private sector investments, paid for mostly through revenue bonds financed by port terminal operators and others through true user fees. California ports are carrying close to $3.5 billion in revenue bonds for maritime infrastructure improvements, and these funds continue to be spent on updating and building new roads, rail capacity and a variety of other projects.

● In addition, public-private partnerships offer a viable way to fund goods movement-related projects outside of the ports. In principle, a public-private partnership must provide real and tangible benefits to all who contribute funds. This concept is most applicable to individual projects because funding sources may derive varying levels of benefit from each specific project and, therefore should have varying levels of financial involvement in those projects. The one-size-fits-all approach offered by SB 974 does not constitute a true public-private partnership.

Key Vote

SB 974 passed Assembly Transportation on July 9 on a vote of 8-6.

Ayes: Nava (D-Santa Barbara); Carter (D-Rialto); DeSaulnier (D-Concord); Karnette (D-Long Beach); Portantino (D-La Cañada Flintridge); Ruskin (D-Redwood City); Solorio (D-Santa Ana); Soto (D-Pomona).

Noes: Duvall (R-Yorba Linda); Galgiani (D-Stockton); Garrick (R-Solana Beach); Horton (R-Chula Vista); Houston (R-San Ramon); Huff (R-Diamond Bar).

Action Needed

SB 974 will be considered next by the Assembly Appropriations Committee. Ask your Assemblymember to oppose SB 974.

For an easy-to-use sample letter, visit www.calchambervotes.com.

Staff Contact: Jason Schmelzer