LAEDC Infrastructure Forecast: Major Capital Investments Ongoing in L.A. County

Geraldine, please begin by sharing what's happening at the Port of Los Angeles relative to infrastructure projects and accommodating an expected increase in container traffic.

Geraldine Knatz:...cargo volumes are up 15 percent so far this calendar year, and we just had really one of the best Junes in history, where volumes increased nearly 35 percent over June of last year. Retailers restocked their inventories, but long-term, our growth depends on jobs and consumer confidence. I just returned from a trip to Asia and all of the customers that we met with had some concern about the end of this calendar year and the first quarter of next year.

Despite that, we're investing in infrastructure. For the fiscal year that ended on June 30, we turned out a million dollars a day in our capital improvement program. Keeping our capital partners coming back and advancing others is one of our highest priorities this coming year. Our capital budget over the next decade includes about a $2 billion investment in port facilities. We're building for our future. These are 21st century facilities. They're all green facilities. There's a drive to electrify everything in the ports and implement the strategy of growing and greening at the same time.

It's really working for us because we came off a two-year period of getting six major development projects approved by our board. We have about five major infrastructure projects under construction. The largest one is our Trapac container terminal. It's the only remaining terminal in Los Angeles that doesn't have on-dock rail. Associated with that project is a major expansion of our West Basin rail yard facility. That project alone will generate 4,300 construction jobs.

We also have the largest federal stimulus project in L.A. County: the Harry Bridges reconstruction project. That also is a big commitment: 250 construction jobs for that $25 million project. We just also kicked off a six-year expansion to the China Shipping Terminal: new wharfs, new cranes, and about 4,000 jobs at full capacity with that project. Just a few weeks ago, the Army Corps of Engineers initiated the remaining pieces of our main channel dredging process so that all of our wharfs will be able to accommodate the largest ships that pull up to the port complex.

Then, on our community side, we have a major $130 million renovation of the area down by Cabrillo Beach-a major marina construction. It's going to create 700 new slips and 80 acres of major space for commercial development.

Looking out on the horizon we have two major rail projects that both have environmental reports coming out this year. We have another major tenant that, even the doldrums of last year, signed a term sheet to allow us to expand their terminal by another 40 acres. Our customers also recognize that they need to invest in the future.

We have a softer side down at the ports, which we call our public infrastructure. We have spent about $50 billion to help cruise terminals. Although you may have heard that we lost Royal Caribbean, and that was a disappointment to us, this business is going to be replaced because next year Disney arrives permanently with the Port of Los Angeles as its home port. That will be huge for us...

...This past year, we approved many kinds of construction projects along the Wilmington and San Pedro waterfront. These are transformational for those communities. That neighborhood will have 16 miles of public promenade along the waterfront...We are now in the design stages of a downtown harbor. We're going to cut into the land and we're going to bring the water right into downtown San Pedro.

Over the next decade there's probably a billion dollars of investment that will go into Wilmington and San Pedro. We're getting ready to throw out RFPs for ports of call. There is a lot going on there, not only in transportation infrastructures but also in public infrastructures.

Mr. Steinke: The Port of Long Beach has similar issues and opportunities as the Port of Los Angeles. What's the status of plans for investing in infrastructure projects at the Port of Long Beach?

Richard Steinke: I think Geraldine stole my notes because what is being done at the Port of Los Angeles is being done at the neighboring Port of Long Beach. While we compete vigorously for customers, we cooperate on a number of regional projects, like the Alameda Corridor or the economic forecast, and I thank Geraldine and her staff for working in cooperation with us.

On the trade side, most of our numbers are very similar to what Geraldine mentioned. In 2007 the two-port complex did about 15.8 million containers-the highest level ever. It plunged about 30 percent, specifically in the Port of Long Beach, in 2009. We have gone through some rough times economically, like many of the businesses here in L.A. County. There is optimism. As Geraldine mentioned, the numbers for the last six months at the Port of Long Beach have been better than the same month of the previous year. The national retail federation said last week that they thought that the growth might moderate a little, but for the large carriers, the ones that are contracting with the shippers themselves, they see a very busy peak season. There's not universal optimism by everyone, but we think we see a trend of increased cargo, at least through the peak season...

...We're very much in line with the Port of Los Angeles when it comes to infrastructure projects. Our ten-year capital improvement program is about $4 billion. That translates directly to jobs for people in this region, which is critical for the city of Long Beach, L.A. County, the state, and the nation.

It is important to keep in mind that the ports of L.A. and Long Beach are the nation's port workforce.

40 percent of all containerized traffic comes in to San Pedro Bay. We're only going to maintain that if we sustain the infrastructure projects that will provide the growth for our customers...

...A lot of what we depend on is discretionary cargo that comes into California. We have a very large population base, and cargo is trucked to this base, as well as Phoenix and Las Vegas. Cargo going east of the Rockies is really discretionary. It can go to the Seattle coast, it can go to Oakland, it can go to Prince Rupert, and it can all the way to the Panama Canal. Discretionary cargo is the bread butter of the two ports. We need to build infrastructure and capabilities to back that discretionary cargo, and most of that is by supporting additional rail facilities. It's not very sexy. We're building additional rail; not a lot of people see it, but it's critical for the efficient movement of cargo...

...You can see the emphasis of our capital improvement project of the next several years. We want to stimulate the economy. We recognize that goods movement is critical to Southern California. [ed: For more on the capital investment at the Port of Long Beach, see page 11.]

A J.D. Power & Associates report released earlier this year ranked LAX number 19 out of the 20 largest North American airports in customer satisfaction. Tell us about the modernization efforts at LAX that have and will help the airport retain some of its lost market share and boost customer satisfaction.

Gina Marie Lindsey: We have almost no place to go but up. The good news is that traffic does appear to be coming back to some degree. We're up about 4 percent, calendar year over calendar year so far. The most delightful positive of that is that international seems to be up about 8 percent. I wouldn't call it a bounce-back, but I would certainly call it a crawling back. And I hope that we keep that same trajectory.

I need to identify a couple of precursor efforts that were necessary in order to try to get these infrastructure investments going. One of those was to get out of litigation with our major customer base. Three years ago, we were in litigation with 95 percent of our major customers, the airlines. Since the airlines are our major source of revenue for infrastructure investment, it's not a good business process to perpetuate that kind of behavior. We were spending a great deal of time trying to unwind that litigation, and we basically have it all resolved...We're also buying back some of the terminals that have been under long-term lease so we have more flexibility in how to deal with the facilities and what kind of control the airport has over facilities.

The capital improvement needs are very robust; how we pay for those is a very significant element since we don't use city coffers to make that happen. We live off our revenue stream and, therefore, have to support whatever investment there is going to be. Some of you who followed our foray into the bond market over the last three years know it has been a challenging three years in the bond market, especially with this decline in traffic. We have done really well. I have to give incredible credit to our Chief Operating Officer Steve Martin and his team. The last entrance in the bond market was April, which, some of you may remember, was also a challenging time for the city because they were faced with some very unhappy choices. Because we are a department of the city, even though we are a proprietary, that adds an extra layer of complexity for what we needed to play in the financial markets. Our AA rating was the same, which makes a huge difference in for a $970 million bond at 12.1 percent, which is fabulous.

All of that underpinning is necessary to do the following. We completed the South Airfield Improvement Project, which moves the runway 50 feet and put in an airline taxiway. It was the first significant infrastructure investment to acknowledge that airplanes today are different than they were in the 1980s. We're just finishing up the Tom Bradley International Terminal renovation project, which was launched about three-and-a-half years ago, totaling $750 million. Much of that in the bones of the structure, so it's not really visible to the passenger, but some of it is. The arrival experience is better now than it was before. We got a new airline baggage system...

...Our signature project is a million square feet of new terminal space at the Tom Bradley International Terminal. That will bring us to the point where we are providing the front door that this city is worthy of. It's a $1.6 billion project. If you're flying over the airport these days, you'll see a three thousand foot trench that is the width of a freeway on the left side of the Bradley Terminal. There are lots of pilings and steel that is subterranean, and by this time next month you will see structural steel actually coming out of the ground. I hesitate to repeat this, but I say it to my staff all the time, so I have to put myself on the hook: "12/12/12." Remember the date: December 12, 2012, we will open Bradley West. The west gates on the west side of the new concourse will be open, and the real heart and soul of that project is going to be a central marketplace. They're calling it the Grand Hall. Dare I say, it's actually going to make air travel fun again. Not only will we have world-class concessions, but we will also leapfrog any other airport in the world in integration of environmental media...

...Through all these investments, creating thousands of jobs. We are doing all this work on what would normally be an insane schedule, but the people in this room know that the window of opportunity for doing any investments at LAX is very short and transitory. We are moving as fast as we possibly can to get all of this investment in place. I very much appreciate the support of many, many people in this room and, certainly, the LAEDC as an organization. Keep that window propped open as long as you possibly can because there's a lot to do.

Metro is expected to spend nearly $35 billion over the next 30 years on highway and freeway projects. During this period, the LAEDC estimates that spending will add about 507,500 full and part-time jobs. Tell us about Metro's key current transit projects and Metro's vision for the future.

Art Leahy:...We have a large capital build and very aggressive capital...What the MTA is trying to do is to make sure that we're working on a broad package of projects, highway and transit projects, so that we are prepared for the future. Measure R is $35 billion-down from the $40 billion because of the recession-for a variety of transportation projects. Much of that is rail, a dozen rail projects, and there are highway projects.

I want to comment briefly on 30/10, the accelerated highway program...The board approved that a couple of months ago, but along with that they approved a parallel measure, which is to accelerate the highway projects. There are a variety of highway projects. A lot of these programs will have different funding sources, but the notion is to accelerate all of these projects because of the fuel consumption benefits, he benefits for mobility, and the jobs creation.

A few months ago, the MTA Board approved full funding for the Foothill Extension in the San Gabriel Valley, terminating in Azusa. That's one of the biggest new rail projects in the country right now, fully funded by Measure R dollars. The East L.A. line opened a few months ago...Next week we're going to have the 20th birthday party of the Metro Blue Line. The Blue Line is the busiest light rail line in the country, with 80,000 people a day. The Westside subway extension was viewed as three projects, but a few weeks ago the federal government agreed to treat it as one project. This is very important in getting the environmental and additional engineering done in one step instead of three. It also sets up that project with the potential to accelerate under the 30/10 program.

We are working on the Crenshaw Line right now. That's under an additional design and environmental review. That will hook up, ultimately, with the Expo Line on Crenshaw Boulevard over by LAX, hooking to the Green Line. We hope that line will be a connector into LAX, so you can a train from Downtown L.A. and go directly into LAX, instead of transferring to a bus stop from the Green Line.

As far as the highway program goes, we're looking widening the I-5 up in north county. Later on this year we'll be doing work on the I-5 project north of the Orange County line, up to the 605. That's about a $1 billion project. That's very important. We're working on the 710 South with the ports and CalTrans; it's very important to get the trucks out of the and east to the I-10 so they can go east.

There's a project called the High Desert Corridor Express. The notion is to have a truck lane from the I-5 across north Los Angeles County. It would be a toll lane in public-private partnership. The idea is that if we create a benefit for the truckers and charge them a toll, it would give them a chance to get truck off of the I-5, east so they could go to Arizona or wherever it is they're going. This changes some of the discussion on the 710 tunnel, which is the current debate of something that has been going on around 30 years.

Some of the folks in the Pasadena area are worried about bringing more trucks into that area. If you get the High Desert Corridor Express built, that will relieve pressure on the 5, the 134, and the 210. That creates an opportunity to set up the 710 tunnel.

We're also working on the high-speed rail project, with San Diego County, Orange County, and the State of California. We're working on integrating the so-called Los Angeles-San Diego corridor. We are integrating Amtrak service with Metrolink service with San Diego and future high-speed lines. We're going to go up north up into the Central Valley and the Bay Area. A lot of work is happening.