Dear Users of OffPeak Gates,
Over the past few months, some port interests have been promoting the idea of mandating that terminals in the Ports of Los Angeles and Long Beach operate truck gates 24 hours a day, seven days a week. On behalf of the terminal operators, I recently summarized our point of view on this position in a letter to a Member of the U.S. Congress. Because this issue has significant implications for port users, I am sharing our point of view with the broader cargo movement community.
While the idea may seem appealing when considered in a vacuum, it can’t survive a basic cost/benefit analysis. Such a mandate would undermine the competitiveness of the San Pedro Bay ports, as it would raise costs for shippers and drive away cargo.
When the terminals nearly doubled the number of gate hours per week under the PierPass OffPeak program in 2005, container volume was expected to grow rapidly to fill the new second shift. However, by 2013 volume was only slightly higher than it was in 2005 (14.6 million TEUs in 2013 vs. 14.2 million TEUs in 2005).
As a result, marine terminal operators have never recovered the full costs of the night gate operations. The incremental costs of the current OffPeak night gates are approaching $180 million annually, with TMF collections falling short by $64.9 million in 2013.
The West Coast Marine Terminal Operators Agreement members recently contracted an accounting firm to calculate the cost of operating seven days a week, at either two shifts or three shifts per day. The firm took into account an expected decrease in the cost of existing shifts as a portion of cargo volume flows into the new shifts.
The accounting firm provided the following estimate:
- Working two shifts per day, seven days per week would add $121.5 million to current annual operating costs, a 22% increase
- Working three work shifts per day, seven days per week would add $167 million to current annual costs, a 30% increase
When the gridlock of 2004 threatened cargo owners’ ability to move their goods and strongly undermined community support, cargo owners were willing to accept a fee to open up new capacity. At this time, we believe cargo owners would be extremely reluctant to pay additional fees for adding capacity that is unneeded. Neither the trucking companies nor the terminal operators are in any financial position to pay the costs. Nor would we expect the money to come from taxpayers. (The OffPeak program receives no port, city, state or federal funding.)
Mandated 24/7 operations at the terminals would be financially crippling and would offer little practical benefit to the trucking industry. The second half of the existing night shift, from 11:00 p.m. to 3:00 a.m., is significantly underused by trucking companies. The hour beginning at midnight receives only 66% of the traffic received during the busy hour beginning at 6:00 p.m., while the hour starting 1:00 a.m. receives only half (53%) of the 6:00 p.m. traffic. Traffic during the start of the day shift is similarly light.
When the terminal operators added the OffPeak second shifts in 2005, they and other stakeholders expected harbor trucking companies to begin running two shifts per day. While many have done so, a large proportion of trucking companies and drivers are instead operating a single shift, spanning the afternoon of the peak daytime shift and the first half of the night shift. If they’re not even taking advantage of having two shifts, there is little or no reason to believe that they would make much use of a third shift.
Unlike in 2005, there is no capacity crisis that needs to be addressed through a hugely expensive increase in hours of operation.
Nor will 24/7 operations will do anything to fix the largest cause of daily truck gate congestion: trucking companies sending trucks to park outside the terminals waiting for the OffPeak shift to start. These trucking company practices directly influence the length of turn times. Truckers can reduce their turn times by moving containers during the 8 to 10 hours per day when lines are short, and by taking simple steps to avoid trouble tickets.
Sincerely,
Bruce Wargo
President and CEO, PierPass Inc.