Who Pays The Freight?

On June 26, 2008, Los Angeles Mayor Villaraigosa signed into law a City ordinance, passed by a unanimous vote of the L.A. City Council, enacting the Port of Los Angeles Clean Trucks Program, the most progressive in the nation.  If the ordinance is left undisturbed – litigation attacking the plan by the trucking industry may come as early next week – it has a very good chance of reducing deadly diesel particulate emissions from the Port of L.A. by 80 percent within five years. 

The Port of Long Beach is a different story.  As I’ve written before, the Long Beach trucking program continues the current, broken economic model of port trucking by forcing underpaid “independent” truckers to finance, maintain and replace new trucks on their own nickel.  The reality of this misguided decision became crystal-clear at a Port of Long Beach meeting this week on financing new trucks.  

The problem is this:  money from the port’s container fees, state-sponsored incentive funds and other sources will not cover 100 percent of the cost of a new, low-emitting diesel truck.  So, a portion of the cost needs to be financed by the (mostly low-income) drivers.  To pay for their new, low-emission trucks, drivers will need to make monthly payments in the amount of $500-$700 even with a subsidy paying for up to 80 percent of the truck.   

Long Beach asked three potential lenders to bid:  Bank of America, GE Credit, and Daimler Trucking.  B of A and GE declined to take on more than a small piece of the risk, presumably partly based on the grounds of risk related to providing financing to drivers who may not be able to meet payment schedules.  Daimler, which did pony up to take on the full risk, explained that it expected about 40 percent of the drivers to (at some point) have problems paying their bills on the new truck, and touted its experience in repossessing trucks. 

This sorry testimony from hard-headed businesspeople should be a wakeup call for Long Beach.  The business plan that the Port of Long Beach wants to continue is risky because it has kept trucker incomes so low that they can’t afford new trucks, even if most of the truck is already paid for.  And this doesn’t even consider paying for maintaining the trucks, or buying new ones when these wear out.  This is exactly why the L.A. business model that Mayor Villaraigosa signed into law is better – it relies on well-capitalized private industry rather than poor truckers to pay the freight.