Existing law requires the Transportation Agency to prepare a state freight plan that provides a comprehensive plan to govern the immediate and long-range planning activities and capital investments of the state with respect to the movement of freight.

This bill would declare the Legislatures intent to enact subsequent legislation relating to increasing efficiency of ports and the goods movement industry. authorize GO-Biz to serve as the coordinating entity to steer the growth, competitiveness, and sustainability for freight and the supply chain across the state and to promote and assess the continued economic vitality, economic competitiveness, and sustainability of the freight sector. The bill would also authorize GO-Biz to provide freight and supply chain economic competitiveness information.

Existing law requires the Transportation Agency to prepare a state freight plan that provides a comprehensive plan to govern the immediate and long-range planning activities and capital investments of the state with respect to the movement of freight.

This bill would declare the Legislatures intent to enact subsequent legislation relating to increasing efficiency of ports and the goods movement industry.

 THIRD READING  

Bill No: SB 517

Author: Gonzalez (D), et al.

Amended: 3/22/23

Vote: 21

SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 13-0, 4/17/23

AYES: Roth, Nguyen, Alvarado-Gil, Archuleta, Ashby, Becker, Dodd, Eggman, Glazer, Niello, Smallwood-Cuevas, Wahab, Wilk

SENATE TRANSPORTATION COMMITTEE: 16-0, 4/25/23

AYES: Gonzalez, Niello, Allen, Archuleta, Becker, Blakespear, Cortese, Dahle, Dodd, Limón, McGuire, Newman, Nguyen, Seyarto, Umberg, Wahab

SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/18/23

AYES: Portantino, Jones, Ashby, Bradford, Seyarto, Wahab, Wiener

SUBJECT: Economic development: movement of freight

SOURCE: Author

DIGEST:

This bill establishes a Freight Coordinator (Coordinator) within the Governor’s Office of Business and Economic Development (GO-Biz) to steer the growth, competitiveness, and sustainability for freight and the supply chain across the state and to promote and assess the continued economic vitality, economic competitiveness, and sustainability of the freight sector, as specified. Makes various findings and declarations.

ANALYSIS:

Existing law:

1. Establishes GO-Biz for the purpose of serving as the lead state entity for economic strategy and marketing of California on issues relating to business development, private sector investment and economic growth. (Government Code (GC) §§ 12096 – 12098.5)
2. Authorizes GO-Biz as the lead entity for economic strategy and the marketing of California on issues relating to business development, private sector investment, and economic growth. Authorizes GO-Biz, in this capacity, to coordinate the development of policies and criteria to ensure that federal grants administered or directly expended by state government advance statewide economic goals and objectives. Authorizes GO-Biz to market the business and investment opportunities available in California by working in partnership with local, regional, federal, and other state public and private institutions to encourage business development and investment in the state. Authorizes GO-Biz to support small businesses by providing information about accessing capital, complying with regulations, and supporting state initiatives that support small business. (GC § 12096.3)
3. Requires the California State Transportation Agency (CSTA) to prepare a state freight plan with specified elements to govern the immediate and long-range planning activities and capital investments of the state with respect to the movement of freight and to establish a freight advisory committee. (GC § 13978.8)

This bill:

1. Requires the Governor to appoint the Coordinator, tasked with various responsibilities, including advising and coordinating policies that promote the growth, competitiveness, and sustainability for freight and the supply chain across the state; promoting and assessing the continued economic vitality and sustainability of the freight sector and; advising the Governor and GO-Biz Director on issues affecting the state’s freight and supply chain; working directly with various state agencies to address and discuss ongoing freight and supply chain issues.
2. Adds serving as the coordinating entity to steer the growth, competitiveness, and sustainability for freight and the supply chain across the state, and promote and assess the continued economic vitality, economic competitiveness, and sustainability of the freight sector as a GO-Biz authority. Requires GO-Biz to provide freight and supply chain economic competitiveness information.
3. Prohibits GO-Biz from tracking or monitoring the productivity of port workers, including, but not limited to, productivity metrics and from interfering with any collective bargaining agreement or workers’ right to collectively bargain.
4. Makes various findings and declarations about: California’s role in the international and national supply chain and as a freight gateway, about the importance of the state in having a Coordinator to address the various efforts contained in the bill; about the importance of the freight sector in California’s economy and; about the need for coordination between governmental entities and industries; about the lack of coordination and the reliance on multiple agencies to address freight issues which in turn hampers our ability to invest in our supply chains, support our supply chains, and green our supply chains efficiently and cost-effectively.

Background

AB 14 (Lowenthal, Chapter 223, Statutes of 2013) established the California Freight Advisory Committee (Advisory Committee). It also required the California Department of Transportation to collaborate with the Advisory Committee and various state, local, private, and public stakeholders to develop the California Freight Mobility Plan (CFMP) every five years. The CFMP is a comprehensive plan for investments in freight, emphasizing both assessing and planning freight infrastructure.

Additionally, in 2015 Governor Brown issued Executive Order B-32-15, which directed the California Air Resources Board, the California Department of Transportation, the California Energy Commission, and Go-Biz to develop an integrated action plan (Action Plan) to establish clear targets to improve freight efficiency, transition to zero-emission technologies, and increase competitiveness of California’s freight system. According to CSTA, the resulting Action Plan “responds to the Governor’s Executive Order by articulating one shared vision to improve the efficiency of California’s freight system while reducing its pollution, all the while bolstering the competitiveness of California’s goods movement system nationally and internationally.”

In addition to State planning for freight, the Federal Fixing America's Surface Transportation (FAST) Act (2015) requires states to develop FAST Act compliant state freight plans that provides “a comprehensive plan for the immediate and long-range planning activities and investments of the State with respect to freight” and update them every five years to be able to obligate National Highway Freight program funding.

COVID-19, Freight Supply Chain, and State Government Action. The events of the COVID-19 pandemic provided the perfect storm for the resulting backlog in the freight supply chain. First, the COVID-19 lockdown, combined with government stimulus checks, raised household disposable income from an 8% in 2019 to 16% in 2020, reaching up to 34% in April 2020, according to a study at the Giannini Foundation of Agricultural Economics at UC Davis. This extra savings led to extra consumer spending. Because this demand was partially met with imported goods from Asia, an imbalance of traded goods between China and the US developed by about 15% in the nine months of 2021, as compared with the same period of time in 2020. Most goods from Asia arrive via containers. Before COVID-19, California handled around 40% of US containerized imports. However, California ports became quickly overwhelmed with growth in imports. California ports moved about 0.7 million additional loaded import containers (up to 16%) during May 2021-September 2021. In comparison, US ports outside of California handled more than 1.4 million additional loaded import containers in May – September 2021 (up to 23% compared to the average for the same five-month period from 2017-2019).

Increases in imports resulted in an increase in backed-up ports, as warehouses attempted to hire enough people to keep up with the demand, according to an article in CalMatters. Containers full of new goods were left at the ports, creating traffic jams. At the same time, there was an increased demand for empty shipping containers in Asia, and freight rates from Asia to the US rose steeply, such that many more containers were shipped back to Asia empty, instead of carrying US export products. This situation led to questions such as: what is to be done with the increased imports? Where can we store them? Do we have enough equipment to carry them and store them?

In 2021, GO-Biz launched the California Supply Chain Success Initiative (SUCCESS Initiative), a partnership with the California State Transportation Agency, the Port of Long Beach, and the CSU Long Beach Center for International Trade and Transportation to engage the diverse network of stakeholders along the supply chain to discuss key challenges and identify creative solutions. This effort, which brought together federal, state and local leaders, is focused on both short-term and long-term steps to address port congestion. According to a summary report of the SUCCESS Initiative, one of the outcomes of discussions held in the Fall of 2021 at the Port of Long Beach was understanding the need to examine how the supply chain challenges impacted individual sectors of our state’s economy. As a result, GO-Biz convened an agricultural supply chain working group at the Port of Oakland in late 2021. The report summary noted that both of the meetings brought about a set of priority action items that expected to relieve some of the ongoing pressure points and bottlenecks, allowing both imports and exports to flow more predictably, and set the stage for long-term changes in how we move goods. The report summary highlighted various actions taken in response to the SUCCESS Initiative discussions.

Comments

Given the similarities to this measure and the effort undertaken by GO-Biz in the SUCCESS Initiative, is may not be necessary to have a whole statutory framework, with prescriptive language, that may remove some of the flexibility and nimble means by which this work can be conducted through continued pathways like those undertaken by various state agencies and partners. Additionally, implementation and program maintenance are jeopardized by a lack of dedicated, reliable funding, leading to questions about necessity of establishing a program and effort that may not materialize and assist those the effort intends to support.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Committee on Appropriations, GO-Biz would likely incur annual costs in the hundreds of thousands of dollars annually to establish the Coordinator position and the California Air Resources Board anticipates administrative costs of $484,000 per year. Implementation costs across other impacted entities could also total in the hundreds of thousands of dollars annually (General Fund and special funds).”

SUPPORT: (Verified 5/19/23)

Bay Area Council
California Association of Port Authorities
California Business Roundtable
California Retailers Association
California Trucking Association
Long Beach; Port of
Norwood Associates, LLC
Pacific Merchant Shipping Association
Port of Hueneme
Port of Oakland
Port of Redwood City
Port of San Francisco
San Diego Unified Port District

OPPOSITION: (Verified 5/19/23)

None received

ARGUMENTS IN SUPPORT: Generally, supporters argue that this bill will improve any potential future supply chain issue disruptions by having one, centralized person to coordinate between parties at GO-Biz.

Prepared by: Dana Shaker / B., P. & E.D. /

5/20/23 13:00:17

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

SB 517 (Gonzalez) - Economic development: movement of freight

Bill Summary:

SB 517 would establish a Freight Coordinator (Coordinator) within the Governor’s Office of Business and Economic Development (GO-Biz), as specified

Fiscal Impact:

• GO-Biz would likely incur annual costs in the hundreds of thousands of dollars annually to establish the Freight Coordinator position (General Fund).
• The California Air Resources Board (CARB) anticipates administrative costs of $484,000 per year (Trade Corridor Enhancement Account). Implementation costs across other impacted entities could also total in the hundreds of thousands of dollars annually (General Fund and special funds).

Background:

The State has had various economic development departments through the decades. Prior to 2003, the majority of the State’s economic development programs were housed within the Technology, Trade, and Commerce Agency. The 2003 04 Budget Act abolished both the Agency and state funding for many of its programs designed to encourage economic development.

GO Biz was established statutorily in 2011 to be the lead entity for economic strategy and the marketing of California on issues relating to business development, private sector investment, and economic growth. GO-Biz staff provide a wide range of advisory and coordinating roles across the administration related to economic development. Several units of GO Biz serve as points of contact for businesses considering relocating to or expanding in California. For example, the California Office of the Small Business Advocate (CalOSBA) provides resources for small businesses and financial assistance for small business advisory centers. Other units assist international investors, help businesses obtain information about business permits, administer the California Competes Tax Credit Program, and administer the Cannabis Local Equity Grant Program. Additionally, the California Film Commission, Travel and Tourism Commission, and the Infrastructure and Economic Development Bank have been assigned for oversight purposes to GO Biz.

Proposed Law:

This bill would, among other things, do the following:

• Require the Governor to appoint the Coordinator, tasked with: advising and coordinating policies that promote the growth, competitiveness, and sustainability for freight and the supply chain across the state; promoting and assessing the continued economic vitality and sustainability of the freight sector and; advising the Governor and GO-Biz Director on issues affecting the state’s freight and supply chain, including economic strategy, investment, improvements in technology, as well as on policy and administrative regulations affecting the state’s freight and supply chain.
• Require the Coordinator to work directly with the California Transportation Commission, the Department of Transportation, the State Energy Resources Conservation and Development Commission, the Department of Food and Agriculture, the Public Utilities Commission, the State Lands Commission, and the State Air Resources Board as necessary to address and discuss ongoing freight and supply chain issues. Authorizes the Coordinator, to establish and convene one or more stakeholder advisory groups to help inform their work in implementing their mission and duties.
• Further require the Coordinator to (1) consult with representatives from the public and private sectors of freight stakeholders, as specified, (2) consult with the Legislature, (3) use the most current data reasonably available to update freight and supply chain economic competitiveness information such that it reflects current market conditions, (4) evaluate the resiliency of the state's freight sector, as specified, (5) expand on the California Sustainable Freight Action Plan, as specified, (6) determine the economic competitiveness of all sectors of freight movement along the supply chain, as specified, (7) identify metrics and baselines from which to measure the effectiveness of the goals, recommendations, and actions to improve financial performance, market share performance, workforce development, positive labor market effects, emerging technologies including logistics, and overall short- and long-term economic performance of the freight sector, (8) assess the relative competitiveness and resiliency of different sectors of the supply chain, the impacts of trends in the economy across the supply chain, and how businesses and the freight sector can be supported under state and federal climate and air pollution policies, (9) identify goals to increase economic competitiveness and strengthen resilience to economic downturns and the effects of climate change, (10) determine a process to track, at least annually, progress being made to reach the goals and implement the recommendations and other actions, (11) identify ongoing strategies the state is employing to address freight mobility issues, such as congestion, truck bottlenecks, inefficiencies, and a lack of workforce training, and prioritize and recommend to the California Transportation Commission and the Transportation Agency complementary or additional strategies to reduce these mobility issues, (12) identify challenges the California freight sector faces in meeting the state's emission reduction goals, quantify the costs associated with meeting those emission reduction goals, and prioritize and recommend strategies the state can use to address these challenges, (13) participate in the California Freight Advisory Committee and in all future updates to the California Freight Mobility Plan of the Department of Transportation, and (14) participate in all future updates to the AB 32 climate change scoping plan, updated every five years pursuant to the California Global Warming Solutions Act of 2006.
• Add the following to GO-Biz authority: serving as the coordinating entity to steer the growth, competitiveness, and sustainability for freight and the supply chain across the state, and promote and assess the continued economic vitality, economic competitiveness, and sustainability of the freight sector. Require GO-Biz to provide freight and supply chain economic competitiveness information.

Related Legislation:

• SB 1104 (Gonzalez, 2022) would have established the Office of Freight and required it, in coordination with other specified agencies, to prepare an assessment of statewide economic growth, competitiveness, prosperity, resiliency, and sustainability for the state’s ports and freight sector. The bill was held under submission on the Suspense File of the Assembly Committee on Appropriations.
• AB 1678 (Fong, 2022) would have required a Blue Ribbon Commission on Port Congestion and Supply Chain Deficiencies to be established, with the Secretary of Food and Agriculture to serve as the chair and to appoint the other members of the commission. The bill would have required the commission to recommend changes needed in the immediate and long-term future to mitigate the negative impacts of port congestion and supply chain deficiencies on agricultural commodities. The bill was held under submission on the Suspense File of the Assembly Committee on Appropriations.
• AB 1679 (Fong, 2022) would have required the Governor to: appoint a Supply Chain Coordinator within GO-Biz to be the principal advocate in the state for supply chain participants and advise the Governor on legislation, administrative regulations, and other issues affecting the state’s supply chain; to establish and appoint a Supply Chain Advisory Group consisting of stakeholders from each sector that make up the supply chain; to require the Supply Chain Coordinator to oversee the advisory group, which would develop and recommend policies that improve the supply chain; and would have required the advisory group to meet on a biannual basis and as needed to resolve issues in times of crises or at any other time upon request of the coordinator or a majority of the members of the advisory group. The bill was held under submission on the Suspense File of the Assembly Committee on Appropriations.

Staff Comments:

CARB’s new positions would, among other duties, (1) analyze recommendations from GO-Biz, (2) compile, analyze and review data from freight-related regulations, and (3) participate in Freight Advisory Committee and related meetings.

-- END --

SENATE COMMITTEE ON TRANSPORTATION

Senator Lena Gonzalez, Chair

2023 - 2024 Regular

Bill No: SB 517 Hearing Date: 4/25/2023

SUBJECT: Economic development: movement of freight

DIGEST: This bill establishes a Freight Coordinator (Coordinator) within the Governor’s Office of Business and Economic Development (GO-Biz) to steer the growth, competitiveness, and sustainability for freight and the supply chain across the state and to promote and assess the continued economic vitality, economic competitiveness, and sustainability of the freight sector, as specified.

ANALYSIS:

Existing law:

1. Establishes GO-Biz for the purpose of serving as the lead state entity for economic strategy and marketing of California on issues relating to business development, private sector investment and economic growth. (Government Code (GC) §§ 12096 – 12098.5)
2. Authorizes GO-Biz as the lead entity for economic strategy and the marketing of California on issues relating to business development, private sector investment, and economic growth. Authorizes GO-Biz, in this capacity, to coordinate the development of policies and criteria to ensure that federal grants administered or directly expended by state government advance statewide economic goals and objectives. Authorizes GO-Biz to market the business and investment opportunities available in California by working in partnership with local, regional, federal, and other state public and private institutions to encourage business development and investment in the state. (GC § 12096.3)
3. Requires the California State Transportation Agency (CSTA) to prepare a state freight plan with specified elements to govern the immediate and long-range planning activities and capital investments of the state with respect to the movement of freight and to establish a freight advisory committee. (GC § 13978.8)

This bill:

1. Specifies that GO-Biz is the coordinating entity for encouraging the growth and sustainability of California’s supply chain.
2. Requires the Governor to appoint a freight coordinator with experience in commerce, trade, and supply chain management to serve as the coordinating entity for GO-Biz.
3. Requires the freight coordinator to advise and coordinate policies that promote the growth, competitiveness, and sustainability for freight and the supply chain across the state.
4. Requires the freight coordinator to work directly with the California Transportation Commission, the State Transportation Agency, the Department of Transportation, the California Energy Commission, the Department of Food and Agriculture, the California Public Utilities Commission, the State Lands Commission and the State Air Resources Board as necessary to address ongoing freight and supply chain issues.
5. Establishes numerous other duties for the freight coordinator including, but not limited to, the following:
6. Consulting with public and private freight stakeholders
7. Consulting with the Legislature
8. Evaluating the resiliency of the state’s freight sector
9. Determining the economic competitiveness of all sectors of freight movement along the supply chain
10. Identifying metrics to measure the performance of the freight sector
11. Assessing the relative competitiveness and resilience of the supply chain.
12. Identifying challenges the freight sector faces in meeting the state’s emission reduction goals.
13. Participating in the California Freight Advisory Committee, all updates to the California Freight Mobility Plan, and all updates to the climate change scoping plan.
14. Makes numerous findings and declarations about the importance of California’s supply chain and the lack of a coordinated and comprehensive freight and supply chain policy.

COMMENTS:

1. Author’s Statement. “SB 517 will advance the economic vitality and long-term sustainability of the freight sector by addressing gaps in current coordination and long-term statewide economic planning. Freight is the backbone of California’s economic engine, accounting for one-third of California’s economy and generating millions of direct and indirect jobs. However, despite the importance of the freight sector to the livelihoods of Californians, the 2021 supply chain crisis has shown that the complex system of producers, vendors, warehouses, distribution centers, retailers, ports, and truck, rail, sea, and air transporters along the supply chain is vulnerable to disruptions. Stakeholders across the board have voiced concerns that the freight sector needs better statewide coordination, direction from state agencies, and planning to advance the economic competitiveness of the freight sector and keep trade in California. SB 517 will accomplish all of these goals by creating a Freight and Supply Chain Coordinator within the Governor’s Office of Business and Economic Development to act as a single coordinating entity for the stakeholders, businesses, and agencies involved in the supply chain.”
2. Power Up. Within GO-Biz is the Office of Supply Chain, led by a deputy director, which has the following duties:
3. Maintain direct links with industry business owners and leaders.
4. Assist the industry by facilitating meetings with local, state, and federal representatives on issues impacting California’s freight movement.
5. Take a leadership role in supporting the transformation of the industry into a sustainable freight economy.

This bill requires the Governor to appoint a freight coordinator (Coordinator) with specific experience, establishing significant new duties for the Coordinator which put him/her at the center of the Executive Branch efforts to address supply chain issues. These new duties overlap and expand upon with the current duties of the Office of Supply Chain and, while not required, the Coordinator could be the leader of that office.

The Coordinator has expansive advisory, coordination, and analytical duties, but no power to establish policies or compel agencies to perform. Giving the Coordinator a seat at many of the tables where freight issues are discussed will facilitate communication between agencies and with interested parties. And while the Coordinator is well-placed at GO-Biz, the lack of explicit power means that the Coordinator’s effectiveness will depend on the support of the GO-Biz Director and the Governor.

The Coordinator is specifically tasked with several analytical projects which will require significant resources. Evaluating the resiliency of the state’s freight sector, determining the competitiveness of all sectors of freight movement, identifying metrics and baselines for measuring the performance of the freight sector, and assessing the relative competitiveness of different sectors of the supply chain are all complex tasks that will require contracting with multiple consultants as well as expert staff to manage them.

1. Do Better. The premise of this bill is that California’s freight sector is an enormous contributor to the California economy and that California’s policy-making apparatus is poorly coordinated and insufficient for the job. The economic contribution of the freight sector is apparent: 5 million Californians are employed by the freight system at 12 seaports, 12 airports with major cargo operations, 27 railroads, three land border ports of entry, and a large warehousing and distribution sector. For evidence that California’s freight policy-making apparatus could benefit from improvement we need only recall the recent supply chain crisis where the state’s response was slow, costing both importers and California exporters. Part of this is explained by jurisdictional issues which limit California’s ability to act. But as demonstrated over the last few years, there were actions that California and local governments could take to provide some relief.
2. Reversal of Fortune. During the COVID pandemic, California ports were swamped with imports as the trend to stay-at-home led to increased purchases of home goods, resulting in record ship queues at the Ports of Long Beach and Los Angeles. More recently those queues have vanished; goods flows through California have dropped by one-quarter compared to the year earlier. Some of those goods flows have shifted to other parts of the country as good flows through East Coast ports have increased by one-eighth, causing California ports to fall behind their East Coast competitors in goods shipped. This loss has been attributed to uncertainty tied to the ongoing West Coast ports labor disputes. While some hope this loss is temporary, it is as likely not, leading to longer-term economic and job losses to California and Californians. Bringing those goods flows back to California will keep the freight coordinator very busy.
3. Double Referral. This bill was heard by the Senate Business, Professions and Economic Development Committee on April 17, 2023 and approved 13-0.

Related Legislation:

SB 1104 (Gonzalez) of 2022 – Would have established the Office of Freight and required it, in coordination with other specified agencies, to prepare an assessment of statewide economic growth, competitiveness, prosperity, resiliency, and sustainability for the state’s ports and freight sector. This bill was held in the Assembly Committee on Appropriations.

AB 1678 (Fong) of 2022 – Would have required a Blue Ribbon Commission on Port Congestion and Supply Chain Deficiencies to be established, with the Secretary of Food and Agriculture to serve as the chair and to appoint the other members of the commission. The bill would have required the commission to recommend changes needed in the immediate and long-term future to mitigate the negative impacts of port congestion and supply chain deficiencies on agricultural commodities. This bill was held in the Assembly Committee on Appropriations.

AB 1679 (Fong) of 2022 – Would have required the Governor to: (1) appoint a Supply Chain Coordinator within GO-Biz to be the principal advocate in the state for supply chain participants and advise the Governor on legislation, administrative regulations, and other issues affecting the state’s supply chain; (2) to establish and appoint a Supply Chain Advisory Group consisting of stakeholders from each sector that make up the supply chain; (3) to require the Supply Chain Coordinator to oversee the advisory group, which would develop and recommend policies that improve the supply chain; and (4) would have required the advisory group to meet on a biannual basis and as needed to resolve issues in times of crises or at any other time upon request of the coordinator or a majority of the members of the advisory group. This bill was held in the Assembly Committee on Appropriations.

AB 2406 (Aguiar-Curry, Chapter 868, Statutes of 2022) – Expands existing state prohibitions on the assessment of certain kinds of cargo storage charges by intermodal marine equipment providers and terminal operators by broadening the definition of prohibited charges, adding new entities on which those charges may not be levied, and adding specific conditions under which these prohibitions apply.

AB 371 (Frazier) of 2019 – Would have required GO-Biz, in consultation with the State Air Resources Board, the California Transportation Commission, and the CSTA, to prepare a statewide economic growth, prosperity, and resiliency assessment of the California freight sector on or before December 31, 2021, and to update the assessment at least once every 5 years. The bill would have required the assessment to identify specified information, and would have required the office, in developing the assessment, to consult with the Legislature and representatives from a cross section of public and private sector freight stakeholders. This measure was held in the Assembly Committee on Appropriations.

AB 14 (Lowenthal, Chapter 223, Statutes of 2013) – Required the CSTA to prepare a state freight plan with specified elements to govern the immediate and long-range planning activities and capital investments of the state with respect to the movement of freight. The bill requires the agency to establish a freight advisory committee with various responsibilities in that regard. The initial state freight plan would be submitted to the Legislature, the Governor, and certain state agencies by December 31, 2014, and updated every 5 years thereafter.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

Unknown

POSITIONS: (Communicated to the committee before noon on Wednesday, April 19, 2023.)

SUPPORT:

Bay Area Council

California Association of Port Authorities

Norwood Associates, LLC

Pacific Merchant Shipping Association

Port of Hueneme

Port of Long Beach

Port of Oakland

Port of Redwood City

Port of San Francisco

San Diego Unified Port District

OPPOSITION:

None received

-- END --

ENATE COMMITTEE ON

BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT

Senator Richard Roth, Chair

2023 - 2024 Regular

Bill No: Hearing Date: April 17, 2023

Subject:

SUMMARY:

Establishes a Freight Coordinator (Coordinator) within the Governor’s Office of Business and Economic Development (GO-Biz) to steer the growth, competitiveness, and sustainability for freight and the supply chain across the state and to promote and assess the continued economic vitality, economic competitiveness, and sustainability of the freight sector, as specified. Makes various findings and declarations.

NOTE:

This measure is double-referred to the Senate Committee on Transportation, second.

Existing law:

1. Establishes GO-Biz for the purpose of serving as the lead state entity for economic strategy and marketing of California on issues relating to business development, private sector investment and economic growth. (Government Code (GC) §§ 12096 – 12098.5)
2. Authorizes GO-Biz as the lead entity for economic strategy and the marketing of California on issues relating to business development, private sector investment, and economic growth. Authorizes GO-Biz, in this capacity, to coordinate the development of policies and criteria to ensure that federal grants administered or directly expended by state government advance statewide economic goals and objectives. Authorizes GO-Biz to market the business and investment opportunities available in California by working in partnership with local, regional, federal, and other state public and private institutions to encourage business development and investment in the state. Authorizes GO-Biz to support small businesses by providing information about accessing capital, complying with regulations, and supporting state initiatives that support small business. (GC § 12096.3)
3. Requires the California State Transportation Agency (CSTA) to prepare a state freight plan with specified elements to govern the immediate and long-range planning activities and capital investments of the state with respect to the movement of freight and to establish a freight advisory committee. (GC § 13978.8)

This bill:

1. Requires the Governor to appoint the Coordinator, tasked with: advising and coordinating policies that promote the growth, competitiveness, and sustainability for freight and the supply chain across the state; promoting and assessing the continued economic vitality and sustainability of the freight sector and; advising the Governor and GO-Biz Director on issues affecting the state’s freight and supply chain, including economic strategy, investment, improvements in technology, as well as on policy and administrative regulations affecting the state’s freight and supply chain. Requires the Coordinator to work directly with the California Transportation Commission, CSTA, the Department of Transportation, the State Energy Resources Conservation and Development Commission, the Department of Food and Agriculture, the Public Utilities Commission, the State Lands Commission, and the State Air Resources Board as necessary to address and discuss ongoing freight and supply chain issues. Authorizes the Coordinator, to establish and convene one or more stakeholder advisory groups to help inform their work in implementing their mission and duties.
2. Further requires the Coordinator to:
3. Consult with representatives from the public and private sectors of freight stakeholders, as specified.
4. Consult with the Legislature.
5. Use the most current data reasonably available to update freight and supply chain economic competitiveness information such that it reflects current market conditions.
6. Evaluate the resiliency of the state's freight sector, as specified.
7. Expand on the California Sustainable Freight Action Plan, as specified.

1. Determine the economic competitiveness of all sectors of freight movement along the supply chain, as specified.
2. Identify metrics and baselines from which to measure the effectiveness of the goals, recommendations, and actions to improve financial performance, market share performance, workforce development, positive labor market effects, emerging technologies including logistics, and overall short- and long-term economic performance of the freight sector.
3. Assess the relative competitiveness and resiliency of different sectors of the supply chain, the impacts of trends in the economy across the supply chain, and how businesses and the freight sector can be supported under state and federal climate and air pollution policies.
4. Identify goals to increase economic competitiveness and strengthen resilience to economic downturns and the effects of climate change.
5. Determine a process to track, at least annually, progress being made to reach the goals and implement the recommendations and other actions.
6. Identify ongoing strategies the state is employing to address freight mobility issues, such as congestion, truck bottlenecks, inefficiencies, and a lack of workforce training, and prioritize and recommend to the California Transportation Commission and the Transportation Agency complementary or additional strategies to reduce these mobility issues.
7. Identify challenges the California freight sector faces in meeting the state's emission reduction goals, quantify the costs associated with meeting those emission reduction goals, and prioritize and recommend strategies the state can use to address these challenges.
8. Participate in the California Freight Advisory Committee and in all future updates to the California Freight Mobility Plan of the Department of Transportation.
9. Participate in all future updates to the AB 32 climate change scoping plan, updated every five years pursuant to the California Global Warming Solutions Act of 2006.
10. Adds serving as the coordinating entity to steer the growth, competitiveness, and sustainability for freight and the supply chain across the state, and promote and assess the continued economic vitality, economic competitiveness, and sustainability of the freight sector as a GO-Biz authority. Requires GO-Biz to provide freight and supply chain economic competitiveness information.
11. Prohibits GO-Biz from tracking or monitoring the productivity of port workers, including, but not limited to, productivity metrics and from interfering with any collective bargaining agreement or workers’ right to collectively bargain.
12. Makes various findings and declarations about: California’s role in the international and national supply chain and as a freight gateway, about the importance of the state in having a Coordinator to address the various efforts contained in the bill; about the importance of the freight sector in California’s economy and; about the need for coordination between governmental entities and industries; about the lack of coordination and the reliance on multiple agencies to address freight issues which in turn hampers our ability to invest in our supply chains, support our supply chains, and green our supply chains efficiently and cost-effectively.

FISCAL EFFECT:

Unknown. This bill is keyed fiscal by Legislative Counsel.

COMMENTS:

1. Purpose. The Author is the Sponsor of this bill. According to the Author, “SB 517 will require Governor to appoint a Freight and Supply Chain Coordinator in GO-BIZ with prescribed experience to serve as the advisory and coordinating entity for the state’s supply chain sector. The bill would require the Coordinator to advise and coordinate policies to promote the growth, competitiveness, and sustainability of the freight sector; promote and assess the continued economic vitality and sustainability of the sector; advise the Governor on supply chain issues; work with state agencies to address ongoing supply chain issues; convene stakeholder advisory groups; and participate in future iterations of the Department of Transportation’s California Freight Mobility Plan and AB 32 Scoping Plan.”
2. Background.

GO-Biz. In February 2010, the Little Hoover Commission undertook a review of the state's economic and workforce development programs. In its final report, Making up for Lost Ground: Creating a Governor's Office of Economic Development, it analyzed the status and effectiveness of current programs since the 2003 demise of the Technology, Trade and Commerce Agency (TTCA) and recommended the creation of a new governmental entity to fill the void left by the dismantled agency.

The report called for a single entity that would promote greater economic development, foster job creation, serve as a policy advisor and deliver specific services (i.e., permitting, tax, regulatory, and other information) directly to the California business community. In April 2010, Governor Schwarzenegger issued Executive Order S-05-10 as a means to operationalize the report recommendations including the creation of the Governor's Office of Economic Development (GOED).

In October 2011, the Governor signed AB 29 (John A. Pérez, Chapter 475, Statutes of 2011), which effectively codified GOED and changed its name to GO-Biz. Since its inception, the office has served thousands of businesses, 95 percent of which are small businesses. The most frequent types of assistance include help with permit streamlining, starting a business, relocation and expansion of businesses, and regulatory challenges.

In March 2012, Governor Brown initiated a reorganization process to realign the state's administrative structure. Key changes include dismantling of the Business, Transportation and Housing Agency (BTH) and the shifting of a number of key programs to GO-Biz including the Small Business Loan Guarantee Program, the California Travel and Tourism Commission, the California Film Commission, the Film California First Program, and the Infrastructure and Economic Development Bank (IBank). Currently, GO-Biz administers the following programs and units:

• “Made In California” program for the purpose of encouraging consumer product awareness and to foster the purchases of products manufactured in California.
• The California Inclusive Innovation Hub Program (iHub2) to incubate and/or accelerate technology and science-based firms, with a focus on underserved regions and communities.
• The California Competes Tax Credit Program under which “businesses who want to come to California or stay and grow in California” can receive an income tax credit.
• The California Business Investment Services Unit, which provides no-fee, tailored site selection services to employers and others who may be considering California for relocation or expansion.
• The California Business Portal, which provides information to California businesses about common questions, permitting, financial options, and more.
• The California Community Reinvestment Grants Program, which was included in Proposition 64, authorized GO-Biz to award grants to local health departments and certain nonprofit organizations to support communities disproportionately affected by the War on Drugs.
• Office of the Small Business Advocate which provides information and assistance to small businesses.
• The Zero Emission Vehicles (ZEV) Infrastructure Unit which works to accelerate the deployment of ZEV infrastructure.
• The International Affairs and Business Development Unit, which serves as California’s primary point of contact for expanding international trade and investment relations. This unit focuses on foreign direct investment (services for foreign investors, foreign investment technical assistance, and the EB-5 Investor Visa Program), international trade promotion (STEP program, trade missions, export assistance, and the California-China Trade Office), and international agreements.

Existing Freight Planning in California. AB 14 (Lowenthal, Chapter 223, Statutes of 2013) established the California Freight Advisory Committee (Advisory Committee). It also required the California Department of Transportation to collaborate with the Advisory Committee and various state, local, private, and public stakeholders to develop the California Freight Mobility Plan (CFMP) every five years. The CFMP is a comprehensive plan for investments in freight, emphasizing both assessing and planning freight infrastructure.

Additionally, in 2015 Governor Brown issued Executive Order B-32-15, which directed the California Air Resources Board, the California Department of Transportation, the California Energy Commission, and Go-Biz to develop an integrated action plan (Action Plan) to establish clear targets to improve freight efficiency, transition to zero-emission technologies, and increase competitiveness of California’s freight system. According to CSTA, the resulting Action Plan “responds to the Governor’s Executive Order by articulating one shared vision to improve the efficiency of California’s freight system while reducing its pollution, all the while bolstering the competitiveness of California’s goods movement system nationally and internationally.”

In addition to State planning for freight, the Federal Fixing America's Surface Transportation (FAST) Act (2015) requires states to develop FAST Act compliant state freight plans that provides “a comprehensive plan for the immediate and long-range planning activities and investments of the State with respect to freight” and update them every five years to be able to obligate National Highway Freight program funding.

COVID-19, Freight Supply Chain, and State Government Action. The events of the COVID-19 pandemic provided the perfect storm for the resulting backlog in the freight supply chain. First, the COVID-19 lockdown, combined with government stimulus checks, raised household disposable income from an 8% in 2019 to 16% in 2020, reaching up to 34% in April 2020, according to a study at the Giannini Foundation of Agricultural Economics at UC Davis. This extra savings led to extra consumer spending. Because this demand was partially met with imported goods from Asia, an imbalance of traded goods between China and the US developed by about 15% in the nine months of 2021, as compared with the same period of time in 2020.

Most goods from Asia arrive via containers. Before COVID-19, California handled around 40% of US containerized imports. However, California ports became quickly overwhelmed with growth in imports. California ports moved about 0.7 million additional loaded import containers (up to 16%) during May 2021-September 2021.

In comparison, US ports outside of California handled more than 1.4 million additional loaded import containers in May – September 2021 (up to 23% compared to the average for the same five-month period from 2017-2019).

Increases in imports resulted in an increase in backed-up ports, as warehouses attempted to hire enough people to keep up with the demand, according to an article in CalMatters. Containers full of new goods were left at the ports, creating traffic jams. At the same time, there was an increased demand for empty shipping containers in Asia, and freight rates from Asia to the US rose steeply, such that many more containers were shipped back to Asia empty, instead of carrying US export products. This situation led to questions such as: what is to be done with the increased imports? Where can we store them? Do we have enough equipment to carry them and store them?

In 2021, GO-Biz launched the California Supply Chain Success Initiative (SUCCESS Initiative), a partnership with the California State Transportation Agency, the Port of Long Beach, and the CSU Long Beach Center for International Trade and Transportation to engage the diverse network of stakeholders along the supply chain to discuss key challenges and identify creative solutions. This effort, which brought together federal, state and local leaders, is focused on both short-term and long-term steps to address port congestion. According to a summary report of the SUCCESS Initiative, one of the outcomes of discussions held in the Fall of 2021 at the Port of Long Beach was understanding the need to examine how the supply chain challenges impacted individual sectors of our state’s economy. As a result, GO-Biz convened an agricultural supply chain working group at the Port of Oakland in late 2021. The report summary noted that both of the meetings brought about a set of priority action items that expected to relieve some of the ongoing pressure points and bottlenecks, allowing both imports and exports to flow more predictably, and set the stage for long-term changes in how we move goods.

The report summary highlighted various actions taken in response to the SUCCESS Initiative discussions, including:

• Executive Order N-19-21 which directs several agencies to grant exemptions to vehicle weight limits, identify non-state and state-owned properties near the ports for temporary storage, expedite leasing processes for storage, initiate high-road training partnerships, establish an industry panel, expedite and give funding preference to supply chain issues, and develop long-term proposals to support goods movement.
• Stakeholder meetings led by CSTA and Caltrans in the form of two workshops to identify which freight routes should qualify for weight exemptions.
• A partnership announced by The Port of Long Beach with Total Terminals International to extend gate hours to 24/7 operations.
• A data sharing portal launched by The Port of Long Beach called the Supply Chain Information Highway, with the support of the Port of Oakland.
• The Port of Oakland and the California Association of Port Authorities issued a five part plan to ease congestion at West Coast ports which includes identifying and allowing off-port staging areas for empty containers and establishing a California Office of Freight.
• The California Senate and Assembly held a Joint Hearing of the Select Committees on Ports and Goods Movement, “The Perfect Storm: California’s Port Congestion and Goods Movement Crisis,” to identify relevant solutions to supply chain problems. The hearing highlighted that in California, the ports of Los Angeles and Long Beach together provide an entry point for 40% of all imports and 25% of its exports. In March 2021, the ports of Los Angeles and Long Beach saw a 50% increase in cargo compared to the same period in 2019, as well as an increase of 14.5 tons of oxides of nitrogen and .27 tons of particulate matter in South Coast Air Basin, which is equivalent to 50,000, Class Eight diesel trucks. Discussions at that hearing noted that the increased consumer demand, COVID-19 shutdowns, and weak infrastructure led to a crisis.
• The U.S. Department of Transportation, a participant in the SUCCESS Initiative’s first discussion, agreed to partner with California to help the state modernize its supply chain.
• The City of Long Beach assigned more temporary storage spaces for containers, while Union Pacific Railroad announced that its operations near the ports would shift to near 24/7 operation.
• Local authorities have been authorized to increase the number of stacked containers to four, from two, in order to prevent the accumulation of unused containers.
• The International Longshore and Warehouse Union (ILWU) announced a commitment to increasing extra shifts for workers in light of 24/7 port operations.
• Several major companies, including Walmart, UPS, FedEx, Samsung, Home Depot, and Target announced plans to shift to 24/7 operations. The White House announced a partnership with shippers, ocean carriers, ports, terminal operators, and other industry stakeholders on a data portal connecting U.S. trade gateways.

1. Related Legislation. SB 1104 (Gonzalez) of 2022 would have established the Office of Freight and required it, in coordination with other specified agencies, to prepare an assessment of statewide economic growth, competitiveness, prosperity, resiliency, and sustainability for the state’s ports and freight sector. (Status: This bill was held in the Assembly Committee on Appropriations.)

AB 1678 (Fong) of 2022 would have required a Blue Ribbon Commission on Port Congestion and Supply Chain Deficiencies to be established, with the Secretary of Food and Agriculture to serve as the chair and to appoint the other members of the commission. The bill would have required the commission to recommend changes needed in the immediate and long-term future to mitigate the negative impacts of port congestion and supply chain deficiencies on agricultural commodities. (Status: This bill was held in the Assembly Committee on Appropriations.)

AB 1679 (Fong) of 2022 would have required the Governor to: appoint a Supply Chain Coordinator within GO-Biz to be the principal advocate in the state for supply chain participants and advise the Governor on legislation, administrative regulations, and other issues affecting the state’s supply chain; to establish and appoint a Supply Chain Advisory Group consisting of stakeholders from each sector that make up the supply chain; to require the Supply Chain Coordinator to oversee the advisory group, which would develop and recommend policies that improve the supply chain; and would have required the advisory group to meet on a biannual basis and as needed to resolve issues in times of crises or at any other time upon request of the coordinator or a majority of the members of the advisory group. (Status: This bill was held in the Assembly Committee on Appropriations.)

AB 371 (Frazier) of 2019 would have required GO-Biz, in consultation with the State Air Resources Board, the California Transportation Commission, and the CSTA, to prepare a statewide economic growth, prosperity, and resiliency assessment of the California freight sector on or before December 31, 2021, and to update the assessment at least once every 5 years. The bill would require the assessment to identify specified information, and would require the office, in developing the assessment, to consult with the Legislature and representatives from a cross section of public and private sector freight stakeholders. (Status: This measure was held under submission in the Assembly Committee on Appropriations.)

AB 14 (Lowenthal, Chapter 223, Statutes of 2013) required the CSTA to prepare a state freight plan with specified elements to govern the immediate and long-range planning activities and capital investments of the state with respect to the movement of freight. The bill requires the agency to establish a freight advisory committee with various responsibilities in that regard. The initial state freight plan would be submitted to the Legislature, the Governor, and certain state agencies by December 31, 2014, and updated every 5 years thereafter.

1. Arguments in Support. California Association of Port Authorities (CAPA) writes in support: “California ports have seen a dramatic increase in trade moved to and from all regions of the country. Between 2000 and 2020, containerized cargo volumes in California grew by 80%. This intense growth has had serious implications on the supply chain. Although California ports have taken proactive steps to alleviate congestion and bottlenecks across the supply chain, our state must establish coordinated collaboration between government and all aspects of the freight industry to ensure continued investment, resilience, and growth.”

The California Business Roundtable, the California Retailers Association, and the California Trucking Association write in support: “Our state’s ranking as a world economy is due in large part to California’s Ports which are responsible for more than 40 percent of the nation’s imports and 30 percent of exports. Additionally, the Ports generate more than billions in trade with the Port of Los Angeles generating more than $1 billion in trade alone in 2019.

While GO-BIZ and California Transportation Agency (CalSTA) have taken leadership roles in facilitating coordination along the supply chain in response to the congestion crisis, there is currently no state entity with the authority and capacity to coordinate across the entire supply chain.

SB 517 addresses this concern by appointing a freight coordinator within GO-BIZ for high-level coordination along the supply chain and by requiring this new position to work with stakeholders to assess and plan for the economic competitiveness of the freight sector.”

The Port of Hueneme, The Port of Oakland, The Port of Redwood City, and The Port of San Francisco write in support: “SB 517 will directly address the priority of having a person specifically responsible for supply chain by developing a Freight and Supply Chain Coordinator in GO-Biz that will coordinate with relevant state agencies and industry stakeholders to develop the state’s freight policies and help prevent future supply chain crises and bottlenecks.”

1. Policy Considerations.

Could The Efforts of This Bill Be Incorporated Into Existing Structures? This bill would establish a Coordinator within GO-Biz to primarily serve as the coordinating entity to steer the growth, competitiveness, and sustainability for freight and ports across the state. Given the similarities to this measure and the effort undertaken by GO-Biz in the SUCCESS Initiative, is it necessary to have a whole statutory framework, with prescriptive language, that may remove some of the flexibility and nimble means by which this work can be conducted through continued pathways like those undertaken by various state agencies and partners?

Is Funding a Barrier to Effective Implementation? Implementation and program maintenance are jeopardized by a lack of dedicated, reliable funding, leading to questions about necessity of establishing a program and effort that may not materialize and assist those the effort intends to support. The Author should continue working to identify and secure proper funding to achieve the goals set out by this measure.

SUPPORT AND OPPOSITION:

Support:

California Association of Port Authorities
California Business Roundtable
California Retailers Association
California Trucking Association
Port of Hueneme
Port of Oakland
Port of Redwood City
Port of San Francisco

Opposition:

None received

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