Assembly Select Committee on Select Committee on Ports and Goods Movement

I want to say good morning to each and every one of you who have gathered first hearing of the Select Committee on Ports and Goods Movement. We are waiting for other Members to join us and other staffs representing those Members who could not be with us, who will be joining us on the diocese as well in lieu of those Members. But we want to get started. I wanted to say thank you very much for being here.

Thank you for participating this space with me and my colleagues because it reveals your commitment to maximize efficiency of the California supply chains going into this informational hearing. We know that there is a lot of good and important work being done in this space and in relations to this industry. But for us to understand the future of California ports, we must understand how this industry has gotten where it's at today.

The purpose of today's hearing is to very simply provide the nuts and bolts and the overview of the California supply chain to Members as well as educate the General public on the supply chain of our ports here in California. I want to pause and simply say that I am absolutely honored to chair this Select Committee. It is absolutely important. I represent the 65th Assembly district, and certainly that includes the ports of San Pedro, Wilmington and San Pedro area.

And our ports are very vital to our economy. During the Pandemic, many of the weaknesses and kinks in the supply chains were in fact exposed and our economy suffered because of that. We must learn from the lessons of the Pandemic to visualize and conceptualize where we could go from here.

My goal as the Chair of the Select Committee is to find out where the weaknesses in these industries are, where they can be reinforced, and create a culture of being proactive, not reactive to issues of the California ports in this state. The ports are the economic engine of our state of California and also the large part of United States of America. The reason why that California is the fifth largest economy is because of, by and large, of our ports. And certainly, the fifth designation is debatable.

Some say we're the fourth and some say we're the fifth. But wherever we are, we are certainly in a good position and we want to maintain that footing. If the Select Committee and the Legislature are to make impactful meaningful legislation, we have to have a full understanding of the supply chain and how each component can work together and reinforce each other to create a robust, sustainable economy.

Today we will hear from representatives from the government agencies, labor, the Port Authority, management industry stakeholders, industry stakeholders and other experts to inform the Select Committee of the history as well as the trajectory of California supports moving forward. Thank you all for being here.

To our panel, for being here and for all of you who are watching and listening to this hearing today for those in the audience, you will in fact have an opportunity for comments at the end of our hearing during our designated time for our public comments. So don't leave.

Certainly write your notes and your comments down and be very succinct and poignant with those comments because we want to make sure that everyone who comes in line during this period has an opportunity to express and make a statement. And so before I begin, I want to recognize my colleagues for being here to select committee. We realize today is Thursday and many Members are already in flight going back to the district, but certainly their representatives from their offices will be here to join us.

And also we have some comments and some questions that they have prepared me to be able to ask our panel moving forward. And so I want to start this process off by allowing my Vice Chair to introduce himself. One also talk about his district, his district number. There's a port in his district and to have a few brief remarks. So with that being said, I want to turn over to my vice chair, Mr. Assemblyember Fong.

There we go. Thank you. Mr. Chair. Certainly appreciate the attention when it comes to our ports and their role in goods movement, not only in California but actually internationally and across the country. I certainly echo your comments. I think that with the supply chain crisis during the pandemic, it did reveal a lot of our challenges and those challenges haven't gone away. And I know the chair and I have talked about that there needs to be more investment in our ports when we talk about infrastructure.

There's been a lot of talk about infrastructure in the Legislature. Well, this is a critical part of our state infrastructure in terms of how we not only get goods into our state and throughout the state, but also to export as well as someone who represents the Central Valley. Agriculture is critical. And so we need to be able to not only provide goods and products into our state, but also to get them into international markets as well.

So I look forward to this conversation, this ongoing conversation, not only how do we improve our transportation corridors, but how do we develop more inland ports. Appreciate the work of developing some inland ports in the Mojave area, but also there's conversations about some inland ports throughout the Central Valley as well. And these are going to be critical conversations to ensure that we were able to keep our economy going.

Billions of dollars go through the ports of Los Angeles and Long Beach, but we have numerous other ports throughout the state that also need attention. So appreciate this attention. This is a critical, critical issue, not only in the short term, but in the long term.

I want to say thank you very much to Member Fong for his kind remarks. I want to offer up those individuals who are on our Select Committee who is not here. But again, their representatives from their offices are welcome to join us on the dais if they're in the audience or they are listening or watching this live. We also have Cecilia Aguiar-Curry representing the Fourth District. Also Tasha Boerner representing the 77th District. Mia Bonta we have representative representing the 18th Assembly district.

We heard from our Vice Chair, Vince Fong, representing the 32nd District, also Josh Lowenthal, the 69th Assembly District, and also Diane Papan, representing the 21st Assembly District. Reyes Gomez or Gomez Reyes, representing the 50th district and also Carlos Villapudua, representing the 13th district. Lori Wilson, representing the 11th district and also Jim Wood, representing the 2nd district. So that makes up the Select Committee on Ports and Goods movement here in this Assembly side. And we're very grateful to have these individual Members.

They are very focused on the ports. Many of them represent the ports and very concerned and I'm happy to serve with them in that capacity. Now, let's start the hearing. Now we will hear from our panelists who will be speaking about the state's role in seaport and goods movement system. Each panel will have up to six to eight minutes to speak and will present in the order that's noted on the agenda. Before presenting, please introduce yourself. So I'm going to call our first panel up.

Would you please come up? We have representative from the Legislative Analyst Office, our first panelist. I think you know who you are. Please come join us at the table. And while those Members are coming up, we're going to have a few words from assuming woman Diane Papan to say a few words. Where did she oh, she's over here. Okay. We have Rachel Ehlers.

You were close.

Okay, great. Deputy Legislative Analyst with the Legislative Analyst Office, specializing in environmental and transportation issues. So thank you very much for being here and we'll come back for Members to say a few words and you can start and please introduce yourself.

Great. Thank you so much Mr. Chair. Rachel Ehlers with your Legislative Analyst's office. I will be speaking from a handout which the sergeants should have passed out and I think may also be in your binders. For those in the audience, there's a stack in the hallway. And for those following online, it is available on our website, LAO.CA.gov for those who want to follow along.

So I think that my role is to kind of do a port, California Ports 101, give you some of the basics and then get out of the way so you can hear from the experts on these topics. What I'll be speaking from is based on a report that our office did about a year ago, August 2022, which is also available on our website that provides an overview of California ports. So turning to the first page of the handout, for those of you who are visual learners.

There's sort of a flowchart here of one pathway that goods originating from overseas could take from a producer to a consumer. As you can see, the goods movement process involves many different modes of transportation, including ships and rail and commercial trucks, also many different kinds of facilities, including ports and distribution centers and warehouses. So even here you can see the essential role that ports play.

Now, as the Vice Chair noted, in California, we don't just rely on ports for imports, as illustrated here in this illustration, but also for exports. It's a really important piece of our economy here, particularly for our agricultural products that are such a key distribution piece of California's products. And globally as well. Ports are a pretty important part, not just in California, but also international commerce as well.

So turning to page two of the handout, you can see an overview of California's twelve ports and how they really do vary in size and in focus. So of the twelve ports, eleven are publicly owned, one is privately owned. The Port of Benecia, the Port of Long Beach and the Port of Los Angeles are the two largest ports in the United States. In terms of container volume.

The ports in California process about 40% of all containerized imports in the country and 30% of all exports in the US. So, pretty important part, not just of California's economy, but nationally and globally as well. As you scan the figure here, you can see our ports vary in size but also in products, both what we export and import at the different ports areas of focus.

So for example, the Port of Oakland is a primary export facility for our agricultural and food related products, whereas up in Humboldt they focus more on lumber just because of the regional economy there. So, all very important pieces of the puzzle, but playing slightly different roles depending on the region. Turning to the next page, even though the ports are locally operated and managed, the state plays a pretty important role in supporting them and overseeing them as well.

Several different state agencies, two of which I'm joined here with on the panel, the California State Transportation Agency and GO-Biz. I won't steal their thunder in terms of talking about what role they play. Just to note that for the agency, you and the Legislature did provide funding last year on a three-year basis to establish a new freight policy team, which I'm sure you'll hear about entities not here on the panel, the California Department of Transportation, which leads state planning for freight transportation, which obviously includes ports.

The Air Resources Board and regional Air Quality Management districts also play pretty important roles in regarding oversight and management of ports around their emissions, greenhouse gas emissions as well as pollution emissions, which I'll talk about in a moment. And then finally, the State Lands Commission is the state agency that oversees all of our state sovereign lands, which includes all of our coastline and all of our waterways.

So the lands that are granted in trust to ports to operate are overseen by the State Lands Commission, and that commission also regulates marine oil terminals as well. So, turning to page four, talking a little bit about funding for ports, majority of the funding does come from lease and fee revenues from the shipping businesses and freight operators at ports, so it is not a primary source of state funding or federal funding for their budgets.

In fact, there's no ongoing federal or state funding dedicated to California's port operations and infrastructure. There is a fair amount of one time funding, however, available as competitive grants from both the federal government and the state government, primarily around infrastructure. Generally, the largest state program is the Trade Corridor Enhancement Program, or TSEP, which doesn't just support ports, it supports all manner of freight transportation. But ports are eligible to apply for some of that funding.

In our review of port budgets, these federal and state grants typically make up 2% or less of their overall budget, so it really is generally a pretty small share. However, in recent years that has increased, or the amount of funding available for ports to apply for has increased in part from the federal infrastructure bills that have passed, as you can see here, in the third bullet, 2.7 billion nationwide for non federally owned port infrastructure and an additional 3.3 billion nationwide in new federal grant availability.

Those grants do, though, have to be matched by local or state funding, so that's something else to consider in terms of port financial availability. There's more federal funding available, but they've got to come up with some match either from state or local funds to draw that down. Also, pretty big increases in state funding, if you look at the chart here at the bottom of the figure, in recent years, enabled by our general fund surpluses, we've had nearly $2 billion planned across these years.

Again primarily for infrastructure, but also for some workforce development as well as support during the pandemic. So, turning to the final page of the handout just to highlight another important role that the state has played in port operations is around air quality issues. Because the vehicles and equipment at ports typically are fueled by diesel fuel that does emit air pollutants, particulate matter and nitrogen oxides, this is an issue both for public health as well as for greenhouse gas emissions in the state's, climate goals.

On public health issues, nearly all of the census tracks that surround the ports of Long Beach and Los Angeles, for example, are ranked in the top one third of the most pollution burdened areas in the state. They have higher exposure and higher vulnerability, typically have lower income, are lower income communities. So this has been a really big area of emphasis for the state, both for public health, environmental justice, as well as our climate goals.

The State Airborne and the Regional Air Quality Management District have passed a number of regulations and some are still in development as well regarding these issues. So ports have been taking steps to meet the state air quality regulatory requirements and goals. For example, the ports of Long Beach and Los Angeles are implementing a Clean Air Action Plan over the past several years that really has made some significant reductions. But despite that progress, these are still some of the most polluted sources. Pardon me.

The ports are some of the largest sources of pollution in those regions. So an important area of state focus here. Ports really are going to need to electrify a lot of their operations in order to address this. But that's pretty challenging. It's challenging because some of this technology is not yet widely available. It's very costly. It may not align exactly with the port's needs.

So thinking about the port's operations as well as the state, how to balance these costs and challenges with some of these important public health goals and to maintain national and global competitiveness in the face of all that. So I would presume that some of what you're going to hear about in subsequent panels, how to balance all of these issues. And with that, Mr. Chair, happy to answer questions after my fellow panelists have presented. Thank you.

No, thank you very much for your presentation. We appreciate you being with us. If you can just stick around a little while longer, there may be some questions from our panelists I'm excusing from our Members rather for you. So just bear with us. I want to also introduce Trelynd Bradley, the Deputy Director of Sustainable Freight and Supply Chain at the Governor's Office of Business and Economic Development, better known as GO-biz. So welcome Mr. Bradley. Thank you very much for being here. And you can start by opening up with a few words and introducing yourself and just proceed with your presentation.

Thank you, Chair Gibson. And thank you to the Members on the dais. My name is Trey Bradley. I am the Deputy Director for sustainable freight and supply chain at the Governor's Office of Business and Economic Development or GO-Biz. I lead the Office of Supply Chain unit within GO-Biz, which is one of the many units within our team and our small Department. As you know, GO-Biz is still fairly young in state government. We just celebrated our 10th year in state government.

But we have many teams who work on a variety of issues and primarily with the business community who is our stakeholder as listed in statute. And those teams work on an array of issues around ports and goods movement. We have a zero emission vehicles unit, for example. We have a Business Investment Services unit which works with businesses in helping them navigate incentives, permit assistance and find sites.

Within California, we have an Office of Permit Assistance who helps companies oftentimes, sometimes those who are interfacing with freight and goods movement and navigating state permitting processes and helping them with local mediation in the permitting process. We operate California Competes Tax Credit, we have the Office Small Business Advocate, and of course, under the broader Gobert umbrella, we also have the Infrastructure and Economic Development Bank, which provides lending support to local government and business capacity. Really quick.

I think it was a great overview of California's port ecosystem, which is vast and very large. Our past year in this position, I've had the opportunity to see every port in the state of California. So I've been to all twelve. It's very interesting. Our ports are dynamic places and each of them have their own respective needs and ambitions and goals. Really. We as GO-Biz have seen our leadership and economic competitiveness in the freight and goods movement.

Space is dynamic and we have very optimistic viewpoints on the future of what that is. In 2022, the ports of Long Beach, LA, and Oakland, if you look at the cumulative total nine select container ports published by the Bureau of Transportation Statistics, those three alone count for 42.4% of the containers that then service the United States.

And if you look at some of the infrastructure capacity that exists at our ports ship to shore gantry cranes that are at ports across the United States, if you take just the top five, LA, Long Beach, and Oakland, they account for 265 of 425 of the ship to shore gantry cranes in the US. For handling demand. In 2021, California's ports saw historic year in trade value, and I don't think it's honest to not hold that up. It is the most volume that our ports moved in history.

The Port of Los Angeles alone moved 10.7 million TEUs, which set a western hemisphere record for a single port of all time here during that time. And so that's really commends not to us as a state, it's to many of the folks behind us in the room here in freight and goods movement and to those in the workforce who've really made these records a reality.

And we've also seen at GO-Biz that not just in our primary major container ports, we've seen our medium ports size ports have been excelling and growing as well. An example here is in 2022 Port of Hueneme, the container business went up 90% in 2022, and revenues up 30%. We have also seen a lot of demand increase in private investment taking place at the Port of Stockton.

So these opportunities are vast and broad, and we're seeing the private investment come in as a result of understanding our ports in a more concerted way from the private sector and understanding how they're able to partner with them on projects and public private partnerships. Riding off of that, we have the largest single investment that the state has made in supply chain this past year. And I know that Calista will be talking about that shortly. But just to put that in perspective.

The last budget in the year budget prior there's 15 billion over five years in transportation investment, 8.1 billion over five years for energy, clean energy and grid reliability, and a collective 10 billion over three years. If you add both the budgets combined for just Zero Emission Vehicle Infrastructure in totality and a lot of that Zero Emission Vehicle funds in the last two budgets are really there's a lot of funds that are focused on heavy duty vehicles and associated other types of ZEBS.

Not just trucks, but also those types of equipment that exist at our ports that you see often when you visit, but then also one-time investments. We spoke as GO-Biz earlier this week with Calista and highlighting the $300 million to say is invested in the Low Sand Corridor, the Los Angeles and San Diego Rail Corridor. Just critical rail corridor for freight and goods movement, especially as but also some other one-time as investments, like a 150,000,000 for the goods movement training campus in Southern California.

That brings us to what the investment and the funds that have been placed within GO-Biz. Within GO-Biz we have 30 million as highlighted in the LAOs in presentation for improving operations, data operations at California's five containerized ports. This past year we signed the California Port Data Partnership MoU Assemblymember Gibson, thank you for being there to speak at that event. And of course, many of the folks who are in the room were also in attendance as well.

Very dynamic partnership and also an ability for us in the next couple of years to look at data system development in a more collective and concerted way to make sure that those investments are actually supporting all the stakeholders that interface with our container ports. The one thing I'll add at the end is the one thing we see in GO-Biz.

And really our role is we work a lot with the business and the private sector community and we see a profound investment amount of private investment in freight and goods movement coming. As a know as we as the state and public agencies are making these investments private sector will follow and be a part of the capital stack. It was mentioned about inland port development. We are tracking many inland port developments across the state of California.

In this past year, we have had the first inland port to be led by a class One railroad in North America announced in California. It's a $1.5 billion private investment project in the Barstow International Gateway by BNSF. There's no project like it for those in the business community and this massive industrial project, there's a lot of folks who are excited about what it can bring, but it is directly tied to some of these public investments that we are making as government.

But then also the opportunity that the private sector is seeing in the future and development of freight and goods movement within the state of California. That's last to say that the reason that some of these private investments are coming in freight and goods movement and we're seeing them is because it's a broader topic. But down the know the supply chain and goods movement ecosystem in California will look very different tomorrow.

The entire global supply chain paradigm within the world is know just in this last year Mexico became the U. S's. Number one trading partner. We're seeing a lot of heavy investments in manufacturing capacity and goods movement and logistics also be made in our southern border region. We have OTAY Mesa East which is one of the largest transportation projects within the state of California currently underway.

There's a lot of new supply chains that are being developed within California and some of us in GO-Biz are constantly looking at what that opportunity can mean for our ports. Some of those new supply chains that we work with are things like critical mineral supply chain hydrogen and then also offshore wind development.

So working with those private stakeholders to build those new supply chains, hyper localize them near where those opportunities are, and diminish environmental impacts across our and for the last piece, I just want to say another part that GO-Biz does and we work across with all our partner agencies. Doing is really assisting in thinking about how to build the capital stack for projects.

That's really one of our fortes at GO-Biz is thinking about how the capex and jobs numbers and what are the different incentives, financial tools, government bonds or loans or grants that can fit in to make the project a success in reality.

And it's really through the leadership of the state transportation agency and caltrans that they have led an interagency freight coordination working group of all state agencies in which we speak very regularly in sharing whether the opportunities and how can we align our investments at the state level to make sure that they are coming to fruition in a way that is not only aligned with the goals at the local level, but also with state goals and vision? So with that I'll conclude a little bit on a piece about GO-Biz. Happy to answer any questions after and.

Thank you Mr. Bradley, thank you very much. We appreciate the office of GoBiz and all the work that this office has been designed to do. So thank you very much for your testimony and again if you can stick around I'm sure my colleagues have some questions for you. So next up we want to invite Eric Fredericks, freight policy manager at the California State Transportation Agency. So welcome. Thank you very much and the floor is yours if you can just open up with introduction and just move forward your presentation. Thank you.

Thanks, Chair Gibson and the Committee Members as you noted, I'm Eric Fredericks with California State Transportation Agency and part of the new office that the LAO report mentioned for freight policy at Calista. So just two years ago, as you all know, in the summer and fall of 2021, there were nearly 100 ships queuing in the waters just outside the ports of Los Angeles and Long Beach waiting to birth at the piers.

And at the peak, there were over 135 ships at birth or in queue waiting to birth, which is just unheard of in California's history. So in November 2021, Governor Newsom pledged to respond to the global supply chain crisis and act with urgency to address disruptions in the near term, while at the same time working on long term solutions.

And the Governor took several short term actions, including signing an Executive order, which a lot of the state agencies had actions to execute and that did help alleviate some of the supply chain congestion at the time. But now, thanks to the partnership with your Legislature, we're addressing those long term needs that you mentioned and the needs of the freight industry with the historic one time investments that were mentioned earlier in our nation leading supply chain infrastructure to power our economy for decades to come.

So last month, and thanks to several of you that attended the announcements, Governor Newsom announced 1.5 billion in awards through the port and freight infrastructure program we call PFIP, and also the Transit and inner city rail capital program we call TIRCP. So 1.2 billion is going toward 15 PFIP projects contributing to a more efficient, sustainable and resilient supply chain, and then another 350,000,000 is going to the 13 TIRCP projects that eliminate at grade rail crossings to improve safety, reduce emissions, and keep goods and people moving.

And these funds include 450 million for zero-emission infrastructure, locomotives, vehicles and vessels, maintaining our competitiveness while creating the greenest ports in the nation and prehistoric for transportation-related funds to go towards so many zero mission projects. Some of the other investments made through our program include modernizing piers, wharfs, and docks at several ports across the state expanding capacity, improving port efficiency, encouraging mode shift, which will have a lot of greenhouse gas and other emission. Benefits from moving from truck to rail and better.

Utilizing the Alameda Corridor in Southern California, providing zero mission terminal equipment, expanding truck battery charging and hydrogen fueling locations, over 376 new charging stations and over 17 hydrogen fueling stations. Available to the public, improving critical grade separations and grade crossings and also supporting active transportation of some key separate grade separations at around the port. So on top of this, as mentioned earlier, there was also 1.1 billion awarded in the Trade Corridor Enhancement Program administered by the California Transportation Commission.

So combined, these awards help maintain our state's competitive edge in national and global trade and put these projects in a stronger position to compete for significant federal infrastructure dollars, all with having a lasting positive impact for the people of California. And so for us, when you're thinking about supply chains, it's maybe not the first thing that comes to. Mind for others, but we're thinking about this as an investment in people.

These investments we made in the supply chain will save lives, lessen environmental impacts on neighboring communities, and also create an estimated 20,000 jobs in very needed places. The PFIP was well oversubscribed though, and over 1 billion in critical projects were not able to be awarded. We expect these projects to be prime candidates for future federal and state funding program awards.

So just on the administrative side, Caltrans is going to provide oversight awardees and they plan to allocate the funds in the coming months and Calista will administer the projects awarded to Caltrans and we've already initiated kickoff meetings with the award recipients. These awards, along with the funding administered by GO-Biz and CWDB, will support data sharing amongst the containerized ports, support workforce, and make a huge and noticeable impact on the supply chain.

As far as the current health of the supply chain, we do track metrics on behalf of the Governor Supply Chain Task Force. We're happy to report that many of the key supply chain metrics have returned to pre-COVID levels. Some of the discretionary cargo that was diverted to the Eastern Gulf Coast in recent months has started to shift back to California.

However, with water level issues in the Panama Canal that we're seeing, the typical season imports forthcoming and upcoming labor negotiations with eastern coastal ports, we should be prepared to see an increase in cargo coming through California's ports. We should also note that much attention is placed on the three largest container ports as mentioned. However, and Trelynd alluded to this too.

The smaller ports in California, such as Hueneme and Stockton, are reporting their busiest volumes in years, if not ever, in their long history, and they're seeing a lot of activity at their ports. Investments in all sectors of California supply chain are critical to continued movement of cargo.

Lastly, I wanted to mention that in March 2023, the State of California signed a letter of intent with the Japanese Ministry of Land, Infrastructure, Transport, and Tourism, also known as MLIT, to support port decarbonation decarbonization and the development of green shipping quarters. Additionally, a number of California ports have executed green shipping corridor agreements with Japanese port counterparts, such as Port of LA with Port of Yokohama, Port of Long Beach with the Port of Kobe, and a few others.

So Calista and its sister state agency, supported by the California State University Long Beach Center for International Trade and Transportation, are now coordinating a symposium with the Japanese MLIT to highlight our port decarbonization work. We are planning that the California Port Decarbonization and Green Shipping Corridor Symposium take place at the Port of LA on October 20th of this year. Additionally, California's ports are planning an event near or during the Asia Pacific Economic Cooperation, better known as APEC Summit in San Francisco this November.

This event will invite several Asian nations to collaborate with California's ports on future green shipping corridors and partnerships. And with that I'm happy to take any questions.

Thank you very much Mr. Fredericks and thank you very much for your testimony. We absolutely appreciate you being here. If you can just stick around for a brief moment, my colleagues will have some questions. I want to have my colleagues introduce themselves, starting with Mr. Muratsuchi on the left and then move to Mr. Lowenthal and then also to Ms. Papan. If you can just introduce yourselves as well as talk about your district and then we will be asking you some questions. So thank you very much.

Thank you very much, Mr. Chairman. I'm Al Muratsuchi. I proudly represent the harbor area in the South Bay of Los Angeles County, sharing with the chair representation of the San Pedro community. We're very proud of San Pedro and we know that the ports of Los Angeles and Long Beach are it is the biggest economic engine of the entire region. I hear often about the competing challenges of making sure that we call it America's Port.

40% of all goods that come into the United States comes through the ports of Los Angeles and Long Beach. We want to make sure that we are competitive, that those goods are coming into Long Beach and Los Angeles and not going to the East Coast or to the Gulf States. And while at the same time we want to make sure that we are supporting and protecting the longshore jobs, the warehouse jobs at the ports.

I know that there's ongoing concerns about increasing automation at the ports and so that's where we need to make sure that we're keeping our ports competitive while at the same time not threatening the jobs of the longshoremen. And there's also concerns about all of the air pollution coming out of the ports.

Not only all the diesel truck transportation coming out of the ports the efforts which I fully support to continue to cut down on air pollution to make sure that we're protecting residents of San Pedro while at the same time making sure that we are keeping the ports competitive so that we're not losing the goods going to other ports because of our efforts to focus on these environmental issues. And so thank you very much, Mr. Chairman.

I know that there are a lot of important issues being addressed by the select committee and I really appreciate your convening this hearing.

Thank you very much, Mr. Lowenthal.

Thank you, Mr. Chairman. I'm Josh Lowenthal, the Assembly Member representing the 69th Assembly District, which includes support of Long Beach. In fact, it includes almost the entirety of Long Beach. And whether you are directly involved in the goods movement sector or indirectly involved through businesses or suppliers or in the goods movement chain itself, if you live in Long Beach, you are impacted by goods movement totally and completely. It is the largest economic driver of the region.

It also is responsible for some of the worst air quality in the United States. And all the things that my colleague, Mr. Muratsuchi, just brought forward, I want to echo. This is something that is in tremendous transition and will continue to be in transition over the next 20 to 30 years. And I think it's just such a crucial and pivotal time to be talking about things.

And I'm just delighted that the Chairman has really made the effort to get all of his colleagues involved, because this truly affects the entire state of California and, dare I say, the United States as a whole. So enthusiastic participant. And thank you, Mr. Chairman.

Thank you very much. Ms. Papan.

Can you hear me? Good morning. It's still morning. So I'm Diane Peppin and I represent San Mateo County, home to the small but mighty port of Redwood City. So our port mostly deals with raw materials, but lest you think they're not important to our economy, they service a lot of what is necessary for the home of biotech to this world as well was home to a lot of tech companies.

So what may be small certainly gets used in ways that affect our economy on a very large scale. So you had my interest when you talked about grade separations because there is a rail line that runs through the spine of my district that is very important and we're looking for a lot of money for grade separation money, although you broke my heart when you said it's all oversubscribed. But we'll get there at some point.

And I want to join my colleagues with respect to their comments about the environmental impacts of ports. We know that the problem exists, and I am one of those that remains very optimistic as it relates to hydrogen and what that can do about trucks that might be idling at ports and affecting those communities of color that might exist in and around ports.

So hydrogen was mentioned a couple of times by a few of you and my ears are perking up and I'm looking forward to some more discussions in that regard because I feel like the drainage of hydrogen is lighter and it doesn't take as much battery for heavy trucks.

So I'm interested, I want to thank the chair for convening this and the enormous amount of work that went into bringing so many parties together for such an important topic that really affects the economy of our state and the strength of our state and makes it, let's face it, the fourth largest economy in the world. So thank you and I'm delighted to be here.

Thank you very much to all my colleagues for your comments. And before we ask questions, I just simply want to say before, because I know the room wasn't full during my opening comments, I'm not going to repeat them, but I will call to your attention the work that's ahead of us. We're going to tour all twelve ports. The select committee will be touring all twelve ports in the state.

In order for us to get a true understanding what's going on, I think it's imperative that we know firsthand to tour, to see, to talk, to have conversation, to view, and to walk on in order for us to be able to do the work that I think that we're setting ourselves up to do. In addition to that, the first hearing, we will have two select hearings. We will have one in Los Angeles, and that has already been scheduled.

The Los Angeles hearing in the ports of Los Angeles will take place September the 26th. My team is passing out flyers that bears the dates and the times and the location. So September the 26th from 10:00 A.m. Until 02:00 p.m., on September the 26th, the Port of Los Angeles, after which we will travel on November the second to the Port of Oakland.

The Port of Oakland will be hosting us that we will convene at 10:00 in the morning, ten to 02:00 p.m.. And in addition to that, we are formulating and getting dates for all twelve ports. And once we identify a date and time and a location, we thank those ports for hosting us. But this select committee will be, in fact be busy because the whole goal is not to just meet, because I hate meetings just to meet.

I have to have meetings that net real results moving forward because I don't want to waste your time and I can't get time back.

So with that being said, our goal is to come out of not only these two hearings and also viewing and touring all twelve ports, is to come out with a legislative white Paper select Committee white Paper that will go to the Administration, the governor's office and to each office here, mixing up the Senate as well as the Assembly so that you will understand the challenges that meets and that faces the ports moving forward.

And also hope to make sure that we prioritize as we look at our budget each and every year, that we prioritize our budget to include the ports, to making sure that we continue to be the fourth largest economy in the world, or the fifth, depends on who you're asking, is the fourth or the fifth?

And so we've asked again the staffs of the select Members to be with us to take copious notes, because your notes are going to be used to help us create the white paper that's necessary moving forward. So with that being said, I have the first question, and I think this question is to Go biz. Is the Administration in communication with the Port to help ease the transition to renewable energy?

And so then I have another question after that question, if you can please enlighten us and then I'll offer up my colleagues to ask questions of the panel as well.

Thank you for the question. The answer is yes, and I say that comes in several forms. The first I would say is it's not just our office who serves us in this role, it's our other agencies as well, and state departments, and also, I would say local bodies, it was mentioned air districts as well as metropolitan planning organizations and the like. It's really a collective team effort because we're changing the entire dynamic of how we do everything in terms of transportation, electrification and the likes.

Our office here at GoBiz, we have played a very active role in the business community and working with the specific associations. For example, just a few weeks ago, I just presented to the association representing all of the tugboats on different various incentives that they can use in addition to those that are kind of slated for exactly clean technologies. So there's a lot of incentives that exist out there for business generally.

That's really where our office's strength is, is identifying them and getting folks and businesses to those when they need them. We spend a lot of that time with the trucking community. We publish and keep updated. A California trucking incentive guide. It's actually probably one of the most utilized resources in our office that we get phone calls about. It's also in Spanish and Punjabi as well.

And that resource, just line by line exists all the incentives, over three dozen incentives that in state of California that truckers can utilize both for fleet owners but also for individual truckers themselves and a small business. So it's bringing every resource to the capital sac to help folks with this transition.

And I would also mention that across our office we're always speaking with large firms and those who are thinking to do these investments in California to build the electric vehicle heavy duty charging station near the port.

And I think that a lot of state agencies all of us are seeing and I think folks across supply chain and goods movement have seen, it seems like every one or two months we see a news announcement that XYZ is building the largest heavy duty electric charging station in the United States at this point. And that's because we speak with a lot of those large firms and having them navigate larger incentives to make sure that they make those investments and retain those investments in California.

And those are through programs such as California competes, the full sales tax exclusion that exists at the treasurer's office and of course our lending capacity and programs. So our office is very much at the forefront of this work and trying to make sure that those in the business community understand what's out there and can help them. And also with working with directly with state agencies and their programs as well.

Thank you very much. How does the Administration take into consideration the need of all industries, trucking, trains and also ships when setting the climate objectives? Because as we look, as we move into this whole world of new technology and trying to making sure that our environment is safe and clean, we also need to look in a very thoughtful way to making sure that it's reasonable as it relates to putting things online, especially if the technology hasn't been even created right.

And I'm reminded of Elon Musk when he has no degrees in this, but he had a vision and he had ideals, so he surrounded himself, but it took time in order to make the electrification of that. And I hear a lot that we need time because the technology hasn't even been designed, but the mandate is there. So can you talk about one lifting up the needs of the trucks, the trains, the ships and setting climate goals and objectives. Does that make sense?

Yes, it does. I'd say that we do have these ambitious climate goals that are at the helm of what we do in state government. I think many folks mentioned here about the impacts of pollution on communities and how profound it has been for decades. It is noted and at the community level and I think it's very important to keep that in frame, in mind and understanding that balance that exists between adopting new innovative technologies and meeting this moment within climate change that we have to meet.

Our objective is to derisk that as much as possible. And making this balance is why we build some of these incentive resources that are bringing nontraditional incentives in the space of this transition to help cover that gap. It's derisking and showing that it's possible to use different things and tools in different ways. And lastly, I'd say the market itself.

We've seen this in many other spaces in the clean sector, but it's the balance of incentives, but then also the carrot and stick of having the goal and ambition to have the market see the opportunity with that. It's mentioned hydrogen here several times. I know that a lot of folks remember hydrogen used to have huge challenges in kind of the market. But a lot of that has changed in the last several years. It used to be just Japan and know, the war in Ukraine.

Now Europe is very ambitious on hydrogen too. And having these other markets come to bear and bringing it in will derisk and lower costs across the board. I think that this last year is where we're really seeing that have accelerated the fastest, and hydrogen is a great example, but also in spaces like critical mineral supply chain to build all the batteries and technologies necessary, we are advancing the largest critical mineral resources within the United States.

We now provide 15% of the world rare earth supply in the last five years and the only facility in the Western Hemisphere for magnets necessary for all clean technologies. We're developing the largest lithium resource projected within the United States. Of course, some of these times and timelines may not be so in sync, but it's working in every single space to derisk that timeline parallel to what our goals and needs are and doing it in a manner constructively.

So I'll say that we're rolling out every single resource that we can to find a way to do that derisk into meeting that demand that you had mentioned.

Thank you very much, Mr. Fong.

Thank you, Mr. Chair. I wanted to kind of delve into something very specific. Certainly in the last hearings we've talked about the fact that there are so many different agencies, both on the state side and on the local level, that impact the supply chain. And there was a bipartisan effort on the Senate side as well as myself trying to get a supply chain coordinator to kind of protect supply chain from those types of encroachments and that could impact volumes and operations.

And now that we have this working group that you lead, I did want to kind of ask the specific question. I did read the June 30 report from PMSA and the headline was cargo volume cap for Los Angeles Long Beach. Question mark. And I believe is a South Coast air district is moving forward with a proposed rule. And if I may read, it says if enacted it may cap cargo throughput at the ports of Long Beach and Los Angeles.

And then it goes through and says that as concerning as this rule is, it should not be viewed in isolation. There are a number of other measures, and it goes through a litany of other rules. And it concludes by saying that this is on top of rules which will already add immense costs while further increasing instability and uncertainty. More stringent shore power requirements, new tech replacement requirements and 2030 goals for zero emission cargo handling equipment that doesn't exist and has no supporting infrastructure.

This is very concerning as I read this report from the merchants. So I guess maybe my question to Kaustra or to GoBiz is how do you balance that? Because are you guys tracking this rule? Are you aware of its impact? I mean, a cargo cap, a volume cap in Los Angeles and Long Beach, as my colleagues have mentioned, would be severely detrimental to not only the trade corridors but also maintaining our leadership in goods movement.

Sure, thanks for sharing that. And we are aware, in fact, some of us shared PMSA's article around so really appreciate PMSA sharing information with us. And I would just mention that Trey had noted we have an interagency working group and I think we've been meeting for about eight years now with the development of the Sustainable Freight Action Plan.

I think one of the benefits of that is when CalSTA or GoBiz or other state agencies or entities or the ports bring to us an issue like that, what we do is try to raise it with our sister state agencies. So California Air Resources Board sets many of the regulations on air quality in the freight industry. So what we try to do is just bring the industry concerns forward to our working group and just try to note and educate each other on some of these issues.

And of course we defer to a CARB for setting those regulations and then the local air districts, of course on that. But that's something that we do closely monitor and make sure that we understand the issues and try to work with the industry to figure out some of the solutions through that. So I think that working group is really important. And just to give an example, I think on the last question, Caltrans and CalSTA commissioned a statewide truck parking study.

And you wouldn't think that that had a connection to the zero emissions. But we ended up going through that study and figuring out we have a 5500 space shortage in California at peak truck parking hour, which is midnight to 01:00 a.m., a lot of times when people are sleeping, so they don't see the situation of parked trucks, but 20,000 trucks are parked along the roads every day.

So you have to think about where are those trucks going to park in charge, because you have to park for long periods of time. So through our study, we worked with energy commission. They used our data to do a lot of modeling. Air resources boards have been very engaged in the truck parking and we brought.

The industry sorry, I don't want to interrupt. Certainly my colleagues here represent the ports of Los Angeles and Long Beach, so they may follow up. But I did want to specifically ask for a comment on this particular this.

If this rule were put in place, according to the merchants and to the ports and to the terminals, it would cap cargo throughput through the ports of Long Beach and Los Angeles, which, as highlighted before, is 40% of the goods and products coming into California and the United States. So what in particular is your working group doing to address the concern of this layered on top of these other sources?

Whether it's coming from the air district, whether it's coming from CARB, the conclusion is pretty damning, which is that it's going to further increase instability and uncertainty in our supply chain while adding immense costs. What is the working group doing?

Well, I think since we're at the state level, it is difficult when you have to balance the local level issues and the south coast air quality management district does have that autonomy. So it is a little bit challenging for our agencies that don't have that authority to step in. So it's just more of an education process, at least for Kalsta.

This is before your time, so I'm not going to layer this on. But for those of us who were here for the last hearings, we had this huge debate and you may have been there on who the lead agency was, who was going to be the lead agency that would ensure and protect the supply chain. Some people wanted GoBiz, some people wanted calstra. And it was concluded in the last hearing that your agency, the California state transportation agency, was the lead agency.

So understanding that because it was coming from your agency, that deferring to other agencies, they may sound nice, but when it comes to actually protecting the supply chain, you're it, the buck stops with you. Right? So if there is a proposed rule that would potentially impose a volume cap in the two largest ports in California, that's 40% of the goods and products into the country, into the United States of America, right.

I would hope that your agency, which is deemed by you the lead agency to protect the supply chain, would have this as your top priority because this is June 30. This was the latest report to keep California and our parts competitive versus other ports. You mentioned that somehow that there was fear of some of those goods going to the Gulf Coast and some of that's returning.

But if there's a volume cap for throughput through the ports of Los Angeles and Long Beach, we have a significant competitiveness issue that I hope that the working group has prioritized. So I know that you're kind of new to this position, but at the end of the day, this is a major existential situation, an existential threat to California.

If there is somehow going to be an indirect rule imposed by a non state agency that would somehow impact the operations of the two largest ports in California, I just want to give you a chance to respond to that.

Oh, yeah, sure. That would definitely be significant and the impacts of it could be quite large. So it is something that we're taking very seriously. And again, we are convening and we'll be working with all of you to try to figure out a good solution that doesn't impact our businesses and also our workforce. But also improving air quality is important goal.

I would say one thing that we have done, we did award South Coast Air Quality Management District a significant award to help with 376 charging infrastructure facilities around at seven different locations in the South Coast Air Quality District and then 17 hydrogen fueling dispensers plus a new battery electric locomotive.

I get what South Coast is trying to do. I think you're trying to spin me a little bit. But here's the thing. South Coast is imposing this rule. So you giving South Coast more money to put more restrictions on the port does not give me any assurance that we have a really secure supply chain moving forward. So you see what I mean?

Not that we're giving for restriction. I'm just saying we're trying to help with the situation of avoiding any kind.

Of I got it. But I'm asking you about a specific rule that was written by the merchants that came out on June 30. I don't know if GoBiz wants to.

Respond, but I'll just say that it's not traditional, I think, for state agencies to interject and there's a lot of proposed rules that we hear across supply chain all the time. I think the difference now between now and a few years ago and maybe hearing proposed things in freight and goods movement, supply chain is in this time. The state of California, including the Legislature and the Governor, are putting $1.5 billion in supply chain, the largest state investment in the nation.

To make that investment shows that we are supporting and building out the infrastructure to facilitate the goods that are necessary to serve the nation. I think that's really different. I think that a lot of the local stakeholders and agencies and departments are recognizing that are cognizant of the fact that we are making these investments as the state of California.

So are you aware of this indirect?

Okay. And are you for.

Yes, yes.

Not for? I don't understand the rule but it's not something that we can even address. Right. It's at the local level. So local agencies, authorities in California have the meat leeways to make proposed rules and go forth with them. But I understand the business community is concerned and Eric mentioned it earlier.

It's important to those, especially those who are here to keep sharing these with us so that we can work with the stakeholders at those levels to understand that we as a state are making these large investments in supply chain.

And I want to compliment the work of GoBiz, certainly the work you've done to make investments. I'm just highlighting the serious concern from my constituents who of course have a lot of goods and products that go to these two ports represented by these two fine individuals. This type of rule has serious, serious implications to our state and to our supply chain. And so as we talk about all these investments, all these investments are for not if somehow we can't move volume through to the ports.

And so I just wanted to I mean I'm trying to impose kind of a sense of urgency when it comes to this and I hope you share that. Thank you very much.

Well, thank you very much. I want to thank my colleague for elevating that question because we need to know who's on first and who's on second. We also need to make sure that who has oversight and I support local control but we also know that the Legislature is a Legislature. We set policy and through that the Governor makes appointments. We have the secretary of transportation.

We cannot have local government in this regard to place a cap on the volume of our ports because what that will do is cause our ports to be crippled. We will be paralyzed. We won't be able to meet the supply and the demand that the consumers are asking for and if they can't get what they're asking for they're not going to be able to spend money and therefore it jeopardize our footing as it relates to the fourth world largest economy in the country.

And so I think that we need to tease out and we need to have further conversation in terms of who has oversight and making sure that people's authority does not jeopardize California moving forward in a very robust way. And so I think we need to have a further conversation with respect to that. I want to give my other colleagues a chance to ask a question, just.

One quick question, because the power of the purse really seems to come from the state. And so I'm just wondering, while you may not tackle the complete problem or meet the requirements of the localities, I'm wondering if the money we spend, you get some credit for meeting it partially to the extent that you can, rather than this heavy duty hammer of a cap coming down. And yet you're the one spending the money on it.

So as we go forward chair it's something we might want to look at because the power of the purse comes from state of California, right? You may want to think about how that mixes with local regulations and being subject to them or getting some reprieve temporarily while you're still building out all of those good things. The first thing you opened up with is seems like this is all a function of time. So in any event, that's my two cent. It's not a question, just a comment.

Thank you very much. I do have a real quick question for the LAO office reported from 2022 that refers to there is a section related to federal funds. Historically, the West Coast ports have received far less federal funds than the East Coast ports. Is there something our industry or the Legislature can do to become more competitive to receive these grants? Because, again, the West Coast is such a large area and our demands are extremely high, but yet we receive less federal funding.

So if you can comment on that briefly because we want to bring up the next panel.

Thank you, Mr. Chair. And I think I will also defer to some of my colleagues here on the panel who may be more familiar. I think one distinction on federal funds that's important to note is that there's quite a bit of the money that typically goes to federally owned and operated ports and then a much smaller share that is competitive for non federally owned ports.

So some of that distinction may be that Congress kind of allocates funding specifically for specific ports that are kind of run by the Army Corps of Engineers or a federal entity. So I'm not sure if that's the distinction, but if any of my colleagues have any familiarity with kind of federal funding and why California gets less.

Yeah, I would say that's definitely part of it. And just to speak to the efforts that at least we're doing. And in partnership with many of the ports and kappa behind us. Practically the second that we announced the port and freight infrastructure program, we sent a letter to USDOT Secretary Buttigieg noting that we had these investments and that California historically hasn't been getting its fair share of funding, and the harbor maintenance tax being one of those.

California, in a sense, has been kind of a donor port state to some of the other ports. A lot of other states have dozens and dozens of smaller ports on rivers and things. So it is important to keep that part of the economy going. But California has mentioned several times where 40% of imports, 30% of exports. So we should be getting a similar federal share.

I think we've been up to maybe 15% or 17% or so of the federal funds coming in, I think, for the Port and Infrastructure Development program and that's not enough for the importance of California to the economy. So back last month, a group of port directors and Secretary of Transportation toquesilma Shocken and several other colleagues went to Washington and noted that we haven't been getting our fair share investments. We appreciate what we've been getting, but it's definitely not enough.

And so we're well aware that California's share of the pie historically in transportation funding, I think it's about 10% that you would typically see. But that doesn't account for the importance of the ports. I think about two thirds of the imports coming into Southern California go to other destinations, every single congressional district in the country.

So it's really important that California be looked at as a federal and national gateway, not just it's a state of California trying to get its 10% normal share of funding when it comes to ports and freight.

Thank you very much. My colleague who couldn't be here, he offers up this question how can the state help businesses ties to the success and improvement of California supply chains becoming more resilient to future challenges such as technology disruptions, climate change impacts and the state's zeb regulations?

I can start on that one. I'm grateful for the question because I think there is a challenge that hasn't really been raised here yet today and that is sea level rise and the impact that that will have on a lot of our ports. So the state has taken some steps.

There was legislation that required the ports to do a vulnerability study to try each of the ports and submit that to the State Lands Commission to look at what their vulnerabilities are and what some steps may be. So in the list of challenges that you noted, I think climate vulnerabilities is certainly one of them, not just from emitting greenhouse gases and how do we reduce that through zero emission technologies, but also what are the climate impacts that we're already facing.

So a vulnerability study is a first step to understand what the problem is. But certainly there's quite a bit more work to be done to address those vulnerabilities. And I think as we look along California's coast, the ports are going to be one of the primary areas of focus that even though they aren't typically fully funded by the state, as we noted, it may be an area of focus for this committee and for the Legislature to think about.

Given their importance in California's economy, there may be some additional state investment needed to help develop some of that resilience. So I'll add that and then defer to my colleagues for additional comments.

Anyone else want to chime?

Sure. And thanks. And our. Department. Caltrans has done a lot of work on those vulnerability assessments and looking at fire weather challenges and then even earthquakes. We've done some research on the impacts of earthquakes on bridge structures around the ports of LA and Long Beach in a catastrophic earthquake. So those are just some of the examples. But also, you noted on zero mission infrastructure.

I think one of the things that we've been looking at is the land use challenges of trying to meet the 2045 carbon neutral goal. Takes a lot of land to be able to do charging infrastructure and places for parking vehicles and cargo handling equipment at the ports. That's going to be a real big challenge to the vulnerability. We need tens of thousands of charging locations around the state.

So even though we're building some of the largest ones in the nation and investing of it, it's just a drop in the bucket of what we'll need. Plus, the grid resiliency, as we saw last a couple of years ago, the ports were very helpful in addressing the crisis of the energy supply that some of the ports did not do shore power for the ships during that time to help with the grid.

But even in that case, I think the port showed that they were very resilient during that and were able to support and some of them were able to keep the ships even plugged in during those times. So that grid resilience is really important, and we know some of the ports are going after large federal grants for that, so we'll be supporting them in those efforts.

Great. Well, thank you very much. This is our first panel. Let's give them a round of applause. Thank you very much for being here and for your presentation. And certainly there will be some follow up that's necessary in order to move forward in a lot of respects. So thank you very much. Once again, we want to invite Gary Herrera and also Christina Zortman and also Mike Jacob to be at our panel, and also Rudy Gonzalez and Tommy Fave.

We want to start our first presenter off by Gary Herrera, the President of the International Longshoreman Warehouse Union Local 13. Welcome and thank you very much. But before you start, let me say, because you're in my district, thank you very much for all the work that you guys are doing for our brothers and sisters in Hawaii. We really appreciate you guys gathering, the food, the goods, all the things that's necessary to help those who are suffering in Hawaii.

So I just wanted to go on record and say that because you are, in fact my district, I'm sure that others are doing the same exact thing. We elevate and say thank you very much for supporting those who are in need of our sisters and brothers over in Hawaii. So with that, Mr. President, please proceed.

If you could, please introduce yourself and the panel again, just so you know, each of you have six to eight minutes to speak, and we'll present in the order that's listed on the agenda. After the panel will finish, we will invite my colleagues to have any questions that they may wish to ask of this panel. So, Mr. Herrera, thank you very much for being here. And please proceed when ready.

First and foremost, I want to say thank you for recognizing men and women of IOW and the community that stepped up for the efforts for Hawaii. It was amazing to see them work, and I'm proud to be a part of it. So thank you. Good afternoon, Assemblymember Gipson and select Committee Members. Thank you for having us here today on this very important topic of the ports. My name is Gary Herrera.

I am the President of the ILW International Longshore Warehouse Local 13, which is in Southern California. I'm here today representing locals 13, 63, and 94, which represents about little over 10,000 Members, plus a part-time casual workforce of over 5000 Members, all in Southern California, in the ports of Los Angeles and Long Beach. We're proud of the hard work that all the ILW Members have done that allows the cargo to move efficiently through the ports.

This, in turn, keeps the source shelf stocked with the goods for millions of Americans and American business that need to survive on a daily basis. We load and unload a variety of imported and exported goods that include automobiles, foods, medical supplies, building materials, home, and personal goods, and anything else that you could think of we load. ILW Members worked tirelessly through the pandemic during the COVID-19 pandemic, which tragically left. We lost numerous members during that uncertain time.

But during that uncertain time, we worked on an average of six to seven days a week to make sure that Americans got the necessary goods, to make sure that the hospitals got their medical supplies, that the PPE went out to the proper organizations to protect themselves so that we can keep America moving and keep California running in a positive way. We broke records every month with the amount of cargo that we worked. The men and women of the ILW, they risked their lives.

They became essential to make sure that they worked hard for every American citizen outside their own families. And I'm proud to be a part of that organization, and I want to recognize them and all their efforts and all their hard work that they did during that uncertain time. Today, the ILW continues to face automation threats, which significantly displaces our workers. We ask that the state funding invested in port equipment not be allowed to use for automated equipment, for infrastructure that supports automated equipment.

In addition, over the last five years, cap and trade funds, as well as transportation funds allocated for equipment have been allocated only for human operated equipment, which is imperative for both to have an environmental justice and an economic justice. We want just like anyone else. We want clean air. We live there, we work there, we're in those communities, but we also want to have economic justice. We don't want at the loss of jobs.

We like to call that Adveco. When we combine environmental justice and economic justice together, the road to a 100% zero-emission port environment is not without challenges and will be very expensive. Please remember that while our ports are a principal engine of the world's fourth largest economy, they are not without vulnerabilities. Currently, states that do not share California ideals like Texas, Florida, and Georgia, are all using their tax regulations to lure away maritime trade as well as economic benefits and political powers that comes with it.

We talked earlier about the harbor maintenance tax. I heard it brought up earlier. $11 go to those states. $1 stays here for our infrastructure. We're building for them to leave. And they don't have the same environmental goals and rules that we have. And we talked a little bit about the indirect source rule. Even if you were to fully automate every terminal in LA, Long Beach, you still couldn't reach that cap in which that rule is asking to be capped.

It is very detrimental to the ports, to the economy, to our communities, to workers, to labor, to the whole state of California, and to the whole mid part of the United States in which they rely on us to go to work and deliver those goods. In addition opportunity, we recognize the benefit of all Californians in development of floating offshore wind. The turbine projects. These trailblazing operations will require extensive shoreside infrastructure investments and collaboration among numerous stakeholders.

We request your support for the financial investments that the state will need to make in offshore wind. We also ask that the ILW's historic and geographic jurisdiction be recognized and respected as we continue to do our traditional work of moving all goods and materials within our ports. IOW Members are the backbone of the ports. During our 86-year history on the West Coast, we have provided a stable, reliable workforce that has kept cargo moving for the benefit of all Californians, the US. And global supply chains.

We are grateful for the collaborative spirit this body has shown our organization, and we appreciate having the opportunity to share our perspective again with you here today. Once again, before I end my comments, I just like to say to the men and women of the ILW and all their hard work during a very uncertain time during the pandemic, that they worked on an average of six to seven days a week, that we moved America's cargo, and we did it at the cost of our own lives.

That's how essential the workers are on the ports down in Los Angeles and Long Beach. And on a community level, on a humanitarian level, what Assembly Member Gibson has stated, we always go back and we give back to those in need. We have a saying an injury to one is an injury to all. And the men and women of the ILW did that. They loaded 13 containers all by hand, and we shipped them out to Hawaii.

And with that, I just want to say, allowing me to be here to speak on behalf of the ILW is an honor, it's a privilege and to represent the men and women who are working on the ports of LA, Long Beach from them to you. Thank you for hearing us out. Thank you for giving us an opportunity to speak and be a stakeholder in here and to protect our livelihoods, protect our communities, and protect American citizens and keep American jobs. Thank you.

Thank you very much, Mr. President. We appreciate your comments and the men and women that you represent. Ms. Zortman is here, want to give her an opportunity. Vice President, California Association of Ports Authority so thank you very much for being here with us today, and you can please start when ready.

Thank you, Chair Gipson, and fellow select Committee Members. I am representing the California Association of Port Authorities and we thank you for convening this hearing today. I am Kristine Zortman, the vice President of CAPA, as well as the Executive Director at A Port of Redwood City. So CAPA is comprised of eleven deepwater municipal port authorities throughout the state of California.

California is home to the most productive system of ports in the nation, including three of our country's largest container ports, as well as a diverse system of specialty ports which are responsible for serving a variety of industries, including tourism and waterfront recreation. Together, CAPA ports are responsible for handling 38% of containerized imports and 28% of all exports in the nation. Our ports play a critical role in our state's in driving our state's economic growth, leading environmental stewardship, as well as supporting our local communities.

Today, I'm pleased to provide a brief overview of some of the pressing public policy challenges and the opportunities facing California ports. California is the largest gateway for U.S. Trade with the Pacific Rim nations, in part due to our geographic location, but also because such a large portion of trade is consumed here locally and many exports are grown, manufactured and produced in our state. The goods that move through California ports have a major impact on the U.S. Economy.

More than 3 million jobs are supported by California's public ports, driving economic opportunities across the country. These jobs generate a worker's income totaling $1.34 billion annually. California ports also drive tax revenues throughout the country. In recent years, this trade has generated an estimated $38.1 billion annually, with impact spread throughout our nation. California ports are also working diligently to ensure their economic impact is in harmony with the environment. Improving air quality, protecting water quality, and enhancing wildlife protection are among the state's top priorities.

And our public ports have been creating ambitious, innovative and cutting-edge programs that propel our ports in California to be the model for ports worldwide. By way of example, in 2005, port-related air pollution emissions in the San Pedro Bay, the home to both ports of Los Angeles and Long Beach, dropped 90% in diesel particulate manner, as well as 63% reduction in nitrogen oxides and dropped 97% in sulfur oxides.

The ports of LA and Long Beach have also made goals in reaching 100% zero emission human-operated cargo handling equipment by 2030 and 100% zero emission drag fleet by 2035. In Oakland, port-related diesel emissions have been reduced over 85% since 2005, and additional initiatives are underway for decarbonization of freight equipment and electrical infrastructure.

The Port of San Diego is home to the first all-electric mobile harbor cranes in North America, leading the way for port electrification and making improvements for both the environment and the health of the neighboring communities. Since 2017, the Port of Hueneme has been certified as a Green Marine Port, the leading voluntary environmental certification program for North America's maritime industry.

At the Port of Redwood City, we are proud to sponsor the reuse of dredge materials for resiliency efforts, addressing sea level rise for our regional bay-wide communities, creating enhancing inner tidal habitat with living shoreline protection while providing GHG reduction, and facilitating carbon sequestration. While these are just a few port examples, you can see each CAPA port is aggressively planning and implementing green transportation initiatives that are aligned with the state's climate goals. Another critical component of California's clean energy goal is offshore wind.

To facilitate the goals of five gigawatts by 2030 and the nation's leading 25 gigawatts by 2045 at the direction of Assembly Bill 525. The California Energy Commission will soon be releasing a strategic plan for California offshore wind outlining essential next steps through those processes. The Port of Long Beach, the second busiest container port in the United States, is proposing a development of the largest facility in the nation specifically designed to accommodate the assembly of offshore wind turbines, or pier wind. The Port of Humboldt Bays.

Offshore wind and heavy lift marine terminal project will support the development of up to 1.6 gigawatts of offshore wind. This project did receive 10.0 $45 million in funding from the California Energy Commission to conduct technical studies, preliminary design and engineering, and pre permitting or entitlement activities. Working collaboratively with the Ports California must expeditiously work to ensure our ports can develop the innovative new technology.

Our ports are thankful to you for the investment you have made, but with offshore wind infrastructure at California ports estimated to cost more than $10 billion, additional public investment is critical to us. California ports are committed to moving goods faster to drive our state's economy. In 2021, CAPA joined the Supply Chain Success Summit convened by the Governor's Office, or GO-Biz, the State Calista, California State Transportation Authority, the California Food and Agricultural Department, and other key stakeholders to work on solutions to improve our supply chain.

In doing so, our ports contributed to solutions that will help make our supply chain more efficient, ensuring consumers can receive essential goods in a timely manner, including policies that incentivize efficiency and coordination. California has made historic investments for port and freight infrastructure to build a more efficient, sustainable and resilient goods movement system.

The largest portion of that investment, as you've heard earlier, was $1.2 billion, which will fund 15 projects statewide, creating an estimated 20,000 jobs and increasing the capacity to move goods throughout the state's global trade gateways, while lessening in the environmental impacts on our neighboring communities. The California State Transportation Agency also awarded $350,000,000 to 13 projects that will eliminate street-level rail crossings, making critical life-saving safety improvements, reducing emissions, and keeping goods flowing and people moving safely.

However, the financial need for deferred maintenance and compliance with new and ongoing regulatory requirements exceeds the investments that our ports are making tenfold in some instances. Many states that compete for cargo that has historically called our California ports, along with the jobs and the economic vitality that comes from this cargo, are creating dedicated and recurring infrastructure funding mechanisms available for their respective ports. For example, for more than 30 years, the Florida State Legislature has provided an annual General Fund allocation for their ports.

There's less than eleven municipal ports in the state of Florida, but it ensures that their ports can both handle freight demands, but also competitively compete in that global economy. Their baseline for that General Fund is $60 million annually that they create. Additionally, California must fight for our fair share of federal funding.

As you've heard earlier, last year, Assembly Joint Resolution 30 highlighted the funding disparity between the ports on the Pacific Coast of the United States, including California, Oregon, Washington, Alaska, and Hawaii, only receiving less than 10% of federal port-specific funding mechanisms. In closing, I would like to thank you for your continued leadership to ensure our ports and goods sector thrives throughout the state and can continue to provide to our nation. We look forward to continuing this ongoing dialogue with you, and I'm available for additional questions or comments. Thank you.

Thank you very much. Appreciate your testimony. Next, we want to invite to the microphone Mike Jacob, Vice President General Counsel for the Pacific Merchant Shipping Association. Thank you very much for being here and thank you for your continuous communication with this office and making sure that we move in the right direction. So I just wanted to let you know how much I appreciate you and the floor is yours.

Yeah. Thank you, Mr. Chairman. And congratulations on the appointment, as Select Committee Chair, we appreciate the communication with you as well and the ambitious goals you've already laid out for the committee. One of the things that is, I think most notable about everyone you're going to hear from today, including on this panel, is how symbiotic all of us are in our relationships. I represent Pacific Merchant Shipping Association, marine terminal operators, and ocean carriers.

So our Members are the employers of the ILW and we're the tenants of the ports. So everything you just heard from Mr. Aaron and Ms. Zortman are very clearly issues that we also care about. And I don't want to belabor those things, but I do want to respect the direction that we got from you, Mr. Chairman, about making this first hearing an overview of some of the ways that we all do that interaction, work together, and create the system that we have today.

And then we look forward to, of course, answering questions here, but also participating in your future hearings to address specific issues that you've already heard reference today, both from the dais and also from Mr. Herrera regarding indirect source rule in Southern California. We'll definitely be talking about that at your Los Angeles hearing next month.

But again, to take a step back to some of the things that Ms. Zortman just highlighted regarding not only the lack of federal funding but also the competition we have with other ports. The way that our port system is set up is a true public-private partnership. We have a system where our ports are proprietary agencies. That means that they move forward without the guarantee of local property tax revenue like any other municipal agency might. They do not have guaranteed state tax revenue, which a state agency might.

They are acting in a proprietary capacity within a market space. And within that market space, that means competitiveness is key because the ports need. Active private partners to help develop, fund. And finance all of the infrastructure that we need to do our work. And to make that public investment actually profitable, we have to be able to reinvest in not only our infrastructure but our equipment and our people.

Really, what that looks like is just to break it down, is when you look at and again, not every port is the same. Ports have different scales. They're in different niches. They handle different business. So this is not going to be illustrative of every single relationship, and different ports handle it differently. But generally, you'll have port infrastructure that needs to be developed. There'll need to be a revenue bond.

The revenue bond needs to be backed by revenue. The revenues are associated with a long-term lease. That lease needs to be entered into, obviously, with one of our members that's a marine terminal operator, or if the port is operating directly, that will be facilitated by a stevedoring relationship with marine terminal or some other company. And those people hire the longshoremen but also invest in the capital that you need to actually run the port, the cranes, and the cargo handling equipment.

We cannot make the reinvestment that's necessary. We can't invest in the next generation of technology that's necessary unless we're growing and we're competing for that cargo in order to reinvest in new leases tomorrow. And so one of the things that we are concerned about with issues such as a cap on the number of containers moving is obviously the ability to grow and then to reinvest. We obviously have made a lot of strides in terms of air quality improvements.

One of the reasons why that is such an interest to everyone and you'll hear it from everybody in the rest of the supply chain as well, is because they need to be in the context of economic growth. The planning horizon for making these types of investments is very long. We are transitioning to brand new technologies. We're investing in the infrastructure to support those technologies. And because those technologies are in their infancy, it's impossible for us to determine. At this point in time exactly what type of investments we're going to need.

What the scale is, and even the technology. When we talk about zero emissions, those. Technologies haven't been fully developed. We did hear in a couple of the conversations on the first panel the term electrification was used. We have not all decided that electrification is the best path to zero. It may be a hydrogen future, it might be a mix of those things, it might be battery electric, but all of those things need revenue streams to support the bonding that's going to underwrite that infrastructure.

And that is a challenge because a lot of our environmental impacts require investments that don't generate revenue. And it's hard to underwrite projects without the revenue to support the bonding for the revenue bonds. And so that's, I think, again, just a general proposition we wanted to make the argument that was made by the state when it adopted its Sustainable Freight Action Plan, which was the last planning document that was comprehensive in nature, adopted.

It was in 2016, and it was. Referenced early in our testimony from CalSTA. We still think that is the best path forward for the state, that you have to grow commerce in order to underwrite the additional cost of the infrastructure and equipment that are necessary to invest in the technologies of tomorrow. We cannot turn around and tell people not to do business here and expect them to invest more. That does not make sense.

So we are dedicated to having that conversation with you, Mr. Chairman. We're very happy to participate in this and other future hearings to talk about the specific issues that are in front. Of us to do that. As you've heard, we've had a lot of challenges. We've also had a lot of successes. We thank the state and the Legislature and the Governor for the investment. But those are one-time investments. They don't create ongoing reinvestment into our system. Our system will become more expensive.

And I'd like to leave just with one final thought, which is through the beginning of containerization, up until about 2005, what we saw was a continuous virtual cycle of reinvestment. We've always had more expensive real estate costs in California. We've always had more expensive labor costs in California and that's okay.

And the reason why it's okay was because we were growing and we were becoming more competitive, and we'd reinvest in ourselves. And we had growing market share. Since 2005, we've had declining market share. But we've been doing that in a way where we also have growing costs. And because we're a volumetric business, because we do everything on economies of scale.

Our customers see cost per unit. So when you see us bring in. Larger and larger vessels, the cost to our customer of a container per overhead. For that vessel goes down per unit. That's competitive advantage. What we're seeing with our customers moving. Their discretionary cargo to other ports is that their costs per unit are going down. And for all the reasons that Ms. Zortman cited, our costs here are going up, but we're losing cargo. So our costs per unit are going up.

And that's the opposite of what we want. That is not how you derive higher volumes and how you get more discretionary cargo. We need to recreate the virtuous cycle that we've had before. We know we need to accommodate higher environmental costs. There's absolutely no doubt. But we need to be able to amortize those costs over decades.

We need to be able to make smart investments in the technologies that we're doing. We need to be able to make smart investments in our infrastructure. We have the framework, including the tentative agreement that was just reached between PMA and the ILW, to have labor stability. And peace on the waterfront without question about what the paths forward are with that labor force. So thank you to that ILW.

We have no doubt what the preferences of the state are. Everything that touches a container is regulated. We have no doubt that the ports have made a commitment to zero emissions future. So as the business entities that are, facilitating those things, we want to be able to make investments in the state and we want to be able to.

Do it in a way where we're growing and we're making those robust contributions and we're not shrinking and we're not basically fighting a managed retreat. That is not what we want to do. So we look forward to having this conversation. It's going to be very complex. It'll be happening for many years, but.

And we would ask if you were to stick around a little, it a little bit in case there's questions from the dais. And so, next up, we want to invite our next speaker, Rudy Gonzalez, secretary Treasurer for the San Francisco Building and Construction Trade Council and also Tommy Favai, who is the business development manager for the International Brotherhood of Electricianal Workers. So thank you both for being here. And we'll start with Mr. Gonzalez first.

If it pleases the chair, I'd like to ask Brother Tommy to go first.

Absolutely.

Good afternoon, brother Chair. Carson native living Carson talofa. I wanted to speak to what our organization, our labor organization, has the partnership with both ports in LA and Long Beach. My service territory covers both Ports and LA county as a whole. I represent International Brotherhood of Electrical Workers local Eleven in Los Angeles. So we do play a vital role in the ports infrastructure.

For the past 15-20 years, I've been heavily involved with a lot of the infrastructure projects that have come across with the good partnership with both Ports LA and Long Beach and their harbor commissions. We've implemented project labor agreements, five year project labor agreements, and then just recently, the Port of Long Beach just adopted a port wide project labor agreement for ten years. And in suit of that, the Port of Los Angeles did the same as well.

So we've seen the successes of what project labor agreements bring for the economy, especially the local economy, and how we can put local people to work that lives in the Carson and the Harbor Gateway area and in both ports. That means a lot to our Members and then the community Members and their families that live in those areas.

I wanted to say that when it comes to the policies that the ports have done, when it comes to the clean air action plan, the clean truck plan and other policies that the ports have followed, especially when it comes to greeting the port.

We play a vital role in that, partnering with the certain terminals that are doing demonstration projects when it comes to zero emissions, with their cargo handling equipment and then other ship to shore power and other technologies that's in place that the ports have put out when it comes to RFPs. We've been dedicated to working closely with the partners that are here today and working closely with the IOW and other trade unions in building construction trades that are affected by a lot of this infrastructure moving forward.

I heard PRW. Peer wind. I've heard hydrogen. I've heard a lot of these things being brought up. IBW, we're all for know we like to green up our ports. We like to bring green hydrogen not just to the ports, but the whole California as a whole. And PRW, I think that's going to be a great terminal. Looking forward. And the key issues.

I think the prior speaker mentioned that when it comes to the electrical grid reliability, that's going to be a key issue of making sure and ensuring that we have our utility partners that are on board, working closely with the port terminals, working closely with the harbor departments, that the grid availability is going to be there. And I know how important that is with LADWP, the local IOU and Southern California Edison that will be affected by it.

As you know, we have local chapters in both entities, and we'll work closely with our local chapters on the outside branch of the IBW. But we're all for bringing more infrastructure dollars to the ports. We like to see more port grants coming down from both state and federal levels because we're talking about creating more good construction jobs in the near future. We currently have close to 2000 apprentices in our apprenticeship program. We're one of the largest apprenticeship program in the nation.

We have close to 12,000 Members of journeymen and apprentices that make up the greater Los Angeles area. So with that, if there's any questions that you have for me, I'll be around to answer. Thank you.

Thank you very much, Mr. Gonzalez. Thank you officially.

Good afternoon, Mr. Chair and Members. First, I want to associate myself with Member Pappin, who, while we may have ports that are relatively small in terms of dockage and volume, the ports of Redwood City and San Francisco continue to play important roles, both for economic vitality. But in particular, there's historical context there that I think could serve as we're following this through line of an overarching or an overview of seaport activity. A model for adaptation and change with an emphasis on climate resiliency.

Certainly a through line of all of our comments today would be infrastructure and would be rising sea levels and the urgency that's needed to repair our aging seawall in San Francisco, which is over a century old. So I've submitted my comments in writing earlier today, and I appreciate your staff. Mr. Chairman, I just want to cover a couple of key points from my written testimony. We still are a very important maritime city.

We have over a mile and a half of shoreline access to the bay in San Francisco, and it's my job to represent about 26 different unions of skilled journey workers and apprentices that contribute to that infrastructure. We also importantly represent civil servants who work for the Port Authority or the Port of San Francisco. And what I hear from them on a regular basis is that and this ranges from iron workers to underwater pile drivers, that the crisis of right now is really around our seawall infrastructure.

And to that end, if there's nothing else taken away from my brief comments, it's that CalSTA has a really important role to play in continuing to fund these efforts, particularly when local jurisdictions like ours pass important bonds and put skin in the game, as they say.

In terms of local dollars, we really need partnership from the state and the federal government to make those real, whether the port is solely focused on tourism or it's importantly, like in Oakland and Long Beach and other areas focused on the movement of goods and personnel. I'd also be remiss if I didn't talk about kind of the adaptation and the history around our port.

Our port served alongside of the Longshoremen, alongside of many other maritime unions as an important center, not just in the Gold Rush and the history of our state and the founding of our state, but it helped us win two world wars. The adaptation into shipyards and dry docks was really important. It was also important on a social economic level because the once thriving black community that we no longer have in San Francisco that we're frankly desperate to hold on to.

And if it weren't for local ten in San Francisco and many of our trades, I don't think many people of color would even exist in San Francisco. But importantly, when our shipyards were activated at their peak, that allowed the economic opportunity for black workers of the time to move west to San Francisco to set down roots and to become what is now known as the Hunters Point area, the Bayview, and the shipyard area.

It also serves as a warning to us that when these models adapt and shift, if we're not focused on the right things in the right order and the right priority, we stand to decimate lives, decimate generational wealth, to deprive people of health outcomes that we believe are just fundamental and part of their human rights.

So there's a dominant theme around economic vitality, but I think we also need to focus on the infrastructure aspect, because the infrastructure investments can provide solutions to the social economic issues, to the environmental issues. I'm very proud to be an affiliate of the State Building and Construction Trades Council and one of the, I think, four or five different councils that have signed on to a CADEMO offshore wind project labor agreement.

One of the things that the skilled trades bring to the Maritime Port Trades Council are that when our partnership comes with a development, whether it's a world class entertainment venue or we have less battleships, more cruise ships these days in San Francisco along the tourism lines, you need a skilled workforce that is capable of meeting that moment. You need trained personnel. And our unions, both from the longshoreman side and into the skilled trades we do that second to none.

We have the capacity to meet any effort tourism, national defense goods movement or the exciting opportunities that offshore wind really present to our state and the nation. And we can be a model for that, not just because of our calm sea conditions and important geographic aspects of San Francisco's Bay but we also bring labor peace with us when the important ILW secured their pack, much like when the teamsters secured theirs with Ups. These are indicators and also guarantees of economic stability under those labor agreements.

Also that comes too with the partnership of the state building trades and our local building trades councils. I also wanted to briefly talk about some exciting developments through that adaptation that have had a lens towards equity and diversity in our skilled trades. I said it and I'll keep saying it less battleships, more cruise ships. But we've also found ways to leverage public private partnerships along port owned land to create economic opportunities and to address existing crises like our housing crisis.

So whether it was the San Francisco Giants and establishing new ferry terminals for them or for the Chase Center or it was specific to manufacturing and recycling apparatus, we have found ways to reactivate our aging ports. There are exciting opportunities even before this Legislature that include peers 30 and 32. Senator Weiner has a Bill moving through the process to support that growth.

These are projects that are not just for economic activity, but they are also opportunities to improve the environmental outcomes and the emergency preparedness of our waterline, which is an understated, I think, asset to the entire Bay Area community. I can't say enough about offshore wind. We have a global outfit that we're in talks with. They want to look at the West Coast ports as key fabrication and manufacturing entities.

And I'm sure I'd be in agreement with my siblings here in this panel that real estate development and commercial development is exciting and sometimes shiny. And that's the thing we want to do with what people perceive to be underutilized port property. But I think we also have, in addition to national defense and readiness needs, we also need to think about what new technology on the horizon and what environmental efforts we're mandating and putting on ourselves that that port property may be necessary to deliver.

And so while some people would like to look at it as an investment opportunity exclusively, I think we also have to keep in mind we're talking about a limited universe of geography here. And we have to be very thoughtful and responsible about what types of developments are supported, what types of projects are funded and frankly, all of it is going to require your leadership around the infrastructure piece. So be it offshore wind or maritime readiness.

We believe that this committee's work is going to play a vital role for the State of California to meeting its climate goals. Certainly, there's always a GDP or a balance sheet opportunity here, but there are real people, real lives, real health outcomes. All will be benefited through your leadership and partnership at the state level. So I thank you and welcome any questions that the committee may have.

Thank you very much. And thank you to the panel for, again, your testimony here before the Select Committee. My first question is, historically, what has been some of the biggest issues that the shipping industry has faced? What were some of the solutions that was implemented to try to address some of those challenges? So whoever wants to take that, I'll.

Start, Mr. Chairman, and then I'll hand it off to Mr. Herrera. I think I alluded to it. Our biggest issues really have manifested themselves in the last 18 years. It is competition. We have been in a place where we were able to take the revolution that was containerization, and we were poised to take advantage of that, and we did. We had ports that were ready to invest in that technology.

We had a willing workforce that was ready to do it, and we had the assets that were there. So at the dawn of containerization, the Port of Oakland became the biggest containerized port in the world. And not long after that, LA and Long Beach started making their investments as well. The state was poised to make those investments and do it with minimal cost.

And I will say that's in a context where there's no federal industrial policy that supports trade, so unlike a lot of other nations that actually invest in their freight infrastructure, that does not happen in the United States. It has not historically happened. It has been up to states to do it on their own. We were blessed by being on the Pacific Rim and able to take advantage of blossoming trade with developing economies, first in Japan and then after we opened up China with the China trade.

That is going to continue to happen, but everyone else has gotten wise to it, and they see all the benefits that come with it. And so we need to not take that for granted. We can't take our geographic location for granted, and we cannot essentially step on our own toes, which is what we've been doing. We haven't been reinvesting in our infrastructure. At the same time, we've been mandating more costs.

And at the same time, as Ms.. Zortman pointed out, our competitors are competing, they're investing, they're putting in tax credits. They're directly supporting the infrastructure. So again, while we support the fact that this Legislature, the previous Legislature, this Governor during the pandemic, stepped up and have put a lot of money into it and are looking forward on issues like ze and saying we need to get ahead of this and put that money in place, it needs to be done in a context.

And the context has to be that we're competing for this cargo. I'll hand it off to Mr. Herrera.

Thank you very much. And you've lifted up tax credits for the ports. And so I just want to let you know that we are certainly taking notes to all these ideals moving forward. They're not falling on deaf ears. We appreciate you offering up solutions that face California.

Thank you.

Thank you, Mr. Herrera. Thank you.

Assembly Member Gibson, to answer your question, I believe some of the biggest changes we've seen in the shipping industry for us, the IOW is the automation piece coming in, displacing the workforce. And as we've seen it, we're starting to understand it. But I think to understand is to really know the best way to do that is to have a zero emission or a near zero emission piece of equipment with a human operator. I think having both of those components is where we need to start heading.

And I think we proved it during the Pandemic when we were breaking records and stacking the cargo all the way up to the back of the fences and finding open land to store containers. And we did that effortlessly. And I think at the same time, when we see the automation come in, we see that we work better than automation, but we also want that clean green. So through these years of change, we need to adapt and bring us along and also have a clean environment.

And I think that that's been the biggest change we've seen recently. But we've proven we can keep the cargo here. And with the alternative ways to keep us in that machine, with it being clean, they're out there. And I think we need to keep that dialogue open and keep that discussion open and keep investing in humans and in clean cargo handling equipment together. And I think it would be amazing to see the outcome when that happens.

And I think those changes and those are things that we've adapted and we're working towards. So hopefully that answers that question, what we've seen, the changes, and where we need to go.

Thank you very much. Does anyone else want to take a stab at that question? If not, let me. Oh, Mr. Fafay. Tommy?

Yeah, I like to mention one. This was back in mid November of 2021 during the Pandemic, and we had a large renewable project, solar renewable project in Riverside, one of the largest in the country, I think over 1000 Megawats. We were starting to get notice from our contractors in the IBW and Riverside that they were having supply chain issues and that their cargo was going to take three months, maybe four months backlog.

And the business manager called me up and said, hey, can we get a hold of the Port of Long Beach and the Port of Los Angeles and see how we can get those cargo here on our job site? So we jump to it. I just wanted to say with both ports working hand in hand, it wouldn't be possible to get those containers and the help of the IOW and our teamsters that unloaded those containers and delivered it to the large project in Riverside.

And it was around the time when Thanksgiving is coming around and Christmas, and we were looking at 200 electricians being laid off and 300 iron workers being laid off. And that was going to be a big detriment to our membership and to the iron workers membership at the time. And the port of Long Beach, thanks to Mario, Cadero and Noel and their container Department, they helped out immediately. They jumped on it right away.

They talked to the shipping owners, and a lot of that material was on the water and on the docks, and they moved all those material to the docks and then got it unloaded and truck unloaded to the city of Riverside. And just working closely with the supply chain, I think if we didn't do anything, the material still would have been like, behind the log and everything. So it's good that we work together on this. I just want to mention that.

Thank you very much. Have another question. How has the relationship between the port Administration and the unions changed over the years? Is there more that could be done on either side?

Well, thank you for the question, Assembly Member Gibson. And I'd like to answer that by saying I think the relationship is built to a really good relationship as we see it today. I think there's more of a respect between labor and management and the local levels of the port executors between Gene Soroka, Mario Codeero and having labor involved. It's been really imperative that they've been calling us and asking our opinion because we are the experts on the waterfront, I'm sure with other labor unions as well.

I think as we move forward, we got to continue that dialogue. We got to be at the table and have an understanding and have an open dialogue. That what each party can give to get the supply chain to its maximum and its best. And I think by doing so and what we have been doing, the foundation has been set, especially, I believe, since the Pandemic. It's created a more open dialogue, and I'm looking forward to it.

But I think we need to continue keeping that dialogue open and open with calls, with testimonials, with bringing people to the meetings and not trying to exclude anybody. And I think we're there, and I think we continue to do that. So I think the relationship is really good, and I think we can build on that even more, even to the point where we're talking. When we speak with PMSA and PMA, we have to have that relationship. We're together, and you have to have that open dialogue. So I think we're there, and I'm going to continue it great before we.

Transition to our next panel because I think it's important. I want to go back to a conversation, a question that my colleague, vice chair of this LEC committee, Vince Fong, made mention regarding the admissions cap. And what does that mean? And I want to specifically ask this committee, because you represent the owners and you represent the men and women and the ports and things of that nature, what is your concern?

And can you articulate what does this mean for the work that you do and the business interests of our ports? Realizing that maybe only speaking for Los Angeles or Long Beach, but if you can create expansion in terms of well, no, because it's only specifically for the ports, because it's AQMD so if you.

Can just talk about that, sure, happy to. And then I'll pass it over to Mr. Herrera again as well. It's an excellent question. Thank you. There's some primary issues with what's being proposed that have to do with jurisdictional issues, big public policy issues, and we need to address those. And then there's some specific questions we have about things like are they proposing a cargo cap? Because it looks like they are. They've told us they are. And if they did that, that would just be, frankly, untenable.

But before we get to that, there's a lot of big picture issues for us. One of them is the state of California is the primary regulator of every mobile source that touches a container in a port. There's a mythology out there about how things are unregulated. That is just not the case. Every vessel has its fuel regulated by the California Air Resources Board. Every vessel, when it comes to birth, has to make a determination to plug in at the direction of the California Air Resources Board.

Every single truck is subject to the regulations of the California Resources Board. Drag fleets specifically have additional rules, and those are addressed by the Advanced Clean Truck Rule, which is just adopted. In addition to rules that have been in place for drainage fleets since 2008. We have the same thing for cargo handling equipment. Every piece of cargo handling equipment it turns over has to be a best available retrofit or control technology if it's diesel.

And that's been in place since 2008, and those have resulted in these reductions that Ms.. Zortman referenced in her testimony. Diesel emission reductions at the ports are down over 90%. All the commercial harbor craft in the port already regulated. All of the rail yard emissions from their equipment, already regulated. And then the railroads themselves have multiple MoUs with the California Resources Board about engines emissions. Nothing is not regulated or accounted for, but it's in a context.

And the context is there are statewide rules that happen under the auspices of the federal EPA and the Clean Air Act. And that's important to us because we move everything in international and interstate commerce. We need to have uniform rules that apply across multiple jurisdictions and California has the strictest rules on the books and the cleanest operations of any place in Northern California I'm sorry, in North America, if not the world. And so we've embraced those. But that's the context.

What we're being asked to do in Southern California under the indirect source rule is have very local rules which potentially impact international and interstate commerce. Not just because the commerce is occurring is that a problem? But because the sources of emissions that they're trying to regulate are in that commerce. So a vessel coming to the state of California should not have multiple rules. If you go to LA and Long Beach, you should have the same rule that occurs in Oakland.

And we believe that same rule should also be in place for the rest of the country, which is what happens when you have standards that are adopted under the federal Clean Air Act by the state of California. Secondarily, the issue of the actual throughput caps is very dangerous. What happens if that goes forward? We don't know because we haven't seen the language, but we've seen the proposal.

And the proposal essentially says, once you hit a cap or a finite number of containers that have moved through a terminal, you cannot lawfully move another container without being in violation of the law. Under our leases that we have with the ports, we cannot knowingly violate the law. We'll lose our lease. Even if you wanted to violate the law, which none of our Members want to do, you can't pay a mitigation fee.

You can't make determinations about what might be economically efficient or when to invest in equipment versus not. It's just a hard cap. So if we had a cap of 10 million TEUs and you hit that number in October, you're dark in November and December. We just think that that makes no sense. Mr. Herrera, I know you have some thoughts about the same.

Thank you very much, mr. Herrera.

Well, absolutely. And I believe everything speaker just spoke about is exactly the way we feel as well. But it's devastating to the community. As know, you're talking about job loss, you're talking about the community. You talk about the local businesses that rely on the workers. This is going to be devastating to the ports of LA and Long Beach. They won't be competitive at all. They will send the cargo to the other ports across the country and to California. That's devastating.

As I mentioned earlier, and it was presented, it said, even if you were to fully automate every terminal in LA Long Beach, you still would not reach the goals that they're asking of. They're unattainable. And what they're doing is what we believe is they're going to destroy this engine that makes us the fourth largest economy in the world. They're going to destroy it.

And I believe that we all have to be on the front line of this to understand it and have them explain to us how this is beneficial to California and to the western part of the United States. So we feel it's truly detrimental to the community, to our job loss, to California, and to everything the previous speaker said.

We're completely in line with them, and we're all trying to fight it to preserve our LA and Long Beach ports as being the fourth largest engine in the world.

Thank you very much. Just wanted to pose that question. Anyone else want to chime in? If not, thank you very much for your testimony. We absolutely appreciate you being here, and we're going to call up the next panel to come and join us.

So we're going to call up Matthew Hargrove, Juan Acosta, Chris Shimoda, Rachel Michelin. Please forgive me if I mispronunciate your name. You can please state it correctly for me. And welcome and thank you so very much for being here and for being part of this discussion. We're going to start off with Matthew Hargrove, who represents the California Business Property Association as well as the National Association of Industrial Office Parks. Thank you very much for being here, sir. We really appreciate it.

And please introduce yourself and please start your presentation. Want to remind the committee you have between six to eight minutes of testimony and presentation, so please continue.

Mr. Chair, thank you very much for inviting me to be here and I know that there's other committee Members that are watching this online. Really appreciate everything that this committee is doing to look at these important issues. My name is Matthew Hargrove. I'm the President and CEO of California Business Properties Association. And I want to thank my colleagues on the panel for letting me kick this off.

Ironically, I have to get to a port terminal in San Francisco by 330 or my wife sails off without me. So I will make this quick. But I want to make sure I hit the points because I'm going to start taking this away from the ports a little bit and start talking about some of the other key pieces of the goods movement issues that we're so thankful that this committee is looking at.

First of all though, I was asked to explain a little bit about who CBPA is, who NAIOP is, who we represent, and what are the things that we look at. And the Administration was kind enough earlier to give this goods movement map and I really appreciate that because we're on here twice what I'll be speaking about today, both warehouses and logistics centers on the goods movement map. So I really appreciate that.

And six to eight minutes isn't enough to introduce all my groups and talk about all the things we're working on. So I'm going to try and move through this very quickly. But from portside, buildings to large warehouses far inland, these facilities play a key role in bringing products to the people and businesses in California. One thing I want to do is describe that CBPA is a large consortium of commercial real estate groups that have come together to work in California.

In fact, we're the largest state, real estate consortium in the nation. We have over 10,000 Members that are active in California. All our Members care deeply about goods movement and supply chain issues. But I want to specifically highlight our NAIOP group that we work with because they are the ones who are building, owning, managing the warehouse and logistics facilities that I will be talking about today. There's NAIOP chapters all up and down the state of California.

Sacramento Valley, San Francisco, NAIOP Silicon Valley, NAIOP SoCal, NAIOP Inland Empire and NAIOP San Diego. I work closely with the leaders from all these groups to make sure that we're providing information on bills and regulatory issues that are coming through that will impact goods movement and supply chain issues from the warehouse perspective. I'm also here today as a co-chair of the Goods Movement Alliance.

The Goods Movement Alliance was put together last year as a broad coalition of leaders in the Goods Movement Economy committed to creating and supporting common sense solutions in Goods Movement Sector. My co chairs on that are Rob Lapsley with the California business I'm sorry, Business Roundtable and Paul Granillo who's a really important partner with us in the Goods Movement.

He is from the Inland Empire Economic Partnership and is really essential in Goods Movement and I hope he will be somebody that you speak with from this select committee. Some of the key messages I have for you today is that the warehouse and logistics industry is critical to California given the proximity to not only our ports but our railroads and our infrastructure in terms of the freeways.

While many think that logistics is just e-commerce folks out there, I know that this committee knows that it's much more than that, that our industry warehouses critical components for families and businesses alike, from fresh food, medicines, you can't have emergency rooms without having warehouses that have those products in them to hospital inventories and business inventories. And the state itself.

The state has large warehouses all throughout the state of California that houses everything from emergency supplies to things that make the state run on a day to day basis. The importance of logistics became very clear during COVID with significant supply chain disruptions and lack of available goods. I for one hope to never see a toilet paper shortage again in my life and this select committee can help get us to there.

The key points I want to make sure you know from us is that warehouses and logistics centers, even the buildings that are far inland from the ports, are key and essential to working with the ports to make sure that stuff gets to Californians and to the businesses that are doing the commerce in this state. There is, however, growing land scarcity for warehousing which you should be very concerned about on this committee.

Much of that scarcity is being driven by a lot of the policy restrictions that the earlier panels have talked about, that you've talked about today on ISR. But more are coming from the Legislature and from local government, which I'll get into in a moment. But limiting warehouse development will be detrimental to the ports. If you don't have warehouses on this end, it's going to be creating more stackups in the ports and that throughput is going to be very difficult.

It will impact the supply chain, it'll impact consumers, workers and California's overall economy. There's also a very concerning lack of infrastructure. You've heard that today. The one time moneys that are coming in right now are fantastic and we love that. But we need to see ongoing investment in the ports and in the infrastructure that connects the ports to the warehouses, that connects the warehouses to the people in the stores where everything gets put out there.

Warehouses and logistic centers contribute greatly to the California economy, economic productivity, taxes and commerce. California warehouses are clean and green job centers that employ many of your constituents with good high paying jobs. I just real quickly want to hit a couple numbers from the LA base. Not of respect for knowing that is your district, Mr. Chair, but some of these things apply to all the ports throughout the state of California.

In Southern California, warehouses and logistics centers from the ports of LA, all the way to Long Beach Inland Empire are critical to efficiently moving goods to market. You can't do it without those logistics centers and you can't do it without the warehouses. The region services the largest consumer base in the United States.

One thing that I've learned recently that I didn't know, which is an elemental piece of goods movement, is a lot of the things that come out of the ports go to those Inland Empire warehouses that you've heard about, but then they come back into the LA basin. That's how the goods move here. They don't just continue moving off to other states. A lot of it do, a lot of them do, but a lot of it comes back into the LA basin to your constituents.

Regional logistics space serves multiple supply chain functions and demand is not contingent on short term movements and port flows. Customers occupy logistics space in Southern California for really three main purposes, to serve the consumption needs of those 25 million people that live in Southern California, to distribute to the greater southwest region where ten metro areas that equal to 15% of consumption in the US is within 500 miles of your ports. So that's extremely important. And then finally, of course, to take advantage of the US Asia trade.

Again, logistics centers and warehouses support all of that. In terms of jobs, one of five jobs in the Inland Empire is logistics industry and had the least unemployment during COVID These are solid jobs in the Inland Empire, they're really great jobs, but they're also good jobs in Los Angeles and around the ports. Over 865,000 employees in the logistics, transportation and material moving sectors, and again, logistics centers and warehouses are at the center of that for us, and these jobs are becoming more skilled.

They're leading to an increase in pay and the need for more educational training. I just real quick want to build on the land scarcity issue I know I'm trying to wrap up but California is very short on developable land and barriers to supply are rising. This will have an impact on ports, it will have an impact on goods movement in California. Already you've heard about a lot of the laws that the ports are dealing with but we also have the California Environmental Quality Act.

This requires new development projects, warehouses and logistics centers for us to analyze and evaluate their air quality, health risk, greenhouse gas impacts on a direct and cumulative basis. If any of the impacts for a proposed warehouse project are found to be significant, CEQA requires the local lead agency to impose enforceable mitigation measures to reduce those impacts.

CEQA is very strong but what you've heard today is a lot of laying on top of CEQA that's making it harder and harder to develop the things that we need to strengthen our Goods Movement Sector. As of November 2022, one third of the buildings under construction in the Inland Empire were in municipalities that had proposed or enacted local moratoriums on industrial development. If you don't have those warehouses in the Inland Empire and in the LA area, again the throughput on the port is impacted.

Other cities, such as recently you've probably read about Pomona. Pomona adopted sweeping bans on new warehouses which will backfire through increased costs of goods and forcing more GHG and VMT by pushing the warehouses further and further out. Policies like the South Coast Air Quality Management District's ISR on trucking and warehouses. You heard today a lot about the ISR issue on ports.

Well, we already have one in existence for our industry which I know Chris will get into a little bit, but it is impacting us big time and it is having a huge negative impact. The ISR that is currently on the books is impacting warehouses greatly and impacting how goods get moved around. We hope that you will stand and push back on the ISR that's being proposed for the ports or at least make them critically think about it much more with all the comments that you heard earlier.

And then we have pending legislation that will layer on some of the issues on warehouses and logistics. Recently there's pending legislation for a bill that will create 1000 foot buffer around many new warehouses. While this bill is very well intentioned, it would devastate the supply chain and it would actually create more GHG and more vehicle miles traveled by pushing warehouses further east into areas that are less populated or to Arizona or Nevada.

And then all of those trucks and all of those trains still go through the communities where the warehouses have been pushed out of. Yet those communities aren't going to be receiving the tax benefits, the jobs, the infrastructure investments that come along with all that. So with all this, the supply chain will not be able to keep pace with demand in Southern California if these types of policies continue to move forward.

The barriers to warehouses are continuing to increase and we ask this committee to take a look at some of those things. If not, roll back some of them. At least don't allow some of them to move forward or at least help inform your colleagues about some of the issues that will impact warehouses and logistics centers in terms of the overall impact on the Goods Movement Sector. And then lastly, I just want to mention that warehouses are inextricably linked with the housing crisis in California.

And it's not a stretch, it's not something I just put out there because we want to connect it, but because of a lot of the rules and regulations you've heard today at ARB, the GHG rules, the VMT rules, a lot of the housing projects now have to be more compact than they used to be. And they have to have a component of residential homes, they have to have office, they have to have some warehousing there to service the people that are living there in order to be able to meet the strict demands in California.

So with some of the scarcity issues I talked about earlier, we have to be able to co-locate these types of buildings with one another, integrate them into the supply chain within Southern California and the rest of the state, all of the corridors, to be able to move forward and meet some of the housing issues.

So with that, I want to thank you for having me here today. We're just scratching the surface. I know you're doing more hearings. I hope that we can come back and be invited again and be a part of this. Again, I want to thank you for reaching out.

Usually the warehouse piece isn't high on the mind of a ports hearing or Goods Movement, but this panel today is really showing that there is a huge piece of Goods Movement and supply chain issues that we're working on and we're a positive source of. And we are providing lots of good jobs in the warehouse sector and most of them are unionized, high paying jobs. Thank you very much for having us.

And again, I'll stick around for a couple of questions, but if I can sneak out a little bit early to try and meet my wife, I would not mind that. Thank you.

Thank you very much, Mr. Hargrove and I will say that I will probably have questions for you, but we want to make sure you're in good standing with your wife. So we'll submit those questions to you and expect an answer in response to the questions and so we'll release you at this particular point in time. Thank you very much for the testimony and appreciate you adding to the conversation. I want to invite up to Mr. Acosta to please proceed six to eight minutes.

And thank you very much for being here representing Burlington Northern Santa Fe Railroad. Thank you very much.

Thank you very much, Mr. Chairman. Thank you for holding this hearing and appreciate the staff's work as well in putting this together. So.

Thanks again. I know we'll be working together on a white paper and other hearings in the future, but this is a great start. You should have a copy of a bunch of slides that I prepared. I'm going to go through those fairly quickly and just touch on a couple of things. And so let's skip to page three in your copy of that.

The slide entitled Our Workforce s just to give you kind of a 30,000 foot level of what the California railroads are who we are, because I'm also testifying on behalf of the industry as well as BNSF. So there are 27 freight railroads, two class ones and short lines in the state. We've got nearly 5000 route miles, 6400 employees. The average wage for railroad workers here in California is $137 in $137,000 in wages and benefits.

And if you just look at the Class One employees who are covered by the twelve collective bargaining agreements that were recently ratified, railroad employees and Class One railroads can make up to $160,000 in wages and benefits. There are 24,000 retirees here in California who are paid $610,000,000 in railroad benefits each year. So if you skip now to slide four in the next page here's sort of the thought exercise for the day. Imagine California without railroads. Stop for a second.

You'd have to add 9.3 million truck trips a day, or year rather in California to make up for that lack of railroad infrastructure in the state. So railroads play a vital role in moving freight around the country, but also especially in California. If you look at page six, just some recommendations on factors that policymakers should consider when you're talking about transportation and environmental policy, because you can't have one really without the other. The two have to go hand in hand.

So the top of the list is avoiding leakage, moving freight out of California to less regulated jurisdictions. You've heard a lot about that today, a modal shift from rail to trucks. Now, I say that with one thing in mind, that some of our best customers are trucking companies. But there is a synergistic relationship between rail and truck, and there's a balance there. So avoiding a shift from rail to truck is important and then making sure that we utilize to its highest and best use, private capital.

You heard Mr. Jacobs talk about growth. And we have a bias towards growth in the railroad industry because growth really starts a virtuous cycle of investment and more growth, but sustainable growth. So those are some recommendations. And then finally, the last page of that deck is page seven. It just gets into safety. And that's actually where we would start. And I want to emphasize safety for a moment, go a little bit deeper into that and also the other s word, sustainability, if you will, Mr. Chairman.

And safety is where we would start. Any meeting on the railroad or job briefing. It is first at the top of the list in everything that we do. The industry has a proven record in safety. If you talk about hazmat, 99.9% of all hazmat shipments that move by rail get to their destination without any incident, without a hazmat spill, without an accident. Over the last ten years, less than 1% of all accidents on the railroad industry wide have involved hazmat releases.

So we have a decline since 2028% decline in accidents across the industry, and a 78% decline, almost 80% decline in hazmat accidents. And that really is due to three concepts that we focus on prevention, mitigation, and response. So on the prevention side, we'll start with people. Again, rules, training, and a culture of safety. Rules are the price of admission. We are a rules based enterprise of our own rules, internal rules, industry standards, as well as federal and state rules. We train around those rules.

We focus on that both in the classroom, technical training and field testing. Then there's a culture of safety. Most importantly, this is about approaching others, about making sure that your colleague next to you. The end of the day, both of you get home safe to your families and friends and loved ones. So it's about validating safe behavior and about bringing attention to exposures behavior that lead to safety exposures. And that culture of safety is vital because we want to maintain situational awareness.

We want to keep focused on safety throughout our day and everything that we do, even if it's a meeting in a conference room, we start with a safety briefing. But prevention also plays. A component of prevention is making sure our infrastructure is sound and is in good working order. The American Association or American Society of Civil Engineers gives rail the highest grade of all infrastructure in this country.

We put $20 billion a year as an industry into maintaining and upkeep on our networks so that infrastructure is critical. And maintaining that infrastructure also requires the use of technology to monitor and to inspect. So for equipment, rail cars primarily, we're looking at detectors that are deployed along our right of way on the BNSF 4000. Detectors that take audio readings, temperature readings, other vital signs of every rail car that goes past that detector each and every day.

Machine vision systems, high speed cameras embedded in the right of way that take a high definition photo of the undercarriage of every rail car on the rail infrastructure. We use ultrasound, lasers, x rays to examine the rail, to get inside the rail and see what you can't see with the human aye beneath the rail bed as well. Also track geometry cars that use lasers to make sure the tracks are perfectly aligned. And we deploy those by way of automated inspection cars, autonomous inspection cars.

So right now on our railroad, and same with the Union Pacific, our railroad is a 35,000 miles network. We can inspect 450,000 miles of track each year using these autonomous cars. So it's a remarkable step up in the level of safety and inspection and maintenance, but it also generates a lot of data, 38 million pieces of data a day that we put into a machine learning system. Other people refer to it as AI. Railroads have been using AI for many years. We've been progressing the technology.

We're well ahead of a lot of folks, certainly well ahead of Wall Street on that. But we use it to develop predictive safety measures. So near real time algorithms can predict when and where you might have a failure in a piece of equipment or track, and you fix it before there's a failure. That's the next level step up in safety. I should also point out that positive train control, something that is deployed across the country, is the unfortunate result of a terrible accident in Metrolink.

You may remember years ago when a locomotive engineer for the metrolink train pulled out of a station, went through a red signal while texting on his phone. But now we've got that deploy. That was a mandate by Congress. And in the industry, 94% of all freight is covered in territory that is controlled with positive train control. So you can't get through a red signal, you can't go through a signal that's misaligned. You can't get into a work zone where employees are out on the tracks.

It is a system that will save lives and is a proven system, one that we were happy to work on and be a leader in terms of development years ago. Secondly, mitigation. So that really simply boils down to this, making sure that there's the right package for each commodity. And that's really starting with tank cars that carry high hazard flammable materials like ethanol, which we import a lot into in California, as well as oil. Dot 117s are the state of the art.

They're mandated by Fomsa and the federal government. They're safer, they're thicker steel, there's a thermal wrap, they're stronger. So 100% of our volumes are covered of high hazard flammable materials are covered, transported in dot rather, and then special routing and speed restrictions for PIH and TIH. And then lastly, response. If there is an accident, we want to make sure that we work shoulder to shoulder with first responders, who we've planned and trained with. We train about 9001st responders a year.

Our railroad in the industry does the same thing across the industry. We have a website dedicated to first responders where they can have there's resources and information, there contacts that they can find on that website. We have 160 1st responders on our network in 60 locations that also have prepositioned response materials and supplies. We used a lot of technology to help keep our first responders informed. There's a phone based application called Ask Rail that the industry has developed.

So if there is a derailment, first responders show up, they can know what's inside of each and every car that's involved in that derailment. We provide something we develop something called secure track, and that is real time tracking of trains and the manifests for those trains as they move through a jurisdiction. We provide commodity flow reports and other reports that show the first responders what's moving through their jurisdiction. So let's talk about the other S word, sustainability.

And I know that's really an important S word in California. What does it mean for us? It means really a form of stewardship. We have a natural advantage in rail in terms of sustainability, in that we can move a ton of freight 500 miles on a gallon of diesel. We're three to four times more fuel efficient than other modes of surface transportation, specifically trucks. And we have a 75% reduction in greenhouse gas emissions compared to moving the same amount of freight by truck.

And again, I say this with love in my heart for trucking and our trucking customers and partners. In 2022, our customers, BNSF customers, reduced their greenhouse gas emissions by 23.9 million metric tons. So that's the equivalent of about the emissions from about 5.2 million vehicles. So the more you move freight by rail, the better off you are in terms of greenhouse gas emissions. But here's the downside of that. 80% of our industry's greenhouse gas emissions are from consumption of locomotive fuel, specifically diesel.

So what do we do about that? So we first try to be more efficient in our use and more frugal in our use of fuel. And we start with energy management systems. It's essentially software. It's like a cruise control concept in a vehicle. It regulates the throttle and brakes and sort of with keeping in mind the terrain, the geography, the train consists a number of other factors and maintaining safe operation of that rail, but reducing the consumption of fuel. We have automatic engine stop start devices.

99% of all our locomotives in the industry have these devices shuts the engine off after 30 minutes to avoid excessive idling, comes back on, only to keep on vital components of the locomotive and the train. Like the air brake system, we also are focused on new technology. So here's the really cool stuff. Okay? Battery electric locomotives. We tested a 2.4 megawatt battery electric locomotive in a consist with two other diesels in commercial service between Stockton and Barstow last year. Good pilot, good test, was interesting.

We learned a lot. Next year, we hope to have delivery of eight locomotives, but with bigger batteries, bigger capacity, 8 MW that will allow us to get from the ports of LA up to Barstow. And that's critical here for what's going to come next. We're working with others in the industry to develop charging stations in Southern California. We have cargo handling equipment, all electric.

In fact, Stockton, our intermodal facility there, was the first all electric facility in the nation in terms of yard trucks and cargo handling equipment. With 21 electric yard trucks, there and a hybrid electric crane that operates with a 90% emission reduction level. We also have solar panels there. We generate our own electricity for the facility as well. The last thing I'll mention two more things on the technology side. Renewables are critical to reducing greenhouse gas emission.

Renewable diesel fuel, it has a lower carbon content and the more we can use it, the better off we are in terms of reducing greenhouse gas emissions. Our target at BNSF is by 2030 to use 20% renewable diesel and reduce our emissions by a commensurate amount. And lastly, we are once again testing or developing hydrogen fuel cell locomotives. We did it 20 years ago. It was interesting. We learned some things. What's old is new again.

And if you have time over a beer or an adult beverage, I'll tell you a great story about Arnold Schwarzenegger and hydrogen fuel cell locomotives. Meanwhile, let me just say this. History teaches us one thing, has taught the rail industry one thing, that the best results in California in terms of reducing emissions have come from allowing the industry to lead on reductions and to collaborate with the air regulators to fashion agreements that incorporate that leadership, that embrace that leadership.

Someone might have mentioned, I think maybe it was LA or I don't know if someone mentioned the 1998 and 2005 MoUs, maybe that was Mike Jacob. Those were historical agreements. They brought emission reductions to California 20 years ahead of the rest of the country. The Clinton Administration EPA administrator called them unprecedented. And that's the kind of leadership that leads to positive results. By contrast, I will tell you that mandating technology doesn't work, at least not as well as leadership. Got you.

Because zero emission vehicles, locomotives don't exist yet commercially takes 30 to 50 years of testing. We can accelerate that by bringing on more of those battery electric locomotives. But that's something that we need to do and focus on in a methodical way. And lastly, Mr. Bradley from the governor's office mentioned the big project, the Barstow International Gateway.

I will just say that that is the last best hope in the state, in my opinion, after 25 years of working on these issues, California to see an advance in sustainability, but at the same time enhancing California's position in global trade. The idea there is to move small and large groups of containers out of the ports as soon as possible. Get them up to Barstow by train.

At Barstow, you can sort them, you can transfer them, you can take freight, move it from international containers to domestic containers. You move all those containers around using electric trucks, you put them back on a train for a move. Cross country, we'll have our own warehouses, self contained. It's 4500 acres. It's a billion and a half dollars investment. Private capital. What it does is it takes trucks off the road so you're saving wear and tear on the highways, reducing emissions creating 20,000 jobs.

You are avoiding that disaster that people spoke about at the ports when containers were piled up and ships were at sea. And you enhance the use of the Alameda corridor, so you help shore up activist finances. So this really is a groundbreaking, game changing project, and we hope it's one that many in the Legislature can support, that everybody in the Legislature can support.

Thank you, sir. Thank you very much for your testimony. We really appreciate it. Next up, we want to invite Mr. Chris Shoemota, the senior vice President of the California Trucking Association. Thank you so very much for being here. And we have six to eight minutes, and please proceed when ready.

Thank you, Mr. Chair, and good afternoon, Assembly Member Fong as well. My name is Chris Shimoto, senior vice President of government affairs for the California Trucking Association. The California Trucking Association was founded in 1934 and is the nation's largest statewide trade association representing the trucking industry. Our Members run the gamut from Fortune 500 companies to single truck operators, with our average Member being a multigeneration, family owned and operated California company operating about 20 trucks. Thank you for the opportunity to appear at today's hearing.

As discussed by my supply chain colleagues, trucks are an integral part of a system of systems that constitute California's supply chain. Trucks, ships, locomotives, warehouses, and the working men and women of the goods movement industry work collectively to ensure vital goods and services are delivered to constituents in all 120 Assembly and Senate districts in a safe, timely and cost effective manner. According to the Administration, goods movement dependent industries make up one third of the state's economy and jobs.

The San Pedro port complex alone is estimated to support one in nine jobs in the LA. Basin. Trucks are a key part of the system, with 65% of containers in the Port of Los Angeles moving by truck and 80% of all goods moving exclusively by truck. Statewide, nearly every facet of modern life and California's economy is touched by trucks. Industries as diverse as manufacturing, healthcare, agriculture, entertainment and construction all rely on trucking services.

Our workforce is majority minority, and the industry is almost entirely dominated by small and medium sized businesses. With nearly three quarters of the port of Los Angeles's containers being hauled by companies with fewer than 100 trucks, fleets operating in California's ports, sometimes referred to as drag fleets, have endured a challenging and ever changing environment over the past several years. The pandemic era supply chain crisis created a crush of activity that created several issues for drag fleets.

First, the rush to ship lucrative import containers to the US West Coast stranded an extraordinary amount of empty containers in and around the ports. Truckers were often forced to store empty containers in their yards, which would tie up critically needed pieces of equipment known as chassis. Chassis are required to move ocean containers by road, and the shortages caused by lack of empty container storage or removal of empty containers, exacerbated inefficiencies delays, costs and unfair fees for truckers, the American shipper and ultimately California consumers.

These and numerous other pandemic era business practices have resulted in both state and federal legislation and action by the Federal Maritime Commission designed to better protect America's supply chain. Then, over the past years, things completely shift in the other direction due to concerns over ongoing contract negotiations in a slowing economy. Cargo volumes are 20% to 25% lower this year in the San Pedro ports than over the previous.

Now, thankfully, contract negotiations have concluded those issues have resolved and California is seeking to convince cargo interests, our shippers from the retail industry to resume their business at the West Coast ports. But truckers are now facing significant new challenges. The California Air Resources Board's upcoming Advanced Clean Fleets regulation will require all trucks entering seaports and rail yards for the first time to be zero emissions starting just a few months from now, January of 2024.

Trucks already servicing ports and rail yards will be grandfathered in until their 13th year. But all trucks must be zero emissions at ports and rail yards by 2035 per this regulation. Given the state of today's zero emission trucks and infrastructure very similar to Mr. Jacob's message, this is going to pose a serious challenge. As of June of this year, of the nearly 21,000 trucks authorized to access the San Pedro ports, only 105 of those trucks were zero emissions.

Those zero emission trucks hauled in June of this year, just 0.76% of the containers in the port complex. By 2025, we estimate that nearly 2000 trucks will be required to be replaced from diesel to zero emissions. By 2028, that number will grow up to 8000 trucks, which will need to be replaced.

Charging needs for this fleet will grow from in excess of 100 MW in 2025, which is enough basically to power a small city up to four to 500 MW by 2028, enough to power a large city. As much as two thirds of this charging, just given the nature of the Dreich fleet, may need to be publicly accessible.

Retail charging these trucks will also be 6000 pounds heavier, cost two to three times more than an equivalent diesel, have greatly reduced range and will take, in some cases hours on a daily basis to charge. I do want to clear up a misnomer that I hear constantly about the Drage fleet that it is entirely a short haul business. We do a lot of short haul and regional business, some extremely short haul to near dock rail.

However, in the state of California, containers routinely travel 200 plus miles. For instance, from Reno in the southern Central Valley to the Port of Oakland. Very, very frequent occurrence. California truckers, especially those in Dredge, are no stranger to environmental regulation. Since 2008, fleets have invested about a billion dollars a year in California to upgrade to cleaner trucks, reducing particulate emissions at the ports. This is verified by the ports emissions inventories. Particulate emissions are down by over 98% and Smog forming emissions down by 83%.

And those numbers will improve even just given the existing technology and regulations. Fleets I am talking to about these regulations are not opposed to zero emissions. They are asking, how am I supposed to get there? The disagreements are purely about timeline, feasibility, cost, not about being opposed to the transition. As you have heard from my fellow panelists, each part of the system of systems is facing serious policy and regulatory challenges.

The fear as we exit a pandemic induced supply chain crisis is that California is creating a new crisis of our own making. Two closing thoughts for the select committee. First, California, I'm going to sing the same song as our fellow panelists, must continue to invest in its supply chain. One time investments are great.

However, ongoing investment is key so that we are better prepared for the next surge in volume, which will come, including an emphasis on improving landsite efficiency, both for trucking, rail and warehousing, and operations for California truckers and shippers. Second, California has positioned itself as a global leader in the drive to zero emissions, but you cannot lead if nobody follows. It is of the greatest importance that we get this transition right, because the world is watching what we are doing.

And failure in the form of a broken supply chain will impact constituents whether or not they are located near ports throughout the state. Mr. Chair, thank you again for the invitation to participate today. Your leadership as well as the select committee Members in elevating these supply chain issues. Happy to answer any questions and look forward to further discussion. Thank you.

Thank you very much for enlightening us with your presentation, and I'm sure we will have some questions. I want to move to Rachel. Michelle, I'm the President of the California retail association. Thank you very much for being with us today. We have six to eight minutes to provide us your testimony, your presentation and the floor is yours. So thank you very much.

Thank you so much. Thank you. Chairman Gibson, Assembly Member, Fong I feel like I'm playing cleanup because all of these guys end up with the retail, because we're the ones that are every part of the supply chain and then ultimately have to interface with our consumers. So I appreciate the opportunity to be here. My name is Rachel Michelin, President and CEO for the California Retailers Association.

We represent retailers large and small throughout the state, from independent retailers to national brands, to our pharmacies, our grocery stores, and our specialty retailers. I'm honored here today to provide testimony on behalf of retailers operating within the state of California.

The topic of supply chain challenges is of paramount importance, especially as it pertains to California's ports, warehouses, the regulatory landscape, cargo security, the impact of trucking on the goods movement, the effect on consumers, the influence on California's economy, and the broader systematic issues that impact our operations. First and foremost, the state's ports play a pivotal role in facilitating the flow of goods into and out of our retail businesses. However, it's imperative to address the challenges that have arisen within this critical component of the supply chain.

Over the past several years, we have witnessed an alarming increase in congestion and delays at California's major ports. This congestion has resulted in significant disruptions to the timely movement of goods, leading to inventory shortages, increased costs and ultimately dissatisfied customers. The surge in container traffic, coupled with labor shortages, has overwhelmed port operations. Retailers have faced extensive waiting times for unloading cargo, leading to increased fees and storage costs. These delays not only affect our ability to restock shelves, but also impacts the overall health of our businesses.

Warehousing the warehouse sector is equally crucial to ensuring that products transition smoothly from ports to retailer shelves. However, in California, warehousing challenges further increase our supply chain issues. Escalating land costs have limited available space for warehousing facilities, leading to increased competition and higher rental prices. This in turn has contributed to a situation where retailers often struggle to secure adequate storage for our products. Moreover, the labor shortage extends to the warehousing sector, resulting in reduced staffing levels and diminished operation efficiency.

As a consequence, retailers have encountered delays in receiving products from warehouses, causing additional disruptions to inventory management and distribution. Important to you, Assembly Member? Cargo theft and retail theft would be remiss if I didn't mention the impact that that has. In addition to all the congestion and delays, California retailers are facing significant concerns regarding cargo security and retail theft. The increased complexities of the supply chain have unfortunately created opportunities for criminal activity.

Cargo theft, in particular has become a major issue, and it's leading to substantial financial losses for retailers and the broader economy. California's vast network of highways, railways and ports serve both as an asset and a vulnerability. Criminal organizations exploit these transport routes, targeting cargo shipments and storage facilities. These thefts not only result in financial losses for retailers, but they disrupt the supply chain, causing further delays and complications. Retail theft, both in physical stores and during transportation, compounds the challenges we face.

This not only affects our bottom line, but OSS poses safety risks to employees and customers. The systematic impact of cargo and retail theft further highlights the interconnected nature of the supply chain challenges we address today. Trucking is also a lifeblood of the goods movement within the retail supply chain. Efficient and timely trucking operations are essential for the distribution of goods from ports and warehouses to our stores. Unfortunately, the trucking sector faces its own set of challenges.

In California, the shortage of qualified truck drivers has led to increased transportation costs and delays. The state regulations, including those related to emissions and rest periods, can sometimes unintentionally hinder the timely movement of goods. Long wait times at ports and warehouses also impact trucker schedules, leading to reduced productivity and increased costs. But at the end of the day, it's important to recognize that the challenges outlined have a direct impact on consumers.

The disruptions in the supply chain lead to product shortages on store shelves, it limits consumers choices and it's driving up costs. These challenges not only impact our businesses, but impact the everyday lives of Californians. Consumers rely on the availability of goods to meet their needs and preferences. Delays in the supply chain can lead to frustration and inconvenience. Moreover, the increased cost occurred due to supply chain challenges can result in higher prices for products, affecting consumers'purchasing power and overall economic well being.

We also have to look at the impact on California's economy. Beyond the direct impact on retailers and consumers, the challenges in California supply chains reverberate through the state's economy. As retailers face disruptions and increased costs, their ability to contribute to California's economic growth diminishes. Retailers are major contributors to the state's tax revenue, employment opportunities and overall economic vitality. The state's economic sectors are interconnected, and disruptions in the supply chain can have cascading effects.

When the retail sector struggles, it affects other industries, including transportation, manufacturing and services. The cumulative impact can ultimately slow economic growth and hinder the state's ability to thrive. While we recognize the importance of regulations in maintaining a fair and equitable business environment, it's imperative that we strike a balance between consumer protection and the smooth functioning of the retail sector. California's stringent regulations, while well intentioned, can sometimes inadvertently hamper retail's ability to navigate the supply chain effectively.

In this context, it's vital to acknowledge that the supply chain is a complex system of systems. Each component, from ports to warehouses to regulatory boards, cargo security, trucking operations, consumer impact, economic implications and retail operations are all interconnected and interdependent. Changes or disruptions in one area will have a ripple effect throughout the entire system, impacting efficiency and performance. Complex, complex labor laws and compliance requirements create additional administrative burdens for retailers, diverting valuable resources away from core operations.

The oversight provided by regulatory boards is essential, but there is room for improvement in terms of fostering collaboration between retailers and these boards. A more transparent and consultative approach could help ensure that regulations are practical and workable within the context of the retail supply chain operations. In conclusion, retailers and Californians are grappling with a complex web of challenges within the broader system of systems.

Congestion at the ports, warehousing limitations, cargo and retail theft, trucking related delays, consumer impact and economic consequences, along with the intrinsicies of regulatory landscape, have combined to create an environment that hampers efficiency and profitability. It's my hope that through continued dialogue and collaboration, we can work towards solutions that not only address these challenges, but also recognize and navigate the interconnectedness of the various components that make up the retail supply chain. Thank you for your. Time and attention, and I'm open to any questions.

Thank you very much, Ms.. Michelin. Thank you very much for your testimony. And again, to all my to the panel, thank you very much for being here and enlightening us and educating us in this space. And so at this point, I want to ask a question, then certainly invite my vice chair to ask questions as well.

Do any of you and any one of you can ask this question or answer this question do any of the panelists think there are solutions that the Legislature should or could take to bolster your prospective industry and what does that look like from your lens? Chris.

There we go. No, thank you for the question, Mr. Chair. I'll stick with the theme of my remarks and specific to this transition away from internal combustion to zero emission technologies. So I'd put it into two buckets, really, is when you talk about the transition to zero emissions, there is not a one to one replacement.

Unfortunately, for the technologies that we have today, there is no either battery electric or hydrogen fuel cell truck plus the infrastructure that is going to do exactly what a diesel truck does at the same cost, at the same efficiency. And so there are specific use cases that are, I'd say, preferential for specifically battery electric technology, which is more highly developed right now.

And policies of the State of California really should be geared towards making sure that those specific use cases are supported to the maximum extent possible, by way of incentives, by way of smart policy. We also have a major issue where previous generations of technologies that both ourselves and railroads have implemented did not require anything other than for us to go to a truck dealership, purchase the truck, fill it up with diesel, and you go operate a zero emission truck.

Specifically, a battery electric truck requires you to actually interface with your local utility to get interconnected. Your charging for Class eight draft trucks specifically is going to impose a huge burden on an address and circuit specific basis for those utilities. And I know that other committees and other authors have been actually tackling this issue with respect to interconnection delays just with our existing demands for the state's investor owned utilities.

And so I foresee a lot of issues there that we are going to need to be, I think, more nimble and smarter than just what we've imposed today, which is a blunt force regulation which basically says it doesn't really matter if your particular duty cycle or model is going to work with zero emission technology, you must do it.

I think we need to pull back and be a little bit smarter about how we implement and the state's position right now because of how early we are in this transition to be. We want to support the success of anybody making the transition to zero emission technologies, and that's, quite frankly, not where we are right now.

Thank you very much, Rachel.

Building a little bit on that. But I think from a broader perspective, what I see happening is that you have too many cooks in the kitchen and we don't have a broad base. And I would hope I think this is something we've talked about with the goods movement, is bring everyone together. I think that we need to have a place where we can have conversations. I think Chris brings a certain perspective from trucking that impacts my industry and my Members.

And I would say that we've always said we're not opposed to sustainability or any of that, but the regulations have to work, and I think it's done in a vacuum. You have one regulatory board doing one thing. You have another regulatory board doing an indirect source rule. You have the Legislature doing something there, and no one's looking at it from a broad perspective and to say, okay, well, if you do this, what impact is that going to have on this?

And I think that's what we're missing. I think during the crisis, all of us were advocating for kind of a port czar, right? Someone who could really oversee our goods movement czar and oversee what's going on. That never really happened. I think we're all hopeful that you can go into that role to really help us understand, but you have to bring everyone together, sit around a table, let's roll up our sleeves. Let's figure out how to make it work.

Because I think we have more in common than we do in issues that we don't agree with, but because we have so many, I always say, what fire hose am I looking at this day? Because it's always coming at you. And I think we need an overreaching opportunity to have these conversations and really talk about solutions.

Thank you very much, and I will be brief.

Okay, mr. chair, first of all, keep doing what you're doing with this committee. Understand the marketplace, understand the supply chain, the stakeholders, and the way we do business and what we're doing. Just keep doing what you're doing with this committee. It's number one. Number two is as far as the Legislature as a body as a whole, do no harm. There are a lot of bad bills. There are a few referenced today.

Mr. Hargrove mentioned one on thousand foot buffer zones that just create more problems than they solve. The ISR concept is a misguided concept. It's like rent control. It's not going to help move freight any cleaner, and it's going to move less of it. And then thirdly, be careful not to paper over bad policy with subsidies when you pass or promulgate a bad regulation or a bad piece of policy, and then there's a cost to that compliance with that regulation.

For you to step in and provide subsidy is like a parent giving their kid a credit card. It doesn't really solve the spending problem or the underlying problem, the bad policy issue, it just runs up a tab, and the policy is still bad. So those are my three suggestions.

Thank you very much. But I do regarding Rachel's question, I think that I just referred to my team. I think there's a piece of legislation that's moving through the process. Maybe it's in the Senate that will create a Tsar, because I think that we need to be having conversations so that everyone knows exactly what's being said and we don't have the unintended consequences that we see today. Right?

So it's important that we elevate that intention of that piece of legislation and the wisdom that goes into that, to making sure that all entities, all stakeholders are having that robust conversation, to making sure that we minimize the unintended consequences that we can have on California's economy. And so we look forward to seeing where that Bill lands moving forward. So I want to see if my colleague, Mr. Fong has some questions for you.

Thank you. Mr. Chair.

Certainly support the idea of a supply chain coordinator carried that Bill. Senator Gonzalez carried a similar Bill. It stalled out. But certainly I think you're absolutely right. I'm a little biased there, but you're absolutely right when it comes to having someone overseeing the supply chain. Appreciate everyone's comments and testimony. You guys shed the light on the real world consequences of the policies that come at the Legislature, especially when it affects the supply chain. I like the reference of system of systems.

People view the supply chain within their own silo, and how they all interact with each other is critically important. I did want to ask, at least from the rail and trucking side, there's been some investment and a push to do some more data management and kind of facilitate communication. How is that going from your standpoint? I know it's the MoU and everything is really initial, but are you having conversations?

Is it going to work within your Members in terms of smoothing out, building more efficiencies with your truck drivers or with your rail operations?

What I'm hearing from our members is you've got multiple Marine Terminal Operators with their own proprietary software, truckers have their own truck management systems. And I think that there is a recognition amongst everybody that to truly get a coordinated supply chain, the systems need to talk.

And as far as whether or not the efforts with the MOU are going to truly fix that, I mean, I've been involved in these discussions long enough to have gone through a few iterations of this, but I think that that is the recognition and hope that data needs to talk to each other for every node in the supply chain to really be coordinated and so I would just encourage state support for those efforts moving forward.

I know that Port Director Seroka and others are really flying that flag for more data integration.

So, Assembly Member Fong, we've developed a number of applications technology that will allow our customers to have transparency into where their freight is at any time on our railroad so they can schedule pickups deliveries, they can coordinate better with container movements and other freight as well. So I think that's progress as far as the railroad is concerned and our relationship with the beneficial cargo owners, I think on a broader technology basis, blockchain technology still holds promise, it's yet to be fulfilled.

But that would begin to address sort of the industry segmentation. So between us and our customers, we can develop that technology and that access and that transparency, but between different industries and different stakeholders, whether it's the port and the trucker and the railroad and the beneficial cargo owner and the steamship line, that has yet to happen, I think.

And then lastly, I would say California, I know Illinois has done something similar, pass laws or enact laws that are meant to address data privacy but then are abused or misused. And I think of a case in Illinois where we have kiosks at our intermodal facilities there in Illinois and California and other places that allow for a trucker to come in with an optical scanner, move in and out.

It cuts the time down and eliminates queues and excess emissions and speeds the trucker's trip and their customers trip as well and the delivery of their goods. But clever trial lawyers have been able to take that law and interpret it and get the courts to agree with that interpretation. And without proper consent from a third party vendor that owns and operates those optical scanners, that software, the railroad faces huge liability for each and every exit and entry into that facility by each and every trucker. And those numbers add up very quickly. So we got to be careful with that application.

Absolutely. It's speaking to, I mean it's preaching to the choir saying the obvious, but the state of California doesn't have a good track record when it comes to IT systems. And so I just want to make sure that you guys are the tip of the spear, making sure that everything is coordinating, building efficiencies, moving potentially larger volumes as time goes on.

So we want to make sure, especially as we're investing as a state, that everything's communicating with each other, that it actually helps you, it's value added to what you're doing and not an obstacle or a barrier. And I think that's a fear that I have. I think others share as well. Wanted to go to the retailers. You did bring up the issue that's very important to me, which is the cargo theft and retail theft.

The Governor just announced, I think moments ago that he's tripling the CHP presence in LA. Recognizing what's going on in the retail theft side. And then of course, we saw what happened. I think on the cargo theft side with what was going on with rail, I was wondering if you could provide some initial data or some trends, I guess we all know it's going up, and I think it's going up exponentially.

But I think in terms of for us conceptually, trying to wrap our hands around the extent of the problem and how pervasive it is, I don't know if you have some data that initial data that you've collected from your members or from what you've seen from your security teams.

I'll answer after. Go ahead.

Okay. Because you probably know more about it than I do, so it's good that you're backstopping whatever I have to say and clean that up. I don't have data for you. Assembly Member. It's something I can get to you. To the extent that we have data, we tend to keep it close to the vest for a number of reasons. But I will say that this is organized crime. These aren't one offs.

These are very sophisticated organizations that have, they've got an intelligence gathering component, they've got a transportation team, they've got an operations team that actually breaks into the container and they exploit opportunities as we move freight faster and get out of sort of the capacity and congestion issues that we had that were particularly acute during the last stages of the pandemic that minimizes the exposure.

But there are sophisticated rings, not just in California, but throughout our southern transcontinental route, where there are teams of organized crime teams that will break into auto racks as they're moving, as they're moving down the right of way. So it is very challenging, but I would be happy to share that in maybe a

Absolutely.

discussion, a sidebar with you.

But it's a problem. I guess it's the conclusion

Yeah, it's a problem.

So I think that on the retail and it's not just rail, I mean, trucks are getting hit, they're going to distribution centers and hitting them. They are very sophisticated. But I think the other piece of it is that they're also recruiting people that maybe people who are unhoused, people with mental health issues, people who are drug addicted. So it's a major problem. This is the number one issue right now facing the industry is organized retail crime and retail theft.

Okay.

I mean, a lot of retailers are doing their calls this week, their earnings calls. It's the number one thing. I do want to say that we were able to get movement with the Organized Retail Crime Task Forces. We were able to get the funding. The Governor stepped up about two years ago with funding. We just finished the round of getting out the local law enforcement grants. So I think that'll help on some of this.

But that's another piece of this conversation, is that we have to have a conversation about how do we protect the employees in the ports and trucking and rail and retail and how do we get a handle on this? Because it is getting worse. You obviously, I know, Assembly Member Gibson, that's down in your area. You know, every day I'm getting emails from these types of organized crime. You know, we're willing to step up.

I mean, you and I have had conversations, we're willing to do and work with anyone we can, but if we can't get a handle on it, it's going to have a huge impact just to not only to our partners, but to the consumers who ultimately won't be getting the products that they're expecting.

And also, you made a great point. The trucking is also impacted too. I don't know if you wanted to add anything in terms of the cargo you carry and just what you're experiencing as well.

Yeah, just to add that whoever is actually performing these activities are very sophisticated. One of our board members actually, their authority with our federal safety regulator, who we obtain authority through, was actually taken fraudulently by somebody who I'm assuming was accepting loads, potentially entering into secure facilities using their credentials. This is something that we're reporting directly to the FMCSA, the safety regulator who has jurisdiction. But just to add on, this isn't just smash and grab sort of things. There's clearly very sophisticated criminal rings involved in this activity.

Yeah, I guess what the emphasis here for this committee as we communicate with the public is that the supply chain is trying to get products to either the store or the home and if it doesn't get there, then the supply chain has broken down partly. Sometimes it's the chug points at the port, sometimes it's the lack of workforce and the need for more warehouses and infrastructure.

But the other piece is if it gets stolen or targeted along these routes, that is also impacting the supply chain, as you correctly pointed out. And so we have to get beyond the silos of supply chain is just moving things around. Well, the supply chain is also vulnerable to criminal activity.

And we have to not only support our law enforcement and what they're doing in our communities, but we also have to change the laws to actually put more consequences and accountability so that we can actually protect the cargo, the precious cargo that's either supposed to go to the stores or come to our homes. Thank you, Mr. Chair.

Thank you very much. Let me simply say thank you very much to our panel, both here and the other two that presented before us. I think the conversation that we're having is absolutely necessary, especially in this time, right now. We want to make sure that we protect the economy of California moving forward. And I think that your voices today helps us get a plan closer towards reaching that particular end.

I want to thank my colleagues for being with us today and being part of this hearing. At this point in time, as I indicated previously, when I opened up, gives an opportunity for the public to weigh in. We would invite you to go to that microphone to my left, your right. You have two minutes to provide public comment to this body and we open it up at this point in time for anyone that wants to have comments, that didn't get a chance to speak. Going once.

We don't want to break anyone's neck to come here. Going twice. Thank you. Thank you very much. Again, I want to thank all of you, all of our speakers who were providing the insights regarding this important issue. This type of conversation that is inclusive of many diverse perspectives is the way we need to expand our understanding of how we move forward on common ground. Again, I want to thank you all for joining us for this hearing today.

I want to also lift up and thank our select committee Members, as well as our speaker, Robert Rivas, for approving this hearing to move forward today, and his team for working with our team. I also want to lift up and elevate what I said earlier. We will be having our Select Committee hearing that will be in the Port of Los Angeles on September the 26th from 10:00 A.m. Until 02:00 p.m.. And we thank the Port of Los Angeles for hosting us that day.

We have a flyer. We will be posting it on our website. Once we complete it, it will be up in time enough for people to see. Again, September the 26th, 2023 at 10:00 a.m at the Ports of Los Angeles, ports hearing room there in San Pedro. 425 South Polo Street in San Pedro. We also will have another hearing. This will be hosted by the Port of Oakland, and that will take place on November the 2nd, 2023 from 10:00 A.M. until 2:00 P.M..

In addition to all of those, we will be having tours for all twelve ports in the state of California with my select colleagues. And we will be providing information, and we invite people to be part of that Select Committee hearing tour here in the state of California, touring all twelve ports. There's one port, it's a private port. We want to also view that port as well. A lot has come out of this hearing.

And again, I want to thank my team and the select committee members, team members for being with us, for taking copious notes. We will ask you to provide those notes and those highlights so that we can add to our white paper at the conclusion of all of our hearings. With nothing else, is there anything else? This select committee stands adjourned. Thank you very much.