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L.A. Harbor Panel Votes to Pay City $80 Million in Fees : Finances: Study found port owes that sum for services dating to 1977. But law may block payment, and critics fear job losses.


The Los Angeles Harbor Commission, hoping to end a two-year dispute, has decided to pay the city about $80 million in fees after a private study found that the port has underpaid for municipal services since 1977.

But state authorities overseeing the Port of Los Angeles said they are reviewing the complex legal questions raised by Wednesday's vote. Money flowing into port coffers can only be used for commercial and navigation-related expenses, according to a state trust law.

State attorneys are unsure whether the back payments suggested by the Nexus study, an analysis of port finances commissioned last year, would be permitted under the law. The attorney general's office has asked to examine material used in writing the report, released last month.

The analysis found that the port owes the city $68 million in back fees and $12 million in current fees for police, fire and public works services provided to the harbor each year. The recommended fees also include a share of the cost of building parks on harbor property and other facilities determined by the study to support commerce.

But a memorandum from the attorney general's office says: "It is not clear whether the charges properly relate to harbor purposes . . . whether they are reasonable."

In a letter to the port last week, the head of the State Lands Commission said the panel "has serious concerns" about the actions the study urges. But the harbor panelists, after meeting Tuesday with state officials in Sacramento, adopted the study and agreed to transfer about $80 million over three or four years. Los Angeles city and port officials expect to meet again with representatives from the land panel and the attorney general's office next month. Assistant City Atty. Winston Tyler said he expected the first payment, $40 million, to be made within 30 days.

Harbor Commissioner Jonathan Y. Thomas maintained that the panel is on sound legal ground, saying the payments represent the port's "fair share" of services.

"We're hopeful that when we work out the concerns of the State Lands Commission and the attorney general's office, we will preclude any perceived need by anybody to file a suit," Thomas said.

Critics derided the study, conducted by Ernst & Young, as "grossly flawed" and indicated that they might sue the city if the state agencies do not reject the report.

Representatives of the Steamship Assn. of Southern California, which represents carriers using the port, the International Longshoremen's and Warehousemen's Union, a dockworkers labor organization, and other opponents say the Harbor Commission's vote could threaten jobs and force delays in port infrastructure work.

"We're clearly disappointed that they have ignored the wishes of the entire industry," said Michael Karmelich, Steamship Assn. president.

Trade officials also worry that the vote could drive shippers in Los Angeles and at the Port of Long Beach to take their business to other West Coast ports, away from "greedy" city governments.

"There is the possibility the city will come to its senses, realize what a good thing it has going at the Los Angeles port and reject the Nexus study," said Thomas A. Russell, an attorney for the Steamship Assn.

The Los Angeles and Long Beach ports now pay $28 million and $8 million, respectively, to their cities annually for municipal services, such as police and fire protection, which do not violate the law. Los Angeles lawmakers, who for two years have anticipated payment of the $80 million in suggested fees, included $20 million in contributions from the port in the last two city budgets.

A spokeswoman for the Port of Long Beach said officials are eager to see the issue resolved, especially because the Long Beach port is preparing to issue $400 million in bonds this fall to pay for a number of expansion and improvement projects. Already the port is more than $600 million in debt.

"We're keeping a close eye on [the L.A. Harbor Commission's agreement]," said Port of Long Beach spokeswoman Yvonne Avila. "It would certainly impact the port's cash flow and its reserves."

To Los Angeles, with an annual budget of $2.4 billion, the harbor payments would be welcome but fairly unimportant, officials said.

"We're confident in the analysis underlying the Nexus study," said Los Angeles Chief Operating Officer Michael Keeley. "Clearly, if there's a problem, we'll be able to address it."

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