The ports of Los Angeles and Long Beach are a cargo powerhouse, handling about 40% of the country's imported goods and making possible hundreds of thousands of well-paying freight-related jobs.
Such a record would be impossible if not for the Alameda Corridor, a $2.4-billion engineering marvel that allows freight trains to travel the 20 miles from the ports to the transcontinental yards near downtown Los Angeles in 30 minutes, compared with four hours previously. With the help of the rail expressway, the twin ports moved nearly 16 million containers at the height of the international trade boom in 2006, up from 9.7 million in 2001, the last full year before the corridor opened.
"Without the Alameda Corridor, it just wouldn't be possible to handle that much cargo," said Jack Kyser, an economist with the Southern California Assn. of Governments. "The freeways and surface streets outside of the ports couldn't handle the burden, and you would have containers stacking up at the ports and lines of ships offshore waiting to load and unload."
But for all of its prowess in speeding up the flow of the nation's Asian imports, the rail route may become a financial burden for the ports it was supposed to help.
The corridor was intended to pay for itself through user fees on each shipping container, and for many years the setup worked, even generating a financial surplus. But port cargo is down sharply from its 2006 peak because of the worldwide recession, and the payments on debt that was taken on to build the route will rise — sometimes steeply — through 2033.
"Until two years ago, we were on track, no pun intended, to have the traffic we needed," said Los Angeles City Councilwoman Janice Hahn, who also serves as chairperson of the seven-member Alameda Corridor Transportation Authority Board, which oversees the rail route.
"We were going to triple the amount of cargo we received. We weren't going to be able to handle the growth. My, how a few years have changed that outlook."
The Alameda Corridor Transportation Authority hopes to refinance about a third of the debt, or $550 million, with a federal loan. If the government lends only part of that amount or none at all, the authority would sell new bonds with later maturity dates and use the proceeds to buy older bonds that mature sooner. If that solution fails or is delayed, officials will have to ask the ports for loans, or "shortfall advances," by October 2011.
At the Port of Los Angeles, Executive Director Geraldine Knatz dutifully says that "we stand ready to help" if the corridor authority runs out of options. But port officials want to avoid the payout after slashing their budgets and reining in job-producing projects.
"This will put pressure on the budgets of the ports at least until this recession is finally over and done with, and that is taking a lot longer than anyone thought," said John Husing, an international trade expert.
"If you're lucky, recession recoveries look like a 'V' on a chart, quickly down and quickly back up. This one is starting to look like an 'L,'" staying down a long time.
In 2009, the recession caused cargo traffic at the ports to drop nearly 17.5% compared with the year before, to 11.8 million containers, the lowest total since 2003. So far in 2010, the ports have seen more business but not nearly enough.
In 2007, the corridor collected $96 million in revenue to cover debt payments. In 2009, its revenue fell to $76 million. Through June, revenue had climbed 10% above the same period a year earlier but was still running 15% below what the corridor earned in 2007. And the surplus amassed during better years is running out.
The corridor authority's payments on debt principal and interest will jump to $117.1 million in 2012 from $102.5 million the year before. The tab keeps rising so that in 2033 the corridor will need to handle twice the cargo it received in 2009 to make $198.6 million in debt payments — an unlikely prospect.
Underscoring the difficulties, Moody's Investors Service in February downgraded the ratings on $1.7billion in Alameda Corridor Transportation Authority bonds and put the bonds on its watch list for possible further downgrade.
"At the time that it was built, they were expected to comfortably meet the debt-service requirements with natural cargo growth," said Baye B. Larsen, a Moody's public finance group analyst who tracks the Alameda Corridor. "They are now going into a period of debt-service growth from a much-lower-than-expected revenue level."
John T. Doherty, the corridor authority's chief executive, said the ports would have to experience annual cargo growth of 15% to 17% "to make all of this go away.... That's not going to happen."
He said long-term forecasts are for a 5% growth rate.
