USC Price School of Public Policy

Price Professor Geraldine Knatz gives insider view on port mergers

April 16, 2015
Professor Geraldine Knatz (Photo by Deirdre Flanagan)

Professor Geraldine Knatz (Photo by Deirdre Flanagan)

By Cristy Lytal

Throughout the past century, civic leaders have attempted to merge the ports of Los Angeles and Long Beach, but efforts have always failed.

USC Price School of Public Policy Professor Geraldine Knatz – the first woman to serve as executive director of the Port of Los Angeles – examined the forces behind this phenomenon during a seminar presentation titled “Seaport Mergers: Why Not Los Angeles and Long Beach?”

Held on March 25 in Dauterive Hall, the talk was part of the Transportation Research Seminar Series jointly sponsored by the METRANS Transportation Center, the MetroFreight Volvo Center of Excellence and the USC Price School of Public Policy’s Women Leading Policy, Planning and Development Student Organization.

The seminar focused on Knatz’s current research, which offers a historically informed perspective in addressing issues of merging the two major ports.

She began her talk by raising a series of research questions: “Have any ports merged? What were their motivations for merging? What were the conditions that made those mergers possible? And do those conditions even exist here in San Pedro Bay? And of course, there’s a more fundamental question: Why consider merging the ports? What problem are we trying to fix? And what benefits would it have?”

Knatz explained that, over the past several months, she interviewed current and former port directors involved in recent port mergers and attempted mergers. Among her findings:

  • In 2008, the ports of Vancouver, Fraser River and North Fraser combined to form Port Metro Vancouver in a swift 18-month merger. The Vancouver port needed the lower cost land that the Fraser River ports could provide, and the Fraser River ports needed the funding to dredge that the Vancouver port could provide. Further facilitating the merger, the three ports boasted complementary customer bases and reported to the same national authority.
  • In 2001, Denmark’s Copenhagen Port merged with Sweden’s Malmö Port with similar benefits to both sides: One port offered more funding, the other more land for expansion.
  • In 2001, the Houston port and city-run Galveston port attempted a merger. Houston, which was leasing land in Galveston, officially approved the merger, and both directors and both boards were also in support. However, two of Galveston’s influential founding families mounted an opposition, and the town’s 57,000 citizens voted the merger down.
  • In 2014, the Seattle and Tacoma ports merged their cargo operations by placing them under one chief executive, splitting the costs and sharing the revenues. At the time, board members supported the cargo operation merger as a strategy for being more competitive against the ports of Los Angeles and Long Beach. Better land use planning was another likely motivation, given the higher values in Seattle.

Conditions in the ports of Los Angeles and Long Beach don’t mirror those in the successful mergers — but that hasn’t stopped people from trying.

“I was amazed to find that there were so many efforts to merge the ports over such a long period of time,” said Knatz, who also serves as Calif. Gov. Jerry Brown’s appointee on the Ocean Protection Council due of her track record of leading successful environmental initiatives, including the San Pedro Bay Ports Clean Air Action Plan, which reduced combined port emissions by more than 70 percent over five years.

‘Annexation Wars’

To explain the dynamics underlying these Los Angeles-Long Beach port merger attempts, Knatz gave a brief history of the area’s “annexation wars.”

In 1905, San Pedro set an election to annex East San Pedro, part of Terminal Island. In response, Long Beach decided to set its own election to annex Terminal Island. Because of Long Beach’s better lease terms on water frontage, powerful Los Angeles business leaders supported Long Beach’s annexation attempt and switched their voter registration to their summer homes on Terminal Island. As a result, Long Beach won the election by a single vote, controlled Terminal Island for four years and changed the name of East San Pedro to West Long Beach. However, the California Supreme Court eventually threw out the bogus votes.

A few years later, the City of Los Angeles succeeded in grabbing the “shoestring” of land, including the formerly separate cities of San Pedro and Wilmington, as a way to start creating the connection to the port area, which was annexed in 1909.

After 1910, Los Angeles began filling and expanding Terminal Island, and the Army Core of Engineers completed a San Pedro breakwater. After World War I, prominent business officials from the two cities formed the Greater Harbor Committee of 200, which influenced the federal government to agree to covering half of the $14 million construction costs of another breakwater — as long as local authorities obtained funding for the other half, and the two ports merged. Both cities’ populations voted to merge the ports in 1926 as a result of the committee’s efforts. However, the chief engineer from the Port of Los Angeles devised a way to build the breakwater for $7 million, which the Board of Rivers and Harbors approved while dropping the condition of the merged ports.

From the 1940s through the 1970s, Assemblyman Vincent Thomas, L.A. Mayor Tom Bradley, the Los Angeles Board of Harbor Commissioners and several L.A. elected officials pushed for a merger, but Long Beach remained opposed.

Recent efforts

In 2011, the Los Angeles County Grand Jury recommended an independent study of the costs and benefits of consolidation, but the ports never commissioned it. Most recently, in 2014, the Los Angeles City Council 2020 Commission report recommended merging the ports and operating them through joint powers of authority.

“There tends to be a pattern here,” said Knatz. “The idea of merging the ports comes from outside the ports. Generally, they’re not aware of what’s going on. And the other thing is, there doesn’t tend to be any background research that looks at what are the benefits of doing this, what are the issues?”

This stands in sharp contrast to the successful mergers, which have generally come from within the port organizations after a formal study of mutual benefits, such as better land use planning or complementary customer bases.

“Would a merger ever happen?” Knatz asked at the end of her lecture. “Maybe there’s a future scenario where conditions get to a point where competition is so bad that there are empty terminals in one port or the other. In any case, examination of port governance has to really involve both ports and both cities working together, and a clear identification of costs and benefits.”