POLA Uncertain of What To Do
By Paul Rosenberg, Senior Editor
Total Transportation Services Inc., or TTSI, one of three companies workers struck in July, touts itself as an environmental leader, but the claim is largely an illusion. TTSI is apparently in violation of the subsidy agreement which underwrote about 90 percent of the cost of one of its initial LNG truck purchases.
Not only does TTSI owe most of its “green” image to government subsidies, ranging anywhere from $5.8 million to $13.2 million— a different kind of green— but it also may have perpetrated fraud by signing a 2008 subsidy agreement in bad faith. In addition, TTSI also received subsidies for more trucks than its fleet originally had, implying that it relied on truckers not previously driving for it to trade in their rigs for some of the trucks TTSI added to its fleet.
Random Lengths is still investigating the full extent of the subsidies involved, as well as the wording of related agreements. However, language from the Port of Los Angeles’ first round of funding shows that TTSI has violated at least some of its agreements. POLA’s agreements with TTSI and other nine companies state that companies will not “sell, lease, encumber, or dispose of” the trucks. Yet, this is precisely what TTSI has done, and apparently intended to do all along. The agreements also include a requirement for workers’ compensation or self-insurance, yet failure to provide workers’ compensation has been one of the key issues involved in the truckers’ strike. More broadly, the agreements also require companies to comply with “all applicable laws, statutes, ordinances, rules and regulations, and with the reasonable request and directions of Executive Director,” which certainly includes the state and federal labor laws that TTSI, among other companies, has been violating.
“The Port of Los Angeles is enforcing its LNG truck grant agreements consistent with its enforcement on similar truck funding agreements,” POLA spokesman Arley Baker said, when Random Lengths asked if POLA has confirmed that the trucks are being used as intended. “It would be inappropriate and premature to disclose at this time possible actions that are being discussed with motor carriers.”
However, Baker also said, “These contracts are up in 2015, so a focus continues on a number of levels in terms of ensuring compliance.”
Regarding questions about the specific violations, Baker could only provide a general response.
“The port continues to engage stakeholders and has been facilitating dialogue between the parties,” Baker said. “As the discussions continue, the port’s direction from the mayor’s office has been to continue our focus on helping to keep information and discussion flowing between all parties while ensuring that the port continues to operate safely and efficiently.”
This response suggests a continued narrow focus on present operations, a focus that inevitably gives short shrift to questions of equity, justice and even legality. But Baker was not finished.
“Concurrently, the port is working to complete an assessment to the mayor,” Baker continued. “The port understands that various drivers have wage and labor law claims pending with the appropriate state and federal labor authorities with jurisdiction to determine if violations of labor laws have occurred and to take enforcement action against violators.”
While nothing Baker said indicated POLA’s willingness to take action and enforcing the terms of its agreement, it at least opens the door a crack.
For a sense of how far TTSI has moved away from its initial promises and how those promises should be seen, we need to start before the Clean Trucks Program was implemented, when the port drayage industry enjoyed a massive subsidy in the form of externalized costs born by the surrounding communities. The subsidy far exceeded their profits and was roughly in same ballpark as what truckers were paid per load.
Based on California Air Resource Board formulas, POLA estimated that Southern Californians paid between $100 million and $590 million annually in health impact costs due to drayage truck pollution. The cost would amount to $10.1 billion through 2025. But those aren’t the only costs. A 2010 document, “The Port of Los Angeles Clean Truck Program: Program Overview & Benefits” stated:
According to a drayage options analysis performed by The Boston Consulting Group (BCG), the current drayage system imposes between $500 million and $1.7 billion of costs on the public each year through: operational inefficiencies (e.g impact on truckers and trucking companies of truck under-utilization, traffic congestion and lack of driver health/benefits); city/community costs (e.g.road maintenance, environmental damage, vehicle and driving safety and residential impacts from truck traffic and parking); and, above all, public health (premature death, hospital admissions, workday and school-day loss, and restricted activity).
This analysis was performed before the Clean Trucks Program was approved in 2008. Given that local container traffic peaked at around 15.7 million TEUs (twenty-foot equivalent units) in 2007, that would equate to a per-container externalized public cost of $32 to $108. The true figure would obviously be higher, since not all containers are moved by truck.
While equity, justice, or even a genuine commitment to free markets would have demanded an immediate end to that massive subsidy, the political power relations of modern capitalism demanded the opposite: a further public subsidy in order to create a low-polluting truck fleet. TTSI was one of the most eager port firms to pursue this new source of money,
collecting anywhere from $5.8 million to $13.2 million. This amounts to over $50,000 per truck, but TTSI cleverly packaged its fondness for subsidies as “environmental leadership.” The ports and even environmentalists like the Coalition for Clean Air were happy to endorse the packaging, in order to motivate others to follow suit.
In August 2007, TTSI rolled out its first LNG trucks, purchased with an 80 percent subsidy from the AQMD, according to a story in the Press-Telegram at the time. It reported that TTSI intended the trucks to be driven by so-called “owner-operators,” but that they could be hired as employees, if the ports required it—as POLA ultimately did, only to be barred from doing so by Ninth District Court.
“We’re prepared for it to go either way, and if they decide to do employee status, we’ll work with them,” La Rosa told the Press-Telegram. “Right now, though, our (drivers) will be contractors.”
Those LNG trucks were actually part of a larger initiative, also involving port subsidies, as explained in a POLA board report dated September 27, 2007. The ports’ agreements were significantly altered in response to truck company criticism, increasing subsidies from $144,000 to $184,000 to account for higher than anticipated costs for new LNG trucks. Agreements were signed with 10 companies, which had requested subsidies for 383 trucks. Funding was provided for 158— 117 by the ports, 41 by the AQMD—according to the report. TTSI requested 60 truck subsidies and was funded for 28 — eight from POLA and 20 from AQMD, as reported by the Press-Telegram (Random Lengths, however, was not able to verify this with AQMD before press time). TTSI and Southern Counties Express Inc. were the only companies slated to receive AQMD subsidies. TTSI’s agreement with POLA is the one referred to above. It was approved by the city council in early 2008.
Later that year, the Great Recession hit, changing everything. The exponential shipping growth abruptly halted, drastically altering the market dynamics. But when markets crash, subsidies become even sweeter. In 2009, POLA cited TTSI as one of three of its “2009 winners for Significant Early Action To Reduce Air Pollution,” saying:
Total Transportation Services, Inc. (TTSI): A licensed motor carrier serving both ports, TTSI enthusiastically joined in the ports’ commitment to clean air. A mere nine months after the ports adopted the San Pedro Bay Clean Air Action Plan, TTSI committed to converting its entire fleet of 106 drayage trucks to a completely green fleet of clean diesel and liquefied natural gas (LNG) vehicles. TTSI was able to complete the conversion in a year’s time. TTSI has again backed up its reputation as an innovator in the drayage community.
Yet, TTSI received further AQMD subsidies, including $4.4 million approved by AQMD’s board on Sept 11, 2009. In retrospect, it was simply a very smart business move: getting as large a chunk of public subsidies as possible, while creating a “green” image paid with other people’s money — a different kind of “green.” What’s more, despite its signed agreement and its statement that drivers could be hired as employees, if the ports required, it’s seems almost certain that exploiting misclassified “independent contractors” was integral to TTSI’s business plan from the beginning. After all, POLA had previously pointed out that one benefit of the employee mandate was the trucks owned by licensed motorized carriers could be used by multiple drivers, thus making them far more efficient, economically. By intentionally choosing a less efficient business model, TTSI was committing itself from the beginning to yet another round of cost-shifting onto others—this time its drivers. Not only were truck leases to its drivers a violation of the LNG agreement with POLA, they also were an income source, forcing drivers to pay for trucks which public entities had already subsidized. It was the drivers who bore the true cost of the Clean Truck Program, more than anyone else.
“Things were bad enough when we owned our trucks, but I would say the situation is desperate now,” driver Alex Mejia told the LA Times in 2010.
He gave up a 1995 Freightliner, which he owned, to lease a ‘clean’ 2008 International, the Times reported.
“We’re all happy that the air is cleaner,” he said. “We live here too. But it is our sweat, our work, that is helping to improve the environment.”
And, it is companies like TTSI taking all the credit, breaking the law, and violating their agreements as they do.
POLA could help put a stop to that, simply by enforcing an agreement, which TTSI has broken since day one. The question now is: will they?