Trade, Travel and Tourism Committee - 04/22/2025

could you please call the role council member Park present Council member Costker here Council member Rodriguez absent two members present and a quorum Madam Chair All right Thank you Madam Clerk That brings us to public comment Members of the public wishing to give public comment can sign up at the kiosk in the back You're going to get one minute for general public comment and up to two minutes for multiple items We call a few names You can come on up Red Chief going once going twice Jason Rei did you sign up as Jason Rei or Red Chief okay Red Chief and Jason Rey can both come off the list now What would you like to be heard on today sir all right your clock's running Go ahead Okay Thank you Um I always respect your gender and I wish you can respect my gender either too Uh start with item number one I'm really concerned about this item because um right now um the last time on the news I checked is is uh 245% terrorist anything from China and then anywhere in between like 25 to 70% from many other any other countries uh all of those products coming into uh Los Angeles uh including for uh coming in from the Los Angeles port Um so when our business is already struggling in their rebuild process and then they are facing a lot of red tape from our uh council president Moscar um they are already struggling with the inflation like 4% 5% they are struggling with their gasoline they are struggling they cannot even afford to eat eggs anymore Um but right now they have to deal with those tariffs Uh now let's move on to item number three Um everything I talk about uh about the port that also apply to the airport because the products the goods uh from uh other countries coming in either from the sea either from the sky Um again those many small business owners they they cannot afford American labor because uh council member Tracy Park believe that American labor should be minimum wage $20 Uh however but uh in my country my parents are proud worker They are working for 75 cents per hour and then we were still were able to maintain a family We are not rich but we were still able to survive We are still able to have a family of three So we are pretty good So all those all those small business owners there's no way they can afford your super expensive $20 per per hour American labor So they don't really have a choice other than importing goods from China from India from North Korea from uh from Syria from Russia and from Ukraine So they don't really have a choice because if they can afford your super luxury amazing American worker they wouldn't importing those amazing uh uh uh goods products from the overseas But right now obviously uh small business even large major big businesses are struggling So I highly recommend our council member president uh Park and our council member uh president Mosskar let's have some um what's that called uh tax uh relief program when when they have to struggling with 245% tariff let's make sure wave their taxes let's have giving them a break in paying taxes So let's survive Let's make sure let's save those local business about those tariffs All right Thanks Mario Garcia Mario Garcia Going once going twice Goat Jonathan Going once going twice Herman What do you want to be heard on today Mr Herman all items and non-aggenda public comment All right your clock's running Okay Uh Miss Park and where's the juju on item 11 that Don't you understand that I'm trying to identify the inefficiencies and overlaps of those poor opportunities Your goddamn stupid mayor That dumb advertise how stupid she is about the budget World airport We're in a world crisis item 11 And then we go into Mr Mac OS on 12 and that little union Yeah Pacific Maritime Association them What about the rest of us planning and permitting and preparing for constructions to build more houses under this up budget at a up time in a up way mosscar why why is that i want to know why Godamn it Then look at item nine radio projects Ongoing system of maintenance What about the goddamn homeless maintenance you got going on shifting these from one side of the street to the other side of the street Not one solution Macoscer I was up in Rodondo Beach and I drove by your goddamn office and you had those food events going on but it wasn't helping the problem We got a world airport problem with environmental problems which is homelessness Get the off the street and do something with our budget Get it Miss Beach Budget And And if I don't want to sign up on a public comment card I'm going to s speak regardless of what you say I have every mandate right under the Brown Act Speaker please stay on topic Who the is that speaking speaker please stay on topic Yeah listen Baldi I'm on my speaker please stay on topic On my non-aggenda public comment now Speaker please stay on topic Speak within the subject matter jurisdiction regarding the first amendment complaint for violation of first and fifth and 14th amendment in California constitution pursuant to 42 C1 1983 Shut the up speak on topics within the airports to to remove the fentinel that is being transferred in here from other countries you dick That's the problem So before you interrupt me before you mandate me to state my name and state my reason state my cause Baldi I'm telling you what it is The airport stop bringing in the drugs Stop letting drugs go on our streets you dumb You're stupid arrogant idiots Idiots Idiots And God hates you like he hates Okay that's enough Thank you speaker Your time has expired You have forfeited your Goodbye Mr Herman Enough Um I want to apologize to members of the public and our city partners and others who have been here today to participate in the meaningful work that we are trying to do We do not endorse that language or that behavior and I apologize to all of you for that Next up Juan Joe Sue Juan Joe Sue Going once going twice Next up R Stefen R Stefan Is everybody on my list if there is anyone here that either signed up but you're not on my list or you are here and you haven't given public comment and you would like to now's your chance Going once going twice All right we are done with public comment Unless there is any objection from my vice chair I would like to move items 6 to 12 on consent For item six I'd like to adopt the BOAC report and the CAO recommendations Mr McCusker any objections no That'd be great Great Madame Clerk please call the RO Council member Park yes Council member McCoscer yes Council member Rodriguez absent two eyes These items are approved on consent All right Fantastic That brings us to items one and two Madame Clerk if you'd read those for us Item one is for verbal discussion only The Port of Los Angeles quarterly update pursuant to council file number 230103 And item two is council file 23-0103 consideration of motion relative to requesting the executive director of Port of Los Angeles to provide focus on current and anticipated impacts of tariff uncertainty on cargo volumes projected effects on employment and local supply chain industries and strategies being considered to mitigate potential negative consequences and support affected workers and businesses during the verbal quarterly report on the status of department activities Okay that was a mouthful All right so uh let's start with the port of Los Angeles We always love to get to hear from the illustrious Mr Sroa himself It's a pleasure to have you here sir today Um I think this quarterly update today regard regarding the state of the port and our trade economy is certainly in light of the uncertainty that we are experiencing at the federal level absolutely could not be more timely So Mr McCosker thank you so much for calling for this presentation today Mr Soka the floor is yours Thanks very much Chair Park Councilman Mossker Uh a lot has been in the news every day about trade policy tariffs ship fees etc At the Port of Los Angeles we've been seeing the impacts of this for about nine months now dating back to the campaign trail last summer when tariffs were a topic of each candidate We saw a lot of importing companies of the large variety begin to advance their inventories forward in preparation for what was seen to be uh tariffs that were going to come in after inauguration and they were in fact correct But these were larger retailers manufacturers importing parts components and peripherals for US factories The small to middlesize importer really doesn't have that wherewithal the warehousing capacity the money to front on inventory So those are the folks that I'm worried about right now U as we leaned into the month of January we started to see tariffs implemented on Mexico Canada and China And then on April 2nd um we saw wider reaching tariffs implemented the widest in our lifetime across a variety of countries and increases in those that had already received tariffs Back and forth after that China's tariffs are now at 145% which effectively means if you import a product from China today it's two and a half times more expensive than it was last month There was an announcement on April 9th that all other countries except Mexico Canada and China would be uh positioned at a 10% tariff regime and a pause on any other activity beyond negotiations for 90 days That's not a long time horizon in our industry Typically orders for parts and finished goods that go into factories in Asia are made four to five months in advance of a ship sailing before it comes to Los Angeles another two or three weeks out So this negotiating time frame is not going to change a lot of behavior of the American companies who import Uh equally as important to notice are the retaliatory tariffs that other countries have filed against us in the United States and those are impacting primarily our agriculture sector along with manufacturing of heavy duty goods information technology servers and other apparatus around technology Uh the concern that we have here obviously in California with the bread basket in the central and northern central valleys almond growers walnut handlers rice uh grapes the wine industry spirits etc is that they are getting hit extremely hard and knocked out of business So much so that in the month of March uh Brazil sold more soybeans to China than they ever have in their history So Asian markets are looking to other countries that have better exchange rates and non-tariff barriers to uh procure their goods Looking down line we have no uh we have no straight line effect as to where this endgame will be and a lot of folks are just sitting in the capacity of wait and see So much so that large American importers have paused all imports from China over the past two weeks uh we'll begin to see the remnants of that with our arrivals in two weeks time where my projection is the cargo volume will be down about 35% compared to the current run rate Beyond that it may get even more bleak as far as not bringing product in where tariff barriers are so high that importers don't want to run the risk of paying those extra duties But more importantly because the information is coming out of Washington so frequently and it could change at any moment folks are again trying to pause just for the time being and seeing what actually happens through some of these discussions Implement uh uh implications closer to home Obviously our first consideration is the workforce For every four containers we move it creates a job One in 15 working Angelenos has a job related to the port today One in nine people in Southern California go to work every day with what we do at the port complex That's about a million folks right so for the dock worker the truck driver the warehouse worker I don't see mass layoffs today but you will see less work than we did during more traditional times The truck driver who's hauling four or five loads of cargo today may be hauling two or three tomorrow the dock worker who's been getting overtime turning two working extended hours may work a more traditional work week or even less than that Casuals who are so important to us around the docks in San Pedro and Wilmington may not get the call out on the docks at all They'll be focused on their day jobs but not supplementing to get the hours to work to hopefully one day become registered longshore men and women A lot is unknown at this point in time On the import side it's traditionally finished goods that we buy online or in retail sectors On the export side agriculture and manufactured products Los Angeles County still is the largest base of employment for manufacturing jobs in the nation 390,000 of us go to work every day in that sector So there's not too many segments that won't be impacted by this And how we find our way out is just trying to get people to the table to work on this policy and see what's possible to turn down the temperature and get back to the trade aspect 90% of world trade moves on water which is why it's so important to our port complex Between our neighbors at the Port of Long Beach and the Port of Los Angeles 40% of containerized imports come through this gateway About a third of the containerized exports go out This is important to our economy locally regionally and nationally But I'm happy to uh answer any questions you may have and talk about some specifics related to the port as we go into the budget cycle and other topics that you'd like to bring to the table Council member McCasker I know you have some key questions Uh and Mr I could just sit here and listen to you all day So you have other highle updates to share by all means we'd love to hear them Thanks very much First I Madame Chair and member and Jean and Chief and members of of public sorry for showing up late I was in another budget meeting so I apologize for keeping you waiting Thank you for this Um it's a very complete report but I I I just want folks to have a sense of how important specifically China is as a trading partner So what's your what is your sense of the of the u percentage of the goods that are coming and going mostly coming uh from China through our uh combined port complex yeah council member uh China represents 45% of our business portfolio at the port of Los Angeles It had peaked as high as 57% during the first round of trade tariffs that came out in the first quarter of 2018 And we saw fits and starts at that time cargo coming in before tariff milestones were implemented and severe drop offs afterward Uh so much so that in the fourth quarter of 2019 our business dropped by 16% at that time because we had so much inventory in the country So we've seen our China business go from 57% to the port of Los Angeles's portfolio down to 45% today and it continues to decline And um I think what we were experiencing before the election and maybe immediately after the election is that goods were moving pretty quickly Folks were trying to get ahead of the potential tariffs and we didn't know what those were And so we've seen a if folks that are following this they'll see a lot of work a lot of activity a lot of cargo moved a lot of containers Um and uh just on the natural that would have meant we would have a little dip right now But with that dip based on just the number of goods that can move around the world and are available to the world and these tariffs we're seeing the potential of a plummet Correct I want you to go back over the numbers of what you might see ship calls go down to Yeah And I would preface only with the statement uh council member that I'm giving you the information as I know it right now and it could change this afternoon Right But to your point of all the cargo that's been frontloaded or advanced in preparation for what many people thought were tariffs coming into play uh we moved more cargo last summer to the end of the year than we did at the peak of the peak during COVID or in year 2022 We did not have one ship backed up The cargo that was moved by international longshore and warehouse union members the uh terminal operators truckers railroads was exemplary more cargo than we did at our peak when we had 109 ships in anchor And this time around because we work so closely together and I'd like to say that we learned so much the cargo fluidity was just great and we pumped out that cargo it goes to every one of our 50 states and each of our 435 congressional districts Naturally with that front loing of cargo I saw the second half of this calendar year projected to drop off because we had so much inventory of furniture appliances electronics in the country I don't want to jump to conclusions right now because what we're seeing is a snapshot in time of 145% tariffs that are in place against China's imports right now that started off as 10% in January The fact that American importers of big brands and large companies have halted all China imports to wait and see could portend some further activity at the negotiating table So because we're going to be down 35% in two weeks I don't know that that carries on to the end of the year I don't think we have enough information just yet But I've gone on record in media press conferences and here in front of this committee to say the second half of this year port of Los Angeles cargo probably drops at least 10% That may have to be revisited as the days and weeks ahead show what these negotiations may tell us One thing is is pretty clear and it's a it's a stat that you use quite effectively and that's for every four containers it's one job and we know that if we have fewer ships in maybe each with fewer containers but certainly fewer ships means fewer containers That means fewer hours on the waterfront for regulars Regulars may see some work go irregular or they may have not not have work even if they're on the payroll But then casual work which is all the overage uh goes down And I don't think I've ever asked you this question I would not be surprised if you knew it or if you had a way of getting it What does that mean immediately uh for dollars that go into households and then those dollars then circulate throughout the economy it's kind of unfair to ask because I don't think I've asked you that question before but it hits me as we talk about it Having you know living next door to regulars and casuals I mean I know when they're working and I know when they're not working It's not it's happy and then it's unhappy Uh maybe we need a sense of what that means for uh spending in our local economy when the workforce uh is less deployed Yeah I think we could do the math and I'll just give you a couple data points I don't know the exact answer but we've got 15,000 longshore men and women um across locals 13 which are the long shore and mechanics local 63 the marine clerks and local 94 which are the four members uh the the walking bosses on the docks Uh about 8,000 of those 15 are registered Longshore members fully uh credentialed and the balance seven or so are casuals working their way towards the hours needed to apply for B status and get into the registered lots Um long shore payroll on average is about $2 billion a year to move all these goods through the uh uh the Southern California gateway of Long Beach and Los Angeles Um so I think we could do some math to say of the 7,000 casuals who are not working at all or half the time or a quarter of the time what that means to the local economy between Wilmington and San Pedro of about 170,000 residents give or take So happy to follow up with you on that but to say it's substantial and whether it's the dry cleaners the grocery store u the restaurants in town it means a lot to everybody around our area I appreciate that I just have a couple more questions Madam Chair Um I appreciate that you went first and I think we would all go first to the working people who get hit the hardest the most immediately but there's also the effect on the the the port as an agency Um and you know could you spend a little time talking about the importance of moving cargo and what that means to the port's bottom line and I will say that I'm particularly interested in the port's bottom line for a few reasons One is we employ a lot of really good people Another is that your um a percentage of your operating income goes back into the community which is a great benefit the PIP which as you know I'm always interested in And a third thing which you know you complimented me on the newsletter last week I didn't put it in because it becomes a little more complicated But the third thing is that all of the money that we are reinvesting as private entities and public entities back into infrastructure to make it clean requires us to move cargo We had to make money to spend money And so I'm really worried about our efforts that will be stalled on getting to zero emissions And if you could spend just a little time talking about the port's bottom line and the interest that we all have in making sure that we have you know vigorous movement of cargo uh to keep the port um successful A as you know council member this is a u this is a complex nuanced global industry with a lot of levers The simple statement is more cargo means more jobs If the port's successful the community will thrive When that community is doing great this port is just off to the races When I came into this job 11 years ago the first budget I was handed in June of 2014 showed $188 million negative cash flow on a top line of $400 million We had stagnated at that topline level for about a decade We put together a great group of people and the gentleman behind me now has witness uh John Acriman to Mara Blevens who came in as our CFO and within 18 months she turned that negative 188 into positive cash flow and it's been that financial discipline that we've had at the port for the past decade that will allow us to invest through cycle We've got budget cycles We've got economic cycles which we will see coming up soon and we have election cycles The rationale here is that on average we have about 3,00 to 3,500 construction workers on the ground every day because of those prudent economic policies that Mara helped introduce to us that Jeff Straford now has adopted and our core team of assistant general managers bureau chiefs work on every day we're going to be able to invest through cycle We may not have access to all the federal and state money that we've seen in the past We may not see the private sector investing as heavily because they're going to have to tighten up a little bit too if this economy takes a downturn But I'm super pleased with how we've paid down debt We've reserved cash against projects like the DWT's alliance with us on the Zepio project the zero emissions project of generating more power transporting it storing it and off taking it at the terminals So there's a lot of work in front of us I don't know where we wind up on the zero emission side We're we're doing a lot of work on cargo handling equipment with the trucks We've got about 500 zero emission trucks registered out of 20,000 on the roads today So there's still a long way to go And we're making some entree into the zero emission shipping side with the MCATa that came in this summertime using e-methanol So we're going to keep plowing ahead And it's because we've prepared for this day just as we went through COVID just as we went through the uh uh the great recession We're going to be smart about how we spend our money but we're not going to take a nose dive just because the economy starts to turn a little bit And uh you know it's been interesting because of all these investments we've made to date with federal and state partners The private sector investment has been two and a half to 3x beyond what we've put in So having those partnerships with the government and the private sector will be key We just got to keep it moving to the time where they g regain that confidence to come with us Do one more Of course Um you know one of the things I would urge us not to be as a victim of our own success I appreciate how right you have the you and and Mara Now you better do that at at Lawa because Mara Mara set us straight Um how right you know the finances are and how you know we as a port are going to weather this We know that But I think it's going to be important for us as a as a community of workers and public sector and private sector investors and the terminal operators and the train operators and the trucking industry to come together and do some do some discussion and education I mean I think as the second largest city in the United States and it's the most important port complex in the United States on the west coast of all the Americas I mean I think it's important for us to use that voice and I know I'm preaching to the converted because you do use that voice but if we could call everybody together and use that voice and convey to folks what I think and I hope we all agree that the the the tariffs could have a very very bad effect on not just this region but on the entire country I think it'd be important for us to use that voice and I I don't know I wouldn't be surprised if you have plans for that but I'd like you to speak to you know the opportunity to to voice our position as a local economy Yeah Yeah And I think that's the outcome of of what we're looking at right now in the short term without all the answers to the questions many of us have What we are seeing from the global business community is a pause on business activity So global growth will slow investment hiring We saw the international international monetary fund today reduce its GDP outlook globally as well as here in the United States because of these trade policies that have been implemented We've also seen that prices will rise for us as consumers They'll rise for the manufacturers around the world based on the cost of those inputs that come in the parts and components And quite simply for us in the harbor area less cargo means fewer job opportunities So going forward I know that you uh I know that the mayor and you council member are looking at putting a discussion team together a round table bringing the industry folks community folks all together down at the port area and giving access to folks that don't always see the port to make sure they understand what the experts are going through what community needs are faith leaders business leaders etc and we're just trying to find a time around the budget season that we have here in the city all the other activities my international travel but the uh the the groundwork has been laid out there with Michelle Grubs of the Pacific Merchant Shipping Association Steve Hennessy the PMA uh Gary Herrera Danny Miranda Danny Villisich over at the IL All these guys want to get to the table and talk about what's possible We've got on average 80 ships that come to the Port of Los Angeles every month For the month of May we're seeing 20 sailings cancelled So a quarter of the ships that normally come our way will not be in the month of May And June early days have about 10 cancellations I mentioned the drop in cargo of about 35% in two weeks So there's some real concern from all of us that work in and around this business And we want to see these trade deals solid We want to see some level of certainty so we can get this cargo flowing again but getting the community together And it doesn't mean you have to be in the cargo business to be at this meeting It's going to be folks that we count on every day around Pedro Wilmington Harbor City Harbor Gateway up to Watts that'll talk about what this harbor community means to our restaurants our churches to our dock workers and the businesses alike So I appreciate your involvement and I know we're going to work the schedule to the hour so we can get everybody involved Well said Madam Chair I appreciate the opportunity to hear all this Uh thank you for the really insightful questions Mr McCoscer Just so many important issues that impact not only our city's financial h health but everyday life uh for a lot of folks So I have been following uh issues related to tourism very closely and I will look forward to hearing from Mr Arian uh his bird's eye view of things at the airport in a few minutes Um but one of the things I'm concerned about is drops in visits uh from Mexico and Canada Canada I think is our second largest source of uh international visitors here Are you seeing impacts in the harbor's cruise business and Warfage revenues not just yet chair But uh what I do see is that a lot of the business on the cruise side is a cash business where tickets are purchased about 12 months in advance So we're not necessarily seeing the impact yet but I especially think we will A couple of reasons for that One is this ongoing tension across our borders with our two largest trading partners uh immigration policy and and the like that's coming out right now from Washington Uh the next piece is as people see things tightening regular moms and dads families uh their discretionary spend will be tightened as well Uh the cruise business why a uh a great value to many families and friends 250 sailings just last year alone for the port of Los Angeles We may see a little bit of dip in that discretionary spend as well Uh but nonetheless we're planning for the future with a uh a great look at a tender for the new uh Outer Harbor cruise terminal partners that are coming to us with investment I was just in Europe last week talking to large cruise companies who are really really excited about the opportunities that lie ahead in Los Angeles And as we look back hopefully with this trade policy overall it will be a snapshot in time Although living in it right now it feels endless But I think we will come out of it for the better All right Well I I I I appreciate your optimism about it and I'm confident with you at the helm Uh we are going to do our best and have great advice and leadership uh through what I'm sure is going to be a tumultuous time with a lot of uncertainty Um so you you hit on a couple of things that I think are really important Um just inflation and the impacts on discretionary spending Um and then sort of you know on the cruise side hard to predict because tickets are brought so early Um are there things especially as we are getting ready for major world events I can't believe the World Cup is next year that crept up awfully fast Uh and certainly the Olympics on the horizon beyond that Um are is the port giving thought to you know additional ways that we can position oursel to lead on the tourism side of things and how to make sure that that business stays healthy and continues to have the investment it needs is especially as we hit really difficult budget times and those sources of revenue become more and more important to us Right Well there are a lot of variables in this equation right now but realistically we have the best drive market in the country when it comes to cruise business You can get in your car in the late morning in Riverside drive out have lunch and be on a cruise at 4:00 to the Mexican Riviera and it just happens so smoothly thanks to the many people that are involved in this Um I would think of a couple things that we need to do right now uh one continue to say that Los Angeles is open for business and open for trade Uh the cargo that's moved through the port over the last 12 months moved more seamlessly in greater volume than ever in our history And it was because of that collective community effort The cruise business continues to rise and this new opportunity for the Outer Harbor Cruise Terminal is because so many people and so many companies believe in our opportunities for cruise in the uh in the future And it's interesting because for every uh cruise ship that calls at the Port of Los Angeles it means about $1.2 million in local spend within a twomile radius of that dock So it's really great for our local businesses in Wilmington and San Pedro our hotels which is why we want to continue to expand I think there is uh there is one thing that that we want to work on very closely and it's as we continue to rebuild our communities the communities that you represent we've got to find a way to have things move a little faster Um you know whether it's softwood lumber coming in from Canada appliances coming in from Mexico furniture from China they're getting hit with huge huge tariffs at this point in time So if there's a way we can fashion a a conversation around helping give some relief to the folks in Pacific Palisades Malibu and up in Altadena as we rebuild these communities at the pace that we all want to we've got to make sure it's done in a uh in a reasonable fashion not with these additive taxes and tariffs on top And I know that's a that's a big ask from my side but just an observation as we've seen all this uh international rhetoric going back and forth We got to help the 16,000 structures that were burned uh get back in place and families to see what opportunities can lie ahead Well I really appreciate the thought and the sentiments for the Palisades and certainly really important talking po point especially as we engage with our elected partners at the federal level Um you know and I think about what is going to be necessary to rebuild in the Palisades I'm not convinced there is enough supply in Southern California to do what is going to be necessary Um and as we tackle trying to rebuild more than 5,000 homes uh as well as public and commercial buildings uh those needs are going to be compounded and we are trying to do this on a very very compressed timeline So I do think that there are a lot of opportunities uh for conversations around the supply chain issues I'll also just add to that having just come back from Lahina and seen the pace of recovery there which of course is compounded by challenges unique to island communities when it comes to transportation logistics and supply chain issues Uh it certainly has my eyes wide open about some of the potential roadblocks that we may have ahead So thank thank you for that If I could follow on that I really I really appreciate that connection in the supply chain the goods that are coming in whether it's lumber or electronics or appliances right they are going to be a critical part of the rebuild And so I appreciate your commitment to keeping these everybody's commitment keeping these goods moving and moving safely uh to make sure that we can recover But I do want to make a one little pitch for the and and a thanks for the the growth of the local economy and situating ourselves for you know better times on trade and tour on tourism and visitors I mean the port has done a lot and continues to do a lot to make sure we're building up the west side of the main channel with you know West Harbor and the USS Iowa and the cruise terminal that'll be coming and all of the infrastructure that's going to be required Even the Vincent Thomas Bridge and the exchange to get off the freeway to make to make us ready for that moment and the big events Fleet Week and Sale GP and I'm hoping for another big event uh maybe in a couple years Um I think all of it is aligned I think all of it aligns to making sure we're supporting the goods movement uh and making sure we're supporting tourism and and visitor serving opportunities and putting all of LA all of LA through the through the port of Los Angeles on the map Absolutely So a lot of work to do as we get ahead from those and a lot of issues that we'll talk to Mr Aban about that overlap as well as we get ready and uh get our airport ready to receive all those anticipated millions of visitors and as we think about how we are going to improve our infrastructure and assets as we bring events like the Olympics uh to our communities across the city Much much to be done and considered Uh so unless there are any other questions for um uh the port I think what we will do since there is no action to be taken uh we will adopt uh the motion on item number two All right madam clerk then if you will please call the role Council member Park Yes Council member McCoscer Yes Council member Rodriguez absent Two eyes This item is approved Great Thank you Mr Shoka as always lovely to have you And that is going to take us to item three LAX Madame Clerk if you would please read the item Item three is for verbal discussion only the Los Angeles World Airport's quarterly update pursuant to council file number 23-02 All right John I know you have been super busy over at LAX and I have uh been mostly out of your hair lately uh working on some other major uh issues up in the northern end of my district But obviously it is a pleasure to have you here today I know that you face a lot of the same issues related to uncertainty and tumult at the federal level um concerns about tourism and I'm very much looking forward to hear your quart quarterly update today John the floor is yours Thank you very much uh Chair Park You're never in our hair You're always seriously an incredible asset uh to to the airport and we look forward we're going to need your help and Mr Moscar's help and all of your colleagues help because we need to make change and I'm going to speak a little bit about that Uh it's always a tough I I just uh leaned over to to Becca and said you know please do not make me follow Jean Seroka again You think I would have learned my lesson the first time I was here but uh uh Jean Jean's very good at what he does and we're very lucky to have him running such an important asset for us As are you and so are we So uh so look uh you know thanks for inviting LA to share an update on the airports Uh as you know airports aren't just places for planes to take off and land They're economic engines for the entire region You know similar to the port uh LAX alone supports more than a half a million jobs and contributes literally tens of billions of dollars a year to the LA regional economy and almost 97% of Vanise airport We we talk about LAX a lot but we forget we have the number one general aviation airport in the country right here in Los Angeles and that's Van Eyes Uh that airport 97% of the core economic impacts for that airport remain in LA County 97% of of the money that generates stays right here in the county And that's jobs And that's a chance for our local families and businesses to to build wealth here And that's super important I don't want to lose sight of that Uh but right now our our airports are facing challenges LAX is the third highest cost airport in the United States for airlines It is also one of the worst recovered airports in the country post pandemic with a gap of more than 30 points to some of our competitors And just last week we learned that we've fallen off the list of the top 10 bus busiest airports in the world for passenger traffic That's the first time we've not been in the top 10 in a very long time Uh and even worse the trend is going in the wrong direction with our current projections uh forecasting fewer passengers this year than last year Our international air service recovery or or lack thereof is due to many macro forces including consumer confidence immigration and trade policy and monetary policy And because we are more exposed than most airports to international disruptions but we're also facing headwinds in domestic travel as well Southwest Hawaiian and Allegant have decreased their LA seats by over 20% Delta in particular has been very vocal about a domestic travel slump revising their Q1 uh 2025 financial guidance in March and pulling their entire 2025 full forecast completely off the table this month alone They have no forecast for this year uh Delta CEO Ed Bastion who's a a leader a very respected leader in this industry recently noted that economic uncertainty has stalled growth and the impacts can be seen with softness in both consumer and corporate travel And it's not just our air service uh that is seeing challenges Our concession partners are hurting too which means that many small businesses are struggling right now Overall concession revenue which is highly correlated with passen pass passenger traffic is down across LAX In terminal one specifically we're down almost 30% 30% Uh duty-free revenues are down 20% compared to 2019 That's due to the decline in traffic and the lack of Chinese traffic Rental car revenue is also decreasing In February some of our rental car companies saw a more than 25% decrease uh from 2024 Uh possible future cost increases mean higher prices reduced revenue and likely further declines uh in all of these metrics But but I want to be clear LAWA itself similar to the port is very financially strong We are structured and we are built for voluntility the agreements the legal agreements we have in place that the the legal structure of our airport gives us significant advantages So LAWA itself is in very good shape As a matter of fact in the last couple weeks we've been in the capital markets Uh we've borrowed several billion dollars in the capital markets the largest transaction in a long time Uh and we achieved that despite unprecedented volatility and uncertainty in the market So LAWA itself is in very good shape But what is not is is is well understood in this city is that the people who depend on us the workers and the small business owners and the large business owners who depend on our success they are hurting We are okay but our partners are hurting So short term we will be okay but long term that does not work for anybody Uh so something has to change Uh and while choices that have been made on the national stage have impacted our airports where we are right now is not solely due to federal policy we can't blame what's going on in in the world right now Uh our lack of recovery is also self-inflicted Uh we are where we are today due to choices we have made choices LAWA has made choices city leaders have made over the course of many years The good news so the bad news is we are where we are right now The good news is we have a chance to change that trajectory And with data and facts we can make different choices better choices and improve our circumstances And I'm going to get to that But but I want to acknowledge uh first the incredible work being done even under the difficult circumstances uh that I've described by all of our LAWA employees all of our LAWA city employees We have more than 3,000 LAWA team members who work daily to ensure the safe smooth and efficient operations of our airports They are focused They are innovative And they are ready to create gold medal airports If we as leaders if you as elected leaders if if uh executive leaders like myself give them the chance they can and they will succeed They are amazing people but we are setting them up for failure The royal we are setting them up for failure Full stop Uh we've also made uh some changes that will properly focus our spending as we look ahead to the 2028 Olympic and Parolympic games We've realigned our capital improvement program with the realities of our air service numbers and uh that's going to allow us to invest in our aging infrastructure Our team has also changed uh how we procure Uh over the past two years our board of airport commissioners and the city council has approved four separate multiple award task order contracts or mtox covering a wide range of services with a total potential value of close to $6 billion That's $6 billion that we can invest in these assets in this city in this region if we're given the chance to do it U this innovative contracting vehicle provides immediate access to highly qualified firms in virtually all disciplines and ensures we have the agility and the velocity we need to meet our ambitious goals for LA28 But the biggest deal about all of this is that we're able to increase opportunities for the small local businesses that reflect Los Angeles Investing in infrastructure is investing in people to people deliver the infrastructure These are all examples of how when we change the way we work and act and think we can more positively impact our city and our airports Now though we have a lot more work to do and we need your help Last summer we did a deep dive into how LAWA operates in areas for improvement As you may guess we found many opportunities for improvement both on how LAWA does business but also how the city's antiquated and sclerotic systems hold us back from being the best airports we can be for our employees our guests and this region The bottom line is that LAX cannot continue on our current trajectory trajectory if we are to drive the LA economy forward We cannot remain subject to the same processes and policies if we are continue to deliver billions of dollars in impact for our communities It's not lost on me that the state of the city was yesterday and it was a very sobering moment for everybody As a proprietary department uh we are uniquely positioned to support the region in the coming years Right now you know our employees our team is asking what can we do to help Los Angeles the answer I gave them yesterday in a message we put out is we need to stay focused on our mission We need to stay focused on safety We need to stay focused on excellence in everything we do Uh the answer you know I give you to the same question is I embrace the mayor's call to action on modernizing our city process and reducing the unnecessary burdens of bureaucracy that hold us back today Los Angeles needs to make hard decisions about the city it wants to be for the ne next decade and for the decades to come City policies can have unintended consequences and you as leaders can weigh in now before final decisions are made The ripple effect of these decisions and policies will be felt for years to come My team and I are working on a proposal for a series of reforms to allow us to more effectively do our work while reducing any impact on our fellow city departments I ask you to be partners in this reform as it is needed now more than ever In the coming weeks and months the city will have hard decisions to make I can't speak for the rest of the city but know that the airport is one of the largest economic engines in the region I implore you to do all you can to help us be as effective efficient and as impactful as possible for our region our businesses our communities and our workers Thank you Um thank you for that uh Mr Acriman Um you sound concerned and that makes me concerned Um a couple of things I want to dive in on that caught my attention Um you described LAWA as being financially sound but our partners are hurting and then you said we are setting them up for failure Can you give us some specifics on what we're doing wrong and what we need to do to fix that problem so we are setting them up to succeed So what I'm referring of we we have city processes procedures uh rules regulations various flavors of of of of structure uh that that candidly uh were created for a world that doesn't exist today Uh they hurt our ability uh to hire uh the right employees They hire they hurt our ability to hire the right number of employees We are more than 20% down on our workforce uh from pre- pandemic more than 20% down I have you know I I tell labor leaders that I've got hundreds of union cards in my desk with no name on them because this I have money I don't have employees I have things to get done I don't have employees The challenge is the city processes the personnel system the civil service system is simply broken Every city employee would tell you the same thing if you ask them I think every leader like myself if given the freedom to speak and and I have the freedom to speak would would say the same thing Uh and we need to make fixes now So hiring heard you loud and clear processes Are we talking about permitting we're we're talking about all all of the above Uh we we run our our proprietary my my department is run the exact same as every other department in the city with with very few exceptions But but as as you know and and some of the constituents may not know we our our department contributes to the general fund We contribute to employment in the city We're we are in net you know we are net accretive to the general fund Uh but yet we are subject to all the same rules to hire someone I have to go through the exact same process as a as a department that is within the general fund and has impacts So we're subjecting us to more regulation which slows our ability to succeed and do our job And then we're placing additional burden on city departments that candidly are struggling right now to deliver basic services to Los Angeles So they're delivering services to our department that candidly we don't need and are actually holding us back and that prevents them from delivering things to other people And that is you know I could go through a long list Uh that is that is hiring that is procurement that is payroll I mean if you look in virtually every department there are opportunities for improvement again not just to help blah because you know we we see ourselves we are obviously we are we are part of the city uh we are here for the city like everything we do is to to help drive the city forward but there are things that are holding us back and I don't I I don't think these are this is not mal intention this is this is not malice this is just simply years and years and years of neglect and unwillingness to make change uh And it we again we are bringing forth a proposal for a variety of sweeping changes that we think will not only help our department but but it will help the broader city What's the timeline um for getting that proposed set of reforms within the next several weeks I intend to deliver this good because whether we like where we are with the budget or not Whether we like where we are because a huge swath of our city burned to the ground we have an historic opportunity to actually try to address some of these challenges and synthesize our departments and our procedures And I think the budget conversation is a really good time to do that So I think absolutely I mean I think the the the the best thing we can do for for our city for the for the the constituents and the taxpayers that we serve uh and and for the city workers who are impacted this is be as as efficient If not now when if we are not going to drive for efficiency now to do a better job to take care of ourselves and to take care of our constituents if not now when uh is what we are saying So we think there are opportunities across the city uh to help And again our our goal is to use you know we are a proprietary and and we have advantages that our that our other departments don't have And we'd like to use those advantages to pilot things to take risk to to to to try innovation because not everything we try is is going to work Many things we try will fail If you're not failing then you're not trying hard enough So many things we try will fail But let us take the risk uh w with our balance sheet with our structure The things that work we can then roll out to our fellow city departments and we can we can help a lot more than just our department We can help in many many ways but we need to be allowed to do so And we need to have uh people who have u the uh I guess the open-mindedness to consider that And I was you know yesterday you heard Mayor Bass uh call for change I I I think we know that we need to make change and I hope that me I heard that message loud and clear I actually went back and revised some of these remarks because of it I revised several things I'm going to say this week Uh you heard the call to action and and we need to heed that because otherwise uh we will not be as successful in 10 years as we've been in the previous 10 years I think as a proprietary LAX and likely the Port of Los Angeles too are perhaps some of our most uniquely positioned partners to innovate and to pilot some of these changes and certainly with some of our city's largest capital improvement projects happening anywhere and being the economic powerhouse and employer of what is it 75,000 regional jobs or more give or take that LAX provides um looking to you for your leadership and your vision on that I think is going to be really important for all of us Well thank you And I think not only you know can we free other city departments uh to do you know more impactful work I mean you know you you know full well what some of that work needs to be done Any any burden that that our department can take off of our city brethren is focus that they can put on palisades and on other more pressing problems We we can solve a lot of our problems ourselves We just have to be allowed to do so and not hindered by city processes And that can free up but that can free the rest of the city to do things that only they can do You know we do airports that the rest of the city can do other things but if we let them do their job better for constituents we can help during this budget crisis John one of the things that you and I have lamented about a couple of times is um the lack of a strategic plan city doesn't have one or proprietary proprietaries haven't historically operated that way Um is that something that you are considering for LA now and is that an opportunity to kind of highlight and wrap some of these big ticket items into a longer term look one of the things that we are challenged by is a 12-month budget um and the inability to see things through over longer periods of time or to have the elbow room or flexibility that we need to account for you know upturns and downturns and revenue collection and things like that So I wonder if some of that longer term strategic planning may be an opportunity to prioritize these goals and keep them front and center It absolutely is So so I think we need a combination of long-term planning You know we we began that last summer We did I mentioned in my remarks we did a a diagnostic on what we saw are the gaps to excellence You know here's where the city wants to be and you know in our opinion on the current trajectory you know here's where you're going to end up And we looked at those gaps and we identified those gaps and we we've started to move against those to put things in place and we will do what we can but we are going to need help from from city council We're going to need help from the mayor's office We're going to need help from everybody uh if we're going to be successful But a long-term plan is part of that We now have a long-term uh capital plan uh you know was uh early last year we were spending more than 95% of our capital budget on you know building new things uh and less than 5% on replacing and repairing our aging infrastructure and we've now pivoted that you know Mike Christensen is is sitting to my right uh has led a massive effort to overhaul that and we now are building a view of what we need to replace for five 10 and 15 years down the road So we do do long-term planning and we'll be doing more long-term planning uh as as we build this together But there are long-term things that need to be done but you know I have told the team that uh you know respectfully the the charter commission uh that the city is putting together I I think that is obviously the time is is now for that But in the best scenario that could make change in 2027 if if I'm not mistaken uh last time I checked that's one year after the World Cup and less than a year before the Olympics So I've told my team that you know we are gonna we'll provide input We'll we'll participate in whatever process and we'll drive any kind of change we can over that but nothing that the charter commission will do is going to help us get ready for LA28 Nothing will help The only thing that will help is what we do over the next 90 to 120 days So what team LAWA is focused on is providing uh recommendations for reform urging people who are capable of making that reform to make it But by the end of the summer uh we're going to look at the the field that we have like yourself we're not going to look at the world we wish we had We're going to look at the world that we have you know right around Labor Day and that's going to tell us where we're going to end up over the next couple years because anything that comes after that is is going to be nice And we're not going to say no but we're going to take it We're going to stick it aside because it's too late to help the calvaryary Cavalry coming in 27 Too late We've already lost So things need to happen this summer for us to to be ready to deliver the excellent airports that this city deserves and that the world needs to see in 28 And I just for the record want to point out that none of what you are describing today or the caution in your voice about what lies ahead is new This is consistent with what LAWA has been reporting to us at least since I took office with the slow economic recovery post pandemic and we have seen that translate in a few different ways now Shelving terminals nine and zero and downsizing of some other projects and things like that even in anticipation of 2026 and 2028 um beyond that And so this is something that um you know I'm seeing the red flags the economic warning signs everywhere And whether we're going to ca

2025-04-29 01:14

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