Judge rejects union’s subsidy argument

Mateusz Perkowski
The Port of Portland did not violate Oregon's constitution by paying subsidies to ocean carriers and its terminal operator, according to a federal judge.

The longshoremen’s union has failed to convince a federal judge that the Port of Portland illegally subsidized ocean carriers and its terminal operator.

U.S. District Judge Michael Simon has rejected claims that the port, a government agency, spent taxpayer dollars to induce visits from ocean vessels and reduce the rent of the terminal operator, International Container Terminal Services, Inc.

“The undisputed facts show that no tax revenues were used for the 2012 or 2013 rent or carrier programs by the port,” Simon ruled at a March 28 hearing in Portland, Ore.

The International Longshore and Warehouse Union filed a legal complaint alleging the subsidies violated Oregon’s state constitution, which prohibits using tax dollars to benefit private firms.

The dispute over the subsidies is just one component in a broader controversy between longshoremen and terminal operators. Agriculture is affected by the conflict because farm products like processed onions and potatoes are exported from the container terminal operated by ICTSI.

Several other Northwest export terminals that load grain headed for Asia are also involved in a labor dispute with ILWU.

Tensions between the union and ICTSI have persisted despite a deal brokered last December that allows longshoremen to plug and unplug refrigerated containers at the terminal.

Earlier this year, the Port of Portland approved a program under which it pays $20 per container to Hanjin, an ocean carrier company. 

The carrier had threatened to stop calling on the port due to higher terminal costs and lower productivity.

In its lawsuit against the port, ILWU claimed previous programs — which paid Hanjin $70,000 per call and other carriers $25,000 to $50,000 per call — were unconstitutional.

The union also challenged a program aimed at decreasing ICTSI’s operating costs and rent payments to mitigate the financial impacts of the labor dispute.

These programs are aimed at influencing the labor dispute between the union and the terminal operator, the ILWU argued.

ILWU asked the federal court to enjoin the port from making the payments and order it to recover money that had been paid out.

The port lacks a “firewall” that separated tax dollars from other funding sources, ILWU attorney Robert Remar said during oral arguments.

The subsidies are a form of “robbing Peter to pay Paul,” he said.

The port doesn’t generate enough operating revenues to cover its expenses, which means it’s effectively drawing on tax money, he said.

Oregon’s constitution also prohibits the port from directing future tax revenues to private corporations, Remar said.

The port is spending money on subsidies that should be saved for repairing and replacing its facilities — costs that will eventually be covered by tax dollars, he said.

“They will have to tap into future funds,” Remar said.

Randy Foster, attorney for the port, said that ILWU is essentially claiming that funds from different sources can’t be untangled.

“I would suggest that is fundamentally nonsense,” he said.

The port does not have to keep tax dollars in a separate “bucket” — it can use accounting methods to track that money and ensure it’s not misused, Foster said.

“The tax revenue has been pushed off to another area,” he said. “Longshoremen have failed to document a single tax dollar that has been spent on this program.”

Tax revenues are only spent on capital projects and the subsidies are funded by other sources, like the rent paid by ICTSI, he said.

In this case, the port is simply refunding some of the money that the terminal operator has already paid, Foster said.

If the mechanism was a simple rent reduction, “we wouldn’t be having this conversation, which shows how artificial it is,” he said.



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