New California Law Restricting Warehouse Development Could Disrupt Ports and Supply Chain
By Mike Jacob, President, Pacific Merchant Shipping Association
If there was one lesson to take away from the pandemic it was this: creating adequate warehouse and distribution center capacity in Southern California is a key to a functional and resilient supply chain in times of crisis. We seem to have already forgotten that lesson.
AB 98, one of the bills to appear out of nowhere and then pass during the last week of the California legislative session, was recently signed by Governor Gavin Newsom last week. This is a bill which intends to restrict the development of new warehousing and distribution centers across the state, and it contains numerous restrictions on local city and county governments, limiting where they can choose to locate these developments, and requiring new truck route mapping.
The potential impact of the bill was summarized well in a veto request letter sent to Governor Newsom by the Southern California Association of Governments (SCAG): “This bill would threaten the economic vitality of the Southern California region by adding new burdensome and rigid rules to the warehousing and logistics sector, which is vital to our regional economy.”
Obviously, the fundamental problem with limiting the development of new warehousing and distribution center facilities in California is that we are creating unnecessary constraints on the supply chain itself. These constraints in turn limit economic opportunity, create inefficiency, and increase congestion and prices with little to no significant environmental improvements. It also exposes us to more of the type of supply chain breakdown potential that we might experience in a crisis – like a pandemic.
California warehouse development is already difficult and is made even more challenging when it comes to environmental compliance under current law. When local cities and counties plan and entitle freight and distribution centers these projects and planning approvals are already subject to the California Environmental Quality Act and the trucks serving the warehouses are already regulated by stringent environmental rules. AB 98 sits on top of these existing regulations.
In theory, some changes in rules or processes for these uses could be viewed as an exercise in good urban planning. But AB 98 was not born of an exercise to improve planning, but a response to community activists seeking bans on any new warehouse development in the Inland Empire. Before its introduction, several bills were proposed to prohibit any warehouse from being built within 1,000 feet of any “sensitive receptor”. These earlier proposals were stopped by a broad coalition of business and labor groups, including PMSA, who opposed them for numerous reasons, but most of all because they were totally unnecessary and completely arbitrary.
The crux of AB 98 was a compromise: that loading docks and other truck activity should not be built within 300 feet of a “sensitive receptor.” While this is less burdensome, it still places additional limits on warehouse projects unnecessarily. And the new law also sets dangerous precedents in its overly generous definitions of “sensitive receptor” but vague definition of what constitutes warehousing.
These bad precedents will not just be limited to warehouse and distribution center development. They pose concerns for other non-warehouse uses as well – including potential impacts for agriculture, manufacturing, and ports.
First, the bill includes open space and parks as “sensitive receptors.” This is nonsense and totally contradictory to the traditional use of parks and open spaces as buffer zones between industrial and non-industrial uses in city planning. This could be problematic at California’s ports – which prioritize both building an industrial waterfront and providing ever more public access to the waterfront. At the Port of Oakland, for example, the Middle Harbor Shoreline Park literally shares fence lines with marine terminals and other industrial uses. And, at the recently opened Wilmington Waterfront Park, the Port of Los Angeles built new waterfront promenades and parks directly across the street from marine terminals to buffer its industrial activities from actual sensitive receptors - housing.
Second, the bill does not clearly define what uses actually constitute a warehouse or not. When the state Senate took up the bill, one Senator felt that it was important to state on the floor that his vote was conditioned on his interpretation that the bill did not include manufacturing. In response, the bill’s author felt obliged to submit a letter to the official record to that effect in the Assembly. These are good steps, but the questions linger both for manufacturers and others that utilize industrial properties, including agricultural processing and port facilities.
These are not small problems. These could have been reasons for a veto, or a signing message that directed clean-up, but since that time has passed, it is critical that these ambiguities get corrected by the Legislature and Governor as soon as possible in 2025 to avoid the unintended consequences of this new law on our supply chain.