Port system unaltered months after critique of secretive meetings.

Nearly nine months after Los Angeles City Controller Laura Chick released an audit blasting the Port of Los Angeles for doing business in secret, maritime officials have yet to implement any corrective measures suggested in the 76-page document.

"I'm certainly not satisfied with the port's response to my audit," said Chick. "There is an arrogance there that says, 'We're different, we're special.'"

Larry Keller, executive director of the city's Harbor Department, drafted a response to the L.A. City Council's audits and governmental efficiency committee two days before a scheduled Feb. 26 meeting, but councilmembers on the panel said they had insufficient time for a proper review. The committee postponed the hearing until mid-April.

In the audit, Chick accused the port of using little analysis in making important business decisions, thereby leaving open the question as to whether the contracts signed with steamship lines and terminal operators could be more financially and environmentally viable.

When a berth becomes available, for instance, the port does not advertise the space within the maritime industry.

Instead, officials meet privately with customers, most of whom have established relationships with the ports--giving them an advantage over lesser-known prospective users, the audit said.

In a prepared statement dated Feb. 23 and sent to city officials the following day, Keller said: "Your audit provided the impetus to review our operating policies and procedures so the harbor can continue to improve upon the services provided to our customers while providing improved procedures and visibility in the leasing process."

Numerous calls to the port's business and environmental officials were not returned.

Poor documentation

During the investigation into port practices, Chick's office found that much of the documentation pertaining to lease negotiations and signings either was deficient or did not exist.

Among the recommendations in the audit are issuing public notices when space becomes available, establishment of protocol, policies and procedures for lease negotiations that include permanent record keeping, and providing a formal fiscal analysis early in the negotiations process.

Chick also wants the audit committee to establish a confidential minute-recording system for closed-door meetings.

The port acknowledged in its draft response that its operations would improve with more documentation and open forums. "The port pretty much said, 'You're right. We can do a better job in these areas,'" said City Councilwoman Janice Hahn, who sits on the council's audit committee. "They didn't dispute any of the claims in the draft."

But city officials want certain areas clarified, such as the extent to which the port will advertise available space to "qualified customers" and the requirements for being considered qualified customers.

"We believe the contract process is ripe for abuse," said Councilwoman Wendy Greuel, chairwoman of the audit committee. "Too much of the port's business is happening in an informal backroom deal manner. We want to have documentation as to rationale--why those leases were given."

The city's other two fiscally autonomous agencies, Los Angeles World Airports and the Department of Water & Power, are under fire for what critics have called a "pay-to-play" system whereby contractors donating to city officials' campaign coffers stand a better change of snagging contracts.

The L.A. DWP took several months to respond to two separate audits by Chick's office: one on agency operations and the other on its "green power" program.

Numerous criticisms were contained in a late 2002 audit of its "green power" program by Chick's office. The latter audit found that the DWP was not investing in significant amounts of green power, despite advertisements to the contrary.

In a Business Journal interview a year ago, Chick characterized the attitude of the DWP as "adversarial" and said the agency was "playing games and was not cooperative."

When the DWP did finally respond, general manager David Wiggs promised to implement the recommendations in the audits.

More recently, LAWA took nearly two months to respond to Chick's audit alleging an environment of "pay-to-play" on airport contracts. That audit also alleged that airport commissioners sat in on staff meetings to review contract bids before they went to the Airport Commission. Airport officials, in their response to Chick's audit, were sharply critical of the audit's methodology and conclusions.

The port's autonomous ways almost caused it problems.

A year ago, port officials reached a landmark settlement with the Natural Resources Defense Council, which had won a 2nd District Court of Appeal order to halt construction of the China Shipping Holding Co. terminal due to the lack of a proper environmental review.

Port officials agreed to invest $60 million in environmental improvements that included remodeling the China Shipping terminal and some of its ships so they would shut off their pollution- spewing engines and plug into electric power while docked.

But the agreement was reached without consulting the steamship line.

On March 11, the City of Los Angeles reached an agreement on outstanding environmental issues with community groups and environmentalists that will allow the terminal to operate, averting a potential move by China Shipping to Long Beach, where some of its ships already call. The agreement requires City Council approval.

The Port of Los Angeles has the nation's largest container cargo operation. Last year it moved more than $105 billion worth of goods, including apparel, vehicles, toys, consumer electronics, computer parts and other manufactured items imported from Asia.

Operating revenue from the 80 steamship lines calling on the port's six container terminals totals approximately $200 million annually.