# Presentation: 925143

## ALAMEDA CORRIDOR

*“****A Project of National Significance”***

- April 19, 2001

## Project Purpose

***The Alameda Corridor Project is needed to keep pace with the steady growth of cargo moving through the Ports of Los Angeles and Long Beach***

- U.S./Pacific Rim trade has doubled during the last decade
- The Port’s share of West Coast container cargo increased from 42% in 1976 to 52% in 1999 with increasing market share projected in future years
- Cargo volume in 2000 exceeds the forecast by the Independent Cargo Consultant for 2006
- Factors affecting future growth
- 18 million population in six county area
- Larger container ships
- Vessel sharing arrangements
- Increase in discretionary cargo
- State of the art facilities at Ports
- Ports are the “Load Center” of West Coast

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## Project Schematic

**ALAMEDA**
**CORRIDOR**

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## Project Description

***The Alameda Corridor is a 20 mile, multi-track rail transportation corridor, paralleling Alameda Street, connecting the Ports of Los Angeles and Long Beach with the transcontinental rail network in downtown Los Angeles***

- Consolidates operations of the Union Pacific/Southern Pacific (UP) and Burlington Northern Santa Fe (BNSF) onto one improved corridor (San Pedro, Wilmington)
- Eliminates traffic conflicts at 200 street level crossings with overpasses and 10 mile long trench
- Estimated cost—$2.4 billion, including contingencies and financing costs
- Estimated completion—Second Quarter 2002
- Projected to reduce train emissions (25%) and vehicular emissions (23%)
- Projected to reduce locomotive hours (30% per day) and vehicle delays (15,000 hours per day)

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## Organizing the Solution

- Identifying Participants and Stakeholders
- Port of Los Angeles
- Port of Long Beach
- City of Los Angeles
- City of Long Beach
- Burlington Northern/Santa Fe Railroad
- Southern Pacific Railroad
- Leadership/Sponsorship roles—the Ports took the lead
- Legal Construct—J.P.A.—two attempts
- Legal Tests

- Union Pacific Railroad
- 6 Corridor Cities
- LACMTA
- Cal Trans
- USDOT

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## Risk Sharing

**Interest Rate/Market Risk**

**Construction Risk**

**Revenue Risk**

**Seismic Risk**

**Environmental Risk**

**Ports**

**Design-Build****Consortium**

**Bondholders/****Bond Issuers**

**Outside Insurers**

**Railroads**

**USDOT**

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## ACTA—Financial Feasibility Analysis as a Central Planning Tool

- First financial model designed in 1992
- 427 scenarios over 6 1/2 years
- Focuses overall efforts
- Centralizes decision-making around feasibility
- Format of Executive Level reports allow policy makers to understand key aspects of projectand follow along with progress

**Construction Parameters**

**Revenues**

**Federal Loan**

**Prepayments**

**Tax Analysis**

**Bonds**
**Senior**
**Subordinated**

**Reserves**

**Structure**

**Retirements & Reimbursements**

**Debt Service Tables**

**Coverage Tables**

**Flow of Funds**

**Revenue Accumulations**

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**Other Sources****of Funds**

- April 19, 2001

## The Original Funding of the Project

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- Federal
- 	Congress, TEA-21 and Demonstration Programs	$700
- 	USDOT–Other Programs		30
- 	Air Quality—EPA		8
- 	ISTEA		40
- State and Regional		100
- 	LACMTA–Regional STIP		0
- Ports		400
- Cities		40
**Revenues—Recurring Sources—For bonds and/or Loan**	600
- 	Ports—Shippers 	5% Gross Wharfage Surcharge
- 	Truck Tolls	$3 toll
- 	Railroads—User Fees	$30/box
- 	 **Total** 		 **$1.838**
**	****	**

**One Time Sources**

**Original Budget**
**($millions)**

**BB**

- April 19, 2001

## Railroad Sensitivities

- RR’s do not like to share facilities
- RR’s are sensitive to additional Per Unit Cost
- May be amenable to Per Unit Cost where:
- Leverage of State/Local/Federal sources is maximized
- Accelerates asset modernization substantially
- High-Density areas dramatically improve times
- Strong demand areas
- R.R. Capital costs are **much** higher
- Uncertainty/Risk Avoidance

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- April 19, 2001

## USDOT and ACTA—Precursor to TIFIA

- ACTA approached Congress/USDOT for $700MM grant
- USDOT countered with $400MM loan
- Underwriters structured terms:
- Consistent with feasibility
- Favorable to ACTA
- Competitive with tax-exempt rates
- USDOT agreed to terms:
- 10 year Treasury rate through 2001—30 year thereafter
- No interest due through 2001
- Negative amortization through 2013—Builds to $880MM
- 30 year term
- No cross default
- No rate covenant
- Congress appropriates $59MM Loan Loss Reserve
- Ratings
- OMB scoring

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## ACTA and USDOT (cont.)

- Congressional heavy lift
- Chair of House Transportation Committee—House authorization
- California delegation—Unified
- Ca. Governor         Speaker of the House         Committee Chair
- Administration efforts
- Central L.A.—Jobs and economy
- Signed loan—1/17/97 to great fanfare
- Amended loan 10/98
- to include package of construction—friendly amendments
- to allow 35 year termination of Use Fees
- Draws scheduled and taken
- $140—9/97
- $140–9/98
- $120—9/99

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## Sources and Uses of Actual Funding

***Sources and Uses of Actual Funding***

***Total Project cost, including all expenditures to date,***
***are estimated at $2.463 billion***

**Sources**

- Amounts in $ millions. All construction cost dollars are inflated at 3.35% other than the design buildcontract price. Bond proceeds include original issue discount/premium and accrued interest.

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## Other Sources of Funds

- The ports advanced $394 million in 1994 to purchase railroad rights-of-way
- The U.S. Department of Transportation made a $400 million loan to the project
- Congressional appropriation made
- Total $400 million already drawn down
- Paid ahead of the Senior Lien Bonds but after the Subordinate Lien Bonds
- The Los Angeles County Metropolitan Transportation Authority has committed $347 million to the Project
- Approximately $300 million already has been received
- All but $76 million of Prop. C funds are from State of California/STIP

***Sources other than bonds comprise nearly 50% of project funding***

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## Project Revenues per Operating Agreement with Railroads

***Project Revenues per Operating Agreement with Railroads***

- Waterborne Containers are those that cross the docks at the Ports **and** leave Los Angeles area by rail (or vice versa)
- Use Fees and Container Charges subject to automatic annual escalation (CPI):
- Minimum of 1.5% per year
- Maximum of 3.0% per year
- No charges if complete blockage of Rail Corridor for more than five consecutive days—offset by business insurance

***Use Fees or Container Charges are to be levied for 35 years***
***commencing after Substantial Completion***

**Railroads pay Use Fees for**
**Using Rail Corridor**

- Waterborne containers	$15/TEU (loaded)(i.e., entering or leaving ports)	$4/TEU (empty)
- Non-waterborne containers	$4/TEU	(loaded or empty)
- Other railcars (autos, coal, white	$8/railcar (loaded)bulk, iron & steel, liquid bulk, tec.)	No charge (empty)

**Railroads pay Container Charges on**
**waterborne containers not using Rail Corridor**

- Waterborne containers	$15/TEU (loaded)	No charge (empty)

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## Payable in any year in which use fees and container charges are insufficient to pay 100% of debt service on the bonds and the DOT loan
The maximum Shortfall Advance payable by the ports in any year (i.e. “Contingent Port Obligation”) = 40% of debt service on bonds and DOT loan
Actual Shortfall Advance = debt service on bonds and DOT loan less Use Fees and Container Charges collected

- The maximum **Shortfall Advance **payable by the ports in any year (i.e. “Contingent Port Obligation”) = 40% of debt service on bonds and DOT loan
**Actual Shortfall Advance **= debt service on bonds and DOT loan **less** Use Fees and Container Charges collected

***Ports’ Shortfall Advances***

***The Ports are obligated to provide limited “Shortfall Advances”***

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## Detail of Revenue Bonds

***ACTA has issued/will issue approximately $1.165 billion***
***of 1999 Revenue Bonds in four series***

- Amounts shown reflect the estimated par amount (**not** proceeds) of the 1999 Bonds

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## Corridor Revenues

***ACTA’s repayment obligations will be paid primarily from Use Fees and Container Charges as projected by BST (based on the Mercer/DRI Cargo Forecast)***

- Source:	BST based on Mercer/DRI 1998 Cargo Forecast through 2020 (“Asian Crisis” scenario); 0% cargo growth assumption and 1.5% CPI 	assumption on revenue from 2021-2037. Assumes termination of revenues occurs July 2037.
- *Containers account for 99% of total revenues

**Federal Fiscal Year**

**FY Revenues ($ millions)**

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- Use Fees and Container Charges

- April 19, 2001

## Available Revenues

***Additional Dedicated Revenues are provided by the Contingent Port Obligation***

- Source:	BST based on Mercer/DRI 1998 Cargo Forecast through 2020 (“Asian Crisis” scenario); 0% cargo growth assumption and 1.5% CPI 	assumption on revenue from 2021-2037. Assumes termination of revenues occurs July 2037. Contingent Port Obligation = 40% of the 	Annual Amount and DOT Loan payments each year.

**Federal Fiscal Year**

**FY Revenues ($ millions)**

- Contingent Port Obligation
- Use Fees and Container Charges

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## ACTA Obligations

***Dedicated Revenues are expected to provide ample coverage of the 1999 Revenue Bonds and DOT Loan***

- All debt service is assumed to be capitalized through January 1, 2003.
- Dedicated Revenues = Use Fees and Container Charges, Contingent Port Obligations and certain interest earnings

**Federal Fiscal Year**

**Debt Service ($ millions)**

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## Mercer Scenarios

***Mercer Scenarios***

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**High**
**Growth**

**Base Case**
**(12/97)**

**“****Asian**
**Crisis”**

- Asian rebound apparent by late 1998
- Steady gains in trade liberalization
- Long-term global GDP growth rate of 3.2%

- Asian rebound begins in mid-1999
- Trade liberalization proceeds at a moderate pace
- Long-term global GDP growth rate of 2.8%

- Asian recovery delayed until early 2000
- Trade liberalization slows
- Long-term global GDP growth rate of 2.4%

**2.9**

**2.9**

**7.8**

**7.0**

**6.3**

**2.9**

**16.7**

**14.4**

**12.4**

**7.6%**

**6.9%**

**6.2%**

- Note:	TEU = Twenty-Foot Equivalent Unit
- 	CAGR = Compound Annual Growth Rate

**Forecast**
**Scenarios**

**Characteristics**

**Total TEUs**
**($millions)**

**Containers (TEUs)****1996–2020****CAGR**

**2010**

**1996**

**2020**

- April 19, 2001

## Conclusion

- Successfully secured the cooperation of major stakeholders including intense competitors.
- Local, state, and national elected officials fully supportive of project with Federal government designating the Alameda Corridor as a “project of national significance.
- Policy maker decision making process facilitated with well developed model and feasibility analysis.
- Risk spread among various parties including construction contractor.
- ACTA among first to use TIFIA program under TEA-21 resulting in $400 million federal loan with highly flexible provisions.
- Funding shared equally between private and public partners.
- ACTA, on time and on budget, has been a public/private partnership success.

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## Slide 22

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