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April 19, 2001 ALAMEDA CORRIDOR “A Project of National Significance”

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Presentation on theme: "April 19, 2001 ALAMEDA CORRIDOR “A Project of National Significance”"— Presentation transcript:

1 April 19, 2001 ALAMEDA CORRIDOR “A Project of National Significance”

2 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 2

3 April 19, 2001 Project Schematic ALAMEDA CORRIDOR Stauson Ave. Firestone Ave. Rosencrans Ave. Vernon Ave. Florence Ave. Southern Ave. Imperial Hwy. El Segundo Blvd. Compton Blvd. Alondra Blvd. Del Amo Blvd. Carson St. Pacific Coast Hwy. LONG BEACH LAKEWOOD CARSON PARAMOUNT BELLFLOWER VERNON HUNTINGTON PARK SOUTH GATE LYNWOOD DOWN- TOWN LOS ANGELES Sepulveda Blvd. Anaheim St. TORRANCE LOMITA RANCHO PALOS VERDES SAN PEDRO WILMINGTON Port of Long Beach Port of Los Angeles P A C I F I C O C E A N Gage Ave. Tweedy Ave. DOWNEY COMPTON 405105110710510110 9160 3

4 April 19, 2001 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) 4

5 April 19, 2001 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 5

6 April 19, 2001 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 6

7 April 19, 2001 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 project and 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 7 Other Sources of Funds

8 April 19, 2001 The Original Funding of the Project 8 Federal Congress, TEA-21 and Demonstration Programs$700 USDOT–Other Programs30 Air Quality—EPA8 ISTEA40 State and Regional100 LACMTA–Regional STIP0 Ports400 Cities40 Revenues—Recurring Sources—For bonds and/or Loan600 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

9 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 9

10 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 10

11 April 19, 2001 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 11

12 April 19, 2001 Uses 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 build contract price. Bond proceeds include original issue discount/premium and accrued interest. Capitalized Interest $247 Financing Costs $82 ROW, Demo Proj., Prelim. Eng. $468 Project Contingencies $200 Corridor Construction Costs $1,431 Subordinate Bond Proceeds $164 DOT Loan $400 MTA $347 Interest $90 Misc. $27 Ports $394 Senior Bond Proceeds $1,006 12

13 April 19, 2001 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 13

14 April 19, 2001 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) 14

15 April 19, 2001 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 Ports’ Shortfall Advances The Ports are obligated to provide limited “Shortfall Advances” 15

16 April 19, 2001 Detail of Revenue Bonds ACTA has issued/will issue approximately $1.165 billion of 1999 Revenue Bonds in four series Senior Lien Bonds Subordinate Lien Bonds Total Tax-Exempt $494MM Series A (2006–2037) $21MM Series B (2003–2006) $515MM Taxable $505MM Series C (2015–2037) $145MM Series D (2003–2015) $650MM Total$999MM$166MM$1,165MM Amounts shown reflect the estimated par amount (not proceeds) of the 1999 Bonds 16

17 April 19, 2001 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) 17 Use Fees and Container Charges

18 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 18

19 April 19, 2001 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) 19 Senior Lien Debt Service DOT Loan Subordinated Debt Service Use Fees and Container Charges “Dedicated Revenues” Required Shortfall Advances

20 April 19, 2001 ACTA’s “base case” projections assume Mercer’s most conservative estimate (“Asian Crisis”) cargo growth scenario Mercer Scenarios 20 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 7.8 7.0 6.32.9 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 201019962020

21 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. 21

22 April 19, 2001

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