Funding Options for Freight Transportation Projects (2009)

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3Freight Transportation Infrastructure Finance Practices Today This chapter describes present freight transportation infrastructurefinance arrangements, with illustrations from case studies of freight projects. An understanding of present practice is necessary as a basis for evaluating the finance reform proposals that are described in Chapter 5. The first section below summarizes capital expenditures in the U.S. freight trans- portation system and public and private roles in providing facilities and services. The second section describes finance arrangements for public infrastructure. The final section describes the eight case study projects. The committee commissioned resource papers to document these cases, concentrating on the finance arrangements in each project, the nature of the intended benefits, and the responsible institutions. To supplement the case studies andprovide a broader viewof finance arrangements, the com- mittee compiled summary informationon30 additional recent or planned freight projects. The final section also presents observations from the projects examinedwith regard to the adequacy of present finance arrange- ments. The annexes to the chapter present tabular summaries of the case studies and the additional projects examined. SPENDING FOR FREIGHT INFRASTRUCTURE Public and private capital expenditures for highway, freight rail, aviation, and water transportation infrastructure in the United States were $90 bil- lion in 2004 (Table 3-1), equal to 6 percent of total 2004 government and private nonresidential gross domestic investment in structures and equip- ment (BEA 2007). Most highways and aviation facilities serve passenger as well as freight traffic. As noted in Chapter 1, there is no unambiguous way to allocate cost responsibilities betweenpassengers and freight on these sys- 88

Freight Transportation Infrastructure Finance Practices Today 89 tems. Highway agencies receive 20 to 25 percent of highway user tax rev- enue (motor fuel taxes and registration and permit fees) from operators of large trucks (FHWA 2007, Tables FE-9, MF-2, MF-121T, MV-2, HF-10), and requirements for accommodating truck traffic have amajor impact on the cost of providinghighways.About 20percent ofU.S. air carrier revenue is derived fromair cargo (AirTransportAssociation2009,AirCargoWorld Online 2006), but requirements for passenger service largely dictate the design and scope of the air transport system. As Table 3-1 indicates, government provides the highway and inland waterway systems and most elements of aviation and port and harbor infrastructure. Government expenditures are 91 percent of the total in Table 3-1. Private-sector firms provide freight rail infrastructure; terminals for highway, water, and air cargo transport; andmost vehicles and equip- ment. Private-sector business expenditures for transportation equipment (excluding automobiles and light trucks) were $56.5 billion in 2004 TABLE 3-1 Capital Expenditures for Freight Transportation Infrastructure, 2004 ($ billions) Public Federal State and Local Total Private Total Highways 30.2 36.5 66.7 n.a. 66.7 Freight railroads 0 0 0 6.4 6.4 Aviation 5.6 6.8 12.4 2.0 14.4 Ports, harbors, and 0.7 1.7 2.4 0.1 2.5 inland waterways Total 36.5 45.0 81.5 8.5 90.0 NOTE: Highways and aviation facilities serve passengers as well as freight; water and freight rail serve minor amounts of passenger traffic. Passenger rail and transit 2004 infrastructure capital expendi- tures (not included in the table) were $16.2 billion. Although the Congressional Budget Office reports no public expenditures for freight rail infra- structure in 2004, the states and the federal government from time to time have awarded grants for this purpose. Also not included in the table are $0.4 billion trucking industry and $3.8 billion pipeline industry expenditures for structures in 2004 (BEA 2007, Table 3.7S). Waterways expenditures may exclude certain navigation-related expenditures of the U.S. Army Corps of Engineers. Nearly all federal spending for highway infrastructure is through grants to state and local gov- ernments. Federal expenditures for aviation include grants to governments and direct outlays for air traffic control. SOURCE: CBO 2008b.

90 Funding Options for Freight Transportation Projects (Table 3-2),most for freight-carrying equipment (although aircraft expen- ditures are primarily for passenger service). Governments operate the facilities they build. The private sector provides all freight transportation services to shippers, with the exception of the U.S. Postal Service. Seventy-four percent of all infrastructure spending and 82 percent of all public spending shown in Table 3-1 is for highways. Although most highway traffic is passenger traffic, highways are the most important freight mode in terms of expenditures: about 80 percent of all shipper expenditures for freight transportation are for trucking. For comparison with the investment patterns, Table 3-3 shows an estimate of expendi- tures of U.S. shippers for goods transportation in 2007. Public infrastructure capital spending, in constant dollars, was at the same level in the early 1980s as in the late 1950s. Since that time, capital spending has grown at about 2.5 percent annually, in constant dollars (Figure 3-1). From 1981 to 2008, constant-dollar public-sector capital expenditures for transportation infrastructure (excluding passenger rail and transit) grew at an average rate of about 3 percent annually. FINANCE ARRANGEMENTS FOR PUBLIC FREIGHT INFRASTRUCTURE The five subsections below describe finance arrangements for highway, water transport, and aviation facilities; compare arrangements across modes with respect to sources of funds and the federal share of funding; and describe several special federal programs for financial aid to infra- structure development. TABLE 3-2 Private Business Expenditures for Transportation Equipment (Excluding Automobiles and Light Trucks), by Type of Equipment, 2004 Type of Equipment Expenditures ($ billions) Trucks, buses, and trailers, other than light trucks 29.6 Aircraft 19.0 Railroad equipment 3.4 Ships and boats 4.5 Total 56.5 SOURCE: BEA 2007, Table 2.7.

Freight Transportation Infrastructure Finance Practices Today 91 Highways The finance arrangements for the U.S. highway system were examined in detail by the Transportation Research Board (TRB) Fuel Tax com- mittee (TRB 2006, 23–58, 83–91) and were described in Chapter 1. The characteristic features are as follows: 1. Imposition of user taxes and fees: federal and state excise taxes on motor fuels; fees for permits, registration, and licenses; and tolls. Receipts from these sources were $116 billion in 2006, including toll receipts of $9.6 billion (8 percent of the total) (FHWA 2007, Tables HF-10, SDF; FHWA 2008a, Table LDF). TABLE 3-3 U.S. Expenditures for Goods Transportation, by Mode, 2007 Mode Expenditures ($ billions) Motor carrier 671 Railroad 58 Air carrier 41 Water carrier 38 Oil pipelines 10 Other shipper costs 8 NOTE: Water carrier expenditures include all shipper expenditures for inlandwaterways and for ocean transportation ofU.S. imports. Expendi- tures for air carriage are presumably on the same basis (expenditures for domestic transport plus transport of imports). “Other shipper costs” include traffic departments and some loading and unloading costs. In addition to the above, the source estimates shipper payments for for- warders’ services, net of forwarders’ payments to carriers, as $30 billion; this figure appears high in comparison with other estimates. A published estimate of $6billion for freight forwarder annual net revenue (Page 2008) appears more likely. Published estimates of expenditures for motor carrier services vary widely, mainly because a large share of the total is private carriage. The 25 largest for-hire trucking companies in 2005 had revenues of $100 bil- lion and operated one-sixth of the U.S. tractor fleet (Vise 2007; FHWA 2007). This group includes the major package express services, which have high average costs per vehicle, but excludes most local operators, which also have high costs per vehicle compared with long-distance general freight. SOURCES: Council of Supply Chain Management Professionals 2008a, 2008b.

92 Funding Options for Freight Transportation Projects 2. Dedication by law of user tax and fee revenue (about 90 percent of the total) to transportation (mainly to highways, but also to transit). User taxes and fees cover most road and highway spending; revenues were equal to 78 percent of spending in 2006. 3. A division of responsibilities among the federal, state, and local gov- ernments for raising revenue and for highway spending. The federal government collects one-third of user tax and fee revenue, nearly all of which is distributed to state and local governments. State govern- ments collect most of the remainder. States performed 62 percent of spending in 2006, nearly all covered by user tax and fee revenue. Local governments collect relatively little in user fees. Local government spending, 36 percent of the total in 2006, is funded with local govern- ment general revenue, dedicated broad-based local taxes, and state and federal aid (derived from user fee revenue). Authorizations in the multiyear federal surface transportation assis- tance acts are limited by the balance in the federal Highway Trust Fund 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 20 06 $, m illi o n s Transport (excluding transit and passenger rail) capital expenditures Transport (excluding transit and passenger rail) operations and maintenance FIGURE 3-1 Public spending for transportation infrastructure (excluding transit and passenger rail) capital and related operation and maintenance (millions of 2006 dollars), 1956 to 2004. (Includes spending by federal, state, and local governments for highways and roads, aviation, and water transportation.) (SOURCE: CBO 2007.)

Freight Transportation Infrastructure Finance Practices Today 93 (into which are deposited the revenues of the federal highway user taxes) and the projected deposits from user tax revenues over the term of the act. In this way, the trust fund serves as a device to equate user tax rev- enue and transportation spending.Normally, a balance of severalmonths’ worth of average revenue has been kept in the trust fund to ensure against revenuefluctuations.However, the revenue projections thatwere the basis of the authorizations in the 2005 Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) were overly optimistic, and consequently by 2008 the trust fund faced a deficit, jeopardizing funding for state transportation projects. To remedy the sit- uation, Congress transferred $8 billion to the trust fund from the gen- eral fund. The action was characterized as a restoration of certain sums (interest earnings imputed on trust fund balances) that 10 years earlier had been transferred from the trust fund to the general fund. Because this remedy entailed tapping the general fund rather than increasing rev- enue from users, it may be viewed as compromising the long-standing federal adherence to the principle of user-fee funding of highways (CBO 2008a; CBO 2008b, Appendix B). The American Recovery and Reinvestment Act of 2009 (the economic stimulus package) (Public Law 111-5, February 13, 2009) provided $27.5 billion for a highway infrastructure investment program that will func- tion according to procedures that depart from the normal practice out- lined above. The funds will be apportioned among the states by formula, similar to the practice in the normal federal-aid program. However, the spending is to be from general revenue rather than debited against the federal Highway Trust Fund, and no state matching share is required. A state may lose some or all of its apportionment if it does not obligate the funds before deadlines specified in the act. Ports, Harbors, and Inland Waterways Most large U.S. seaports are primarily nonoperating or landlord ports, that is, they lease land and facilities to terminal operators who service vessels andhandle cargo. Theports earn revenuemainly fromdockage and wharfage fees (assessed on vessels and on cargoes loaded and unloaded, respectively) paid by vessel operators and lease payments of the terminal operators. Revenue from these sources is supplemented at many ports by government support in various forms. Arrangements vary greatly, but

94 Funding Options for Freight Transportation Projects some ports receive payments from governments out of their general tax revenues; revenues generated by other facilities (e.g., toll bridges and tunnels) operated by the authority; indirect subsidies through expendi- tures of the federal government for harbor dredging and expenditures of state and local governments for roads and other facilities that primarily serve the ports; and federal subsidies in the form of the tax exemption on interest payments for bonds the ports issue (Ricklefs 2000, 44). While some U.S. ports, including several of the largest, are self-sufficient (that is, revenue before subsidies exceeds their expenditures), others are not. No recent comprehensive analysis of port self-sufficiency has been con- ducted (Ricklefs 2000, 43–46). With few exceptions, port revenues his- torically have been expended solely for activities within the boundary of the port property (California ports are prohibited by law fromusing port revenues off-site). The U.S. Army Corps of Engineers constructs and maintains harbor channels for public seaports. Maintenance dredging is funded by with- drawals from the Harbor Maintenance Trust Fund, which receives rev- enue from a federal ad valorem tax on import cargoes landing at ports with federally maintained channels (and which in recent years has accu- mulated a surplus equal to several years of disbursements). Costs of construction of new channels, channel deepening, and maintenance of channels more than 45 feet deep are shared between the federal govern- ment and the port or other local parties. The required local cost share depends on the characteristics of the project and varies from35 to 65 per- cent (AAPA2008). The federal share of costs for new channels and channel deepening is paid out of the federal general fund. The Corps of Engineers also constructs and maintains locks and chan- nels on the inlandwaterways. All maintenance is paid for out of the federal general fund. Half of expenditures for capital improvements to naviga- tion facilities is paid by withdrawals from the Inland Waterways Trust Fund, which receives revenue from a federal excise tax on towboat fuel, and half is paid from the federal general fund. Other Port Charges In addition to the long-standing port charges described above, the rev- enues from which pay for on-site facilities and services, a few U.S. ports

Freight Transportation Infrastructure Finance Practices Today 95 recently have imposed fees designed to pay for road and rail access infra- structure, environmentalmitigationmeasures, or channel improvements, and for congestionmanagement. ThePorts of LosAngeles andLongBeach have been by far themost active in introducing such fees. Table 3-4 sum- marizes four fees introduced since 1998 at these ports as well as infra- structure fees at the Port of New York andNew Jersey and the small Port of Humboldt Bay Harbor in California. Other ports are studying infrastructure fees. The Port of Oakland has plans for a container fee to fund access infrastructure and pollutionmit- igation, similar to the purposes of the Los Angeles and Long Beach fees (Port of Oakland 2008). Bills have been introduced in the state legisla- tures of California and Washington calling for creation of state-level container fees to provide revenue for freight infrastructure improve- ments, but no such fee has been enacted. Ports are likely to be especially hesitant to impose new fees for fear of losing traffic during the period of declining traffic that began in 2007. Federal Sanction of Port User Charges A provision of the Water Resources Development Act (WRDA) of 1986 allows a “nonfederal interest” to impose port or harbor dues on vessels or their cargoes, with certain restrictions, provided the revenue is dedi- cated to paying for construction and operation of harbor navigation pro- jects meeting certain criteria or for providing harbor emergency response services (33 USC Sec. 2236). That law was necessitated by a clause of Article 1 of the Constitution: No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing its inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Control of the Congress. WRDA 1986 imposed the present requirements for local matching con- tributions to the cost of federal capital projects to deepen harbor chan- nels. The harbor dues provision was intended to provide a local revenue source to pay the local matching share. However, competition among

TA B LE 3- 4 P or tU se r C ha rg es fo r A cc es s In fr as tr u ct u re or Im pa ct M it ig at io n Ra te an d B as e H ow Co lle ct ed In iti at ed U se s of Re ve nu e Re ve nu e Lo s A ng el es an d Lo ng B ea ch Po rt -R el at ed U se rC ha rg es Sa n Pe dr o Ba y in fra st ru ct ur e ca rg o fe e Pi er Pa ss tra ffi c m iti ga tio n fe e $1 5 pr oj ec te d in iti al fe e pe rl oa de d TE U en te rin g or le av in g th e Po rts of LA an d LB .E xp ec te d to va ry be tw ee n $1 5 an d $1 8 de pe nd in g on th e co st so fp ro je ct sb ei ng su pp or te d; th e po rti on of th e fe e de di ca te d to ea ch pr oj ec tt o be te rm in at ed af te rt he pr oj ec t’s co ns tru ct io n is co m pl et ed . N on liq ui d bu lk ca rg o fe es to be de te rm in ed . $5 0 pe rT EU or $1 00 fo ra ny ot he r siz e co nt ai ne rf or co nt ai ne rs ca r- ry in g ex po rt or im po rt ca rg o ar riv - in g or le av in g an yt er m in al at th e Po rts of LA an d LB by tru ck du rin g pe ak ho ur s( M on da y– Fr id ay 3: 00 a. m .– 6: 00 p. m .). Em pt yc on - ta in er sa nd co nt ai ne rs ar riv in g or le av in g th e po rts by ra il via Al am ed a Co rri do ra re ex em pt . Im po se d by po rt au th or iti es ; ch ar ge d to ca rg o ow n- er s; co lle ct ed by te rm i- na lo pe ra to rs on be ha lf of po rt au th or iti es . Co lle ct ed by te rm in al op er at or so n be ha lf of Pi er PA SS ,I nc ., a no t-f or - pr ofi to rg an iza tio n fo rm ed by th e po rts ’ 13 te rm in al op er at or s; ul tim at el yc ha rg ed to ca rg o ow ne rs . Re ve nu e de po sit ed in Po rt In fra - st ru ct ur e Fu nd ,e xc lu siv el yf or lo ca lt ra ns po rta tio n in fra st ru c- tu re fo rp or ta cc es s. To pa yf or pr es pe cifi ed sh ar es of pr es pe ci- fie d pr oj ec ts se le ct ed jo in tly by au th or iti es an d st at e an d lo ca l go ve rn m en ts ;c ar go -fe e sh ar e of ea ch pr oj ec td ep en ds on po rt tra ffi cs ha re of to ta lt ra ffi co n fa cil iti es co ns tru ct ed . N et re ve nu e is al lo ca te d to te rm i- na lo pe ra to rs to pa yt he co st so f te rm in al op er at io ns du rin g fiv e ad di tio na lw ee kly sh ift sd ur in g of f-p ea kh ou rs .T he pu rp os e of th e ch ar ge is to re du ce pe ak tru ck tra ffi c, in or de rt o re du ce co ng es tio n on ro ad sn ea rt he po rts an d re du ce tru ck op er a- to rs ’w ai tin g tim es . 20 09 (e xp ec te d) 20 05 $1 .4 bi lli on pr oj ec te d 20 09 –2 01 4 $1 25 .5 m ill io n in 20 07

Ch ar ge s at O th er Po rt s N O T E :T E U = 20 -f oo te qu iv al en tu n it . SO U R C E S: Sh en 20 08 ;K n at z 20 08 ;M on ge llu zz o 20 08 ;P ie rP A SS 20 08 a; P ie rP A SS 20 08 b; A la m ed a C or ri do r T ra n sp or ta ti on A u th or it y 20 07 ;A la m ed a C or ri do r T ra n sp or ta ti on A u th or it y 20 08 ;H u m bo ld tB ay 20 06 ;H u m bo ld tB ay 20 08 ;P A N Y N J 20 06 a; P A N Y N J 20 06 b, 26 3. Cl ea n tru ck pr og ra m fe e Al am ed a Co rri do r us er fe es an d co nt ai ne r ch ar ge s Po rt of Hu m bo ld t Ba yh ar bo r im pr ov em en t su rc ha rg e Po rt Au th or ity of N ew Yo rk an d N ew Je rs ey in te rm od al us ag e fe e $3 5 pe rl oa de d TE U en te rin g or ex iti ng th e Po rts of LA an d LB by tru ck ;l ow -e m is si on tru ck s ex em pt ed . $1 8. 67 pe rT EU (in 20 08 )t o tra ns fe r lo ad ed co nt ai ne rs in th e co rri do r; ot he rf ee sf or em pt yc on ta in er s an d no nc on ta in er ize d ca rg oe s. Ra ilr oa ds al so pa yt he fe e fo r co nt ai ne rs tru ck ed ar ou nd th e co rri do rt ha tl ea ve So ut he rn Ca lif or ni a by ra il. $5 .0 0 or $1 0. 00 pe rf oo to fd ra ft fo r ve ss el so fo ve r2 0 fe et dr af tp lu s $0 .0 75 or $0 .1 5 pe rt on of ca rg o fo rv es se ls ca rry in g ov er 10 to ns of ca rg o, de pe nd in g on w hi ch ch an ne li su se d en te rin g or le av in g th e ha rb or . $5 2. 50 pe rc on ta in er ,a pp lic ab le to al lc on ta in er sm ov in g via po rt au th or ity in te rm od al ra il fa cil iti es . As tra ffi cm iti ga tio n fe e Pa id by ra ilr oa ds to Al am ed a Co rri do rT ra ns po rta tio n Au th or ity ,o w ne ra nd op er at or of th e co rri do r. Co lle ct ed by po rt fro m ve ss el op er at or s. Co lle ct ed fro m ra ilr oa ds by te rm in al op er at or so n be ha lf of th e po rt au th or ity . To re im bu rs e tru ck op er at or sf or 80 pe rc en to ft he co st of pu rc ha se of lo w -e m iss io n tru ck s. To re tir e de bt in cu rre d to fin an ce co ns tru ct io n of th e co rri do r (ra ilr oa ds re im bu rs e Al am ed a Co rri do rT ra ns po rta tio n Au th or - ity se pa ra te ly fo rm ai nt en an ce of w ay ). To re pa ya po rti on of th e de bt th e po rt in cu rre d fo ri ts $5 m ill io n lo ca ls ha re of a 20 00 fe de ra l pr oj ec tt ha td ee pe ne d th e ha rb or en tra nc e ch an ne ls. To pa yf or co ns tru ct io n an d m ai nt e- na nc e of Ex pr es sR ai l, a sy st em of lo ca lr ai lc on ne ct io ns an d sid - in gs to br in g on -d oc kr ai ls er vic e to th e po rt’ sc on ta in er te rm in al s. 20 09 20 02 20 00 20 04 $1 .6 bi lli on pr oj ec te d fir st 5 ye ar s $9 5 m ill io n in FY 20 07 $9 0, 00 0 in FY 20 08 (co m pa re d w ith $2 20 ,0 00 pa ym en to n th e de ep en in g lo an ) $1 8 m ill io n in 20 08

98 Funding Options for Freight Transportation Projects the ports for traffic and availability of public funds for port improve- ments prevented imposition of the harbor dues. The small Port of Humboldt Bay in northern California is apparently the only port to take advantage of the provision (Table 3-4). The fee was enacted in 1997 and imposed in 2000. It is $5.00 or $10.00 per foot of draft for vessels of over 20 feet draft plus $0.075 or $0.15 per ton of cargo for vessels carrying over 10 tons of cargo, depending on which channel the vessel uses approaching the harbor. The revenue is to retire a por- tion of the debt the port incurred for its $5 million local share of a 2000 federal project that deepened the harbor entrance channels (Humboldt Bay 2006). Aviation Airports, like seaports, are operated by local public authorities, who receive revenue from rental payments from airlines and airport conces- sions, from parking fees, and from the locally imposed but federally supervised Airport Passenger Facility Charge added to price of the ticket of each passenger using an airport that chooses to collect the charge. Capital for terminal construction usually is raised by sale of revenue bonds backed by the airlines’ lease payments and the airport’s conces- sion and parking revenue. Airports receive grants from the Federal Avi- ation Administration (FAA), drawn from the federal Airport andAirway Trust Fund, for construction of runways. For most projects, the federal share of the cost is 75 percent. The trust fund receives revenue from sev- eral excise taxes on passenger tickets and aviation fuel. Air traffic control services and facilities are directly provided by FAA and paid for by the trust fund. Of FAA’s $14.7 billion total expenditures in 2007 (including grants, air traffic control, and all other FAA activities), $12.2 billion was paid for from the trust fund (FAA 2008a; FAA 2008b). The Airport Passenger Facility Charge will be cited in Chapter 6 as a possible model for user charges on other kinds of facilities. As a condi- tion of receipt of federal capital grants, federal law restricts the fees that airports may charge. A 1990 law authorized airports to impose the Pas- senger Facility Charge, collected from each passenger boarding an air- plane at the airport. Federal law sets the maximum charge, at present $4.50 per enplanement. Each airport chooses whether to impose the

Freight Transportation Infrastructure Finance Practices Today 99 charge and may set a rate smaller than the maximum. The charge is col- lected by the airlines on behalf of the airports at the time of ticket sale. Each airport retains the entire revenue generated by the charge. An air- port must obtain approval from FAA before it can begin collecting the charge. Federal law specifies the categories of capital improvements that airportsmay construct with Passenger Facility Charge revenue, and FAA must approve individual projects for funding with the revenue. As of 2009, 346 airports are collecting a Passenger Facility Charge, including nearly every major airport. Revenue from the charge totaled $2.7 billion in 2008 (FAA 2009). Comparison of Finance Arrangements Across the Systems For the four systems for which government provides infrastructure, Table 3-5 compares total spending (including capital and operating expenditures), revenue from user taxes and fees, and the share of total TABLE 3-5 Public Expenditures and Sources of Funds for Highways, Aviation, InlandWaterways, and Ports, 2006 Highways Aviation Waterways Seaports User tax fee revenue ($ billions) 116 26.7 0.1 5.0 Total expenditures ($ billions) 150 29.7 0.9 5.3 Capital 79 13.7 0.5 Operating 71 15.9 0.4 User fee revenue/expenditures 0.77 0.90 0.10 0.95 Federal grants and direct 36 15.1 0.9 1.0 spending ($ billions) (Federal grants and direct 0.24 0.51 1.0 0.19 spending)/expenditures NOTE: User tax and fee revenue includes revenues collected by the federal, state, and local govern- ments. Federal grants include distribution of revenue of federal user taxes and fees. Waterways and seaports expenditures do not include any federal expenditures other than those for the navigation program of the U.S. Army Corps of Engineers and certain other federal expenditures reimbursed from theHarborMaintenance Trust Fund. Seaports expenditures include small amounts expended by state and local governments for inland waterways. SOURCES: Highways: FHWA 2007, Table HF-10. Aviation: FAA 2007; CBO 2008b, Supplemental Tables; Bureau of the Census 2009, Table 1. Waterways: U.S. Army Corps of Engineers 2005; U.S. Congress 2006, p. 10; U.S. Department of the Treasury 2007. Seaports: Bureau of the Census 2009, Table 1; U.S. Army Corps of Engineers 2005; U.S. Congress 2006, p. 10; Institute for Water Resources 2008.

100 Funding Options for Freight Transportation Projects funds provided by the federal government. The arrangements differ greatly among the modes. The federal share of total capital and operat- ing expenditures ranges fromnearly 100 percent for inlandwaterways to under 25 percent for highways and seaports. The ratio of user tax and fee revenue to expenditures ranges from 90 percent or higher for aviation and seaports to 10 percent for inland waterways. These differences in finance arrangements reflect in part differences in physical characteristics (for example, air traffic control is most effec- tively operated as a single nationwide system) but also historical circum- stances. At other times in theUnited States, and in other countries today, different distributions of responsibility for infrastructure among the cen- tral government, local governments, and theprivate sectorwouldbe found, as well as different divisions of financial responsibility between system users and taxpayers. The same diversity of practices, dependent on cir- cumstances, will be evident among the case study projects described later in this chapter. Federal Finance Provisions and Practices Relevant to Freight Infrastructure This section describes certain special federal infrastructure programs that are of particular relevance for freight projects. Several components of the overall federal surface transportation assistance program (most recently reauthorized in SAFETEA-LU in 2005) were created with the needs of such projects in mind (although they were intended also for application to passenger facility finance). A review of experience with these provisions will be necessary in assessing finance reform proposals because most proposals are similar to existing programs with respect to goals, aid mechanisms, and demands placed on their federal administra- tors. The four programs described are the Transportation Infrastructure Finance and Innovation Act (TIFIA) credit assistance program, the Rail- roadRehabilitation and Improvement Financing (RRIF) credit assistance program, the SAFETEA-LU Projects of Regional and National Signifi- cance program (and a similar provision in the 2009 economic stimulus package), and the SAFETEA-LU authorization of private activity bond (PAB) financing for certain kinds of highway and intermodal projects. TIFIA is examined in most detail because it has the most points of simi- larity, in intent and structure,with several of the prominent finance reform

Freight Transportation Infrastructure Finance Practices Today 101 proposals described in Chapters 5 and 6. The other current programs are less frequently used or narrower in application. The final two subsections below describe the earmarking of specific projects to receive funding, which is a mechanism frequently used by Congress in providing federal assistance to freight projects, and regulations affecting foreign invest- ment in U.S. infrastructure. TIFIA Special legislation was required in 1996 to authorize the federal loan to the Alameda Corridor. At about the same time, two California toll road projects received federal credit assistance through special legislation (USDOT 2000). Other project sponsors saw the potential value of such assistance, and ports in other regions wanted assurances that similar projects elsewhere would receive equal treatment. These reactions were among themotivations for the 1998 enactment of TIFIA, which provides federal credit assistance to infrastructure projects and was intended to institutionalize the form of federal assistance provided to the Alameda Corridor (TRB 2003, 43). The U.S. Department of Transportation (USDOT) describes the pur- pose of the program as follows: “The TIFIA program is designed to fill market gaps and leverage substantial private co-investment by provid- ing supplemental and subordinate capital to projects of national or regional significance” (USDOT 2006, 1). This description indicates that the program is not seen primarily as a mechanism to deliver subsidies to projects but as a way to exploit inherent federal government advantages in supporting projects that would be perceived as high risk by private- sector lenders and investors. An important source of risk is that projects like the AlamedaCorridor are unusual; that is, they often depend on new organizations or new revenue sources that do not have a record of per- formance. The rationale for TIFIA is that the federal assistance can be justified in such circumstances, either because the cost of risk is lower to the federal government than for any smaller government or private lender by virtue of its large and diverse portfolio of investments and the spread of the burden of risk over a large number of taxpayers or because in a credit market where borrowers knowmore about their creditworthi- ness than lenders do, lenderswill ration the availability of credit (Lucas and Phaup 2007, 4–14).

102 Funding Options for Freight Transportation Projects Increasing the leverage of federal assistance was a related goal of the program. The intent was that by accepting a share of the risk, the federal government could stimulate greater investment by state and local gov- ernments and the private sector in infrastructure projects. TIFIA provides, at least potentially, a mechanism for the federal gov- ernment to intervene constructively in the development of important projects forwhich private firms and state and local governments naturally have primary responsibility. The federal government can offer assistance to projects that have high economic value but pose serious challenges to the local responsible parties. Through TIFIA, it may be able to encourage finance arrangements that are economically beneficial from a national point of view and to attract private-sector cooperation in public–private projects by accepting a major share of project risk. TIFIA offers sponsors of transportation infrastructure projects three kinds of assistance: direct federal loans, federal loan guarantees (ensur- ing repayment to buyers of project bonds), and lines of credit (a federal commitment to provide loans if needed). Federal credit is not to exceed one-third of the total project cost. Projectsmeeting all eligibility require- ments in the law are evaluated by the Secretary of Transportation to determine whether federal assistance will be awarded. The law specifies that the interest rate on a TIFIA direct loan must be no less than the yield on U.S. Treasury securities of similar maturity on the date of the loan agreement. Apparently USDOT policy has been to loan at near this minimum. Eligibility originally was limited to projects costing $100 million or more for constructionof highways, transit, intercity passenger rail, or pub- licly owned intermodal transfer facilities; seaports, airports, and freight railroadswere excluded. The 2005 federal surface transportation assistance act (SAFETEA-LU) liberalized the rules to attract more applications and make the program more useful for freight. The minimum project was reduced to $50million and eligibilitywas extended to freight railroads, pri- vate intermodal terminals, and port intermodal and access facilities. Project sponsors (borrowers) may be governments, public author- ities, or private entities. Projects must be included in the state gov- ernment transportation plan. The federal credit assistance must be repayable at least in part from user charges or other dedicated funding

Freight Transportation Infrastructure Finance Practices Today 103 sources (e.g., a dedicated local sales tax), and these revenue sourcesmust also secure other project obligations. The project’s senior obligations (which usually are not the TIFIA loan)must receive an investment grade credit rating before the federal loan or loan guarantee can be executed (23 USC Sec. 603b). The selection criteria specified in the law are the following (23 USC Sec. 602b): (i) The extent to which the project is nationally or regionally significant, in terms of generating economic benefits, supporting international com- merce, or otherwise enhancing the national transportation system. (ii) The creditworthiness of the project. . . . (iii) The extent to which assistance . . . would foster innovative public– private partnerships and attract private debt or equity investment. (iv) The likelihood that assistance . . . would enable the project to proceed at an earlier date than the project would otherwise be able to proceed. (v) The extent to which the project uses new technologies, including intel- ligent transportation systems, that enhance the efficiency of the project. (vi) The amount of budget authority required to fund the Federal credit instrument made available under this chapter. (vii) The extent to which the project helps maintain or protect the envi- ronment. (viii) The extent to which assistance . . . would reduce the contribution of Federal grant assistance to the project. Decisions on awards are made by the USDOT Credit Council, which is composed of senior officials from the Office of the Secretary and the modal administrations. The TIFIA Joint Program Office in USDOT administers the program (Figure 3-2). According to the provisions of the Federal Credit ReformAct of 1990, the cost in the federal budget of a federal loan program is the present value of expected future loss to the federal government from commit- ments made during the budget year. The 1998 surface transportation assistance act authorized $530 million over 5 years, debited to the High- way Trust Fund, to pay for expected losses on TIFIA loans (this amount, known as the subsidy cost, is, in effect, the cost of an insurance premium paid into a reserve account, in keepingwith the terms of the 1990 act) and capped the total of loans offered or guaranteed at $10.6 billion. The 2005 federal surface transportation assistance act, SAFETEA-LU, authorized

104 Funding Options for Freight Transportation Projects $610million for thebudget cost of theprogramover the 5 years 2005–2009, sufficient to allow about $13 billion in credit assistance. Congress has since rescinded part of the originally authorized funding. Advantages toProject Sponsors USDOT identifies flexible repayment schedules as a major attraction of TIFIA loans to project sponsors. Loan terms can allow the start of repayment to be delayed up to 5 years after project completion. Negative amortization (i.e., loan payments smaller than interest accruals in each period) can be allowed for an initial period, and repayment schedules can be adjusted according to the performance of revenue streams. These features reduce the risks of loan default if the revenue stream backing the loan does not meet expectations. Private credit market products can provide some of these features but may not match the combination of high flexibility and low interest cost of the TIFIA loans (USDOT2006;USDOT2002). Apparently in some instances borrowers have found the added flexibility of TIFIA terms to be worth the cost of a higher interest rate on the federal loan, comparedwith the rate tax-exempt bonds would carry. (Beginning in late 2008, the yield on tax- exempt bonds, normally lower historically than that of the comparable- term Treasury bond, rose to well above the Treasury yield in reaction to 1 Sponsor Submits Letter of Interest to DOT 2 Sponsor Prepares and Submits Application to DOT 3 DOT Staff Prepare Preliminary Evaluation and Arrange Sponsor Presentation 4 DOT Staff Prepare Final Evaluation and Make Recommendation to DOT Credit Council 6 DOT Issues Term Sheet and Obligates Funds 7 DOT Executes Credit Agreement and Disburses Funds 5 DOT Credit Council Provides Recommendations to the Secretary, Who Selects Projects to Receive TIFIA Credit Assistance FIGURE 3-2 Selection of projects to receive TIFIA assistance. (SOURCE: USDOT 2007, 1–4.)

Freight Transportation Infrastructure Finance Practices Today 105 the 2008 financial crisis, greatly increasing the attractiveness of TIFIA loan terms.) The liberal provisions of the federal loan to a TIFIA project allow the borrower to obtain a higher credit rating and lower interest rate on the senior obligations it issues to finance the project (although, as described below, a TIFIA loan is not technically subordinate, since it is treated equivalently to senior debt in the event of a default). The federal endorse- ment implied by a TIFIA loan may in itself aid in attracting private investors to a project. TIFIAProjects From its inception through April 2008, the TIFIA pro- gram had received 32 applications for a total of $6.9 billion in credit assistance (USDOT 2008d) and had awarded assistance to 14 projects (through 15 credit agreements) for credit amounts totaling $4.3 billion, of which $3.7 billionwas in the formof direct loans and $600millionwas a loan guarantee to one project. One additional loan of $500million was near final agreement. No line of credit has been issued. The $4.3 billion in credit assistance awarded is well below the totals that the congressional authorizations would have allowed ($10.6 billion in 1998 and approximately $13 billion in 2005). The $1 billion of TIFIA loans that have been fully repaid represent additional unused credit capacity. TIFIA has been little used for freight-related projects. The recipi- ents (Table 3-6) are eight highway projects (including the Cooper River Bridge in South Carolina, constructed to remove an obstruction to vessel entry to the Port of Charleston); six transit, passenger rail, and passenger intermodal facilities projects; and the Reno ReTRAC rail–highway grade separation project (USDOT 2008a). Cooper River Bridge and ReTRAC are the only projects in which freight-related benefits were a primary motivation. No borrower has yet defaulted on a TIFIA loan. Several projects that received TIFIA assistance have retired their TIFIA loans early by refi- nancing (Table 3-6). For example, in 2004, 3 years after receiving a TIFIA loan, the South Carolina Transportation Infrastructure Bank repaid the Cooper River Bridge loan by refinancing with tax-exempt bonds carry- ing a lower interest rate than the federal loan. Similarly, the City of Reno

TA B LE 3- 6 A pp ro ve d T IF IA P ro je ct s Pr oj ec t Cr ed it Ye ar Pr oj ec t Co st In st ru m en t A m ou nt Pr im ar y Re ve nu e A pp ro ve d Pr oj ec t Ty pe ($ m ill io ns ) Ty pe ($ m ill io ns ) Pl ed ge A ct iv e Cr ed it A gr ee m en ts 19 99 19 99 20 01 20 03 20 05 20 05 20 06 20 06 20 07 20 07 To ta l M ia m iI nt er m od al Ce nt er Re nt al Ca rF ac ili ty (Fl or id a) W as hi ng to n M et ro (D ist ric to fC ol um bi a) Ce nt ra lT ex as Tu rn pi ke (T ex as ) So ut h Ba yE xp re ss w ay (C al ifo rn ia ) 18 3A To ll Ro ad (T ex as ) LA -1 to ll hi gh w ay (Lo ui sia na ) W ar w ick In te rm od al St at io n (R ho de Isl an d) Po ca ho nt as Pa rk w ay /R ich m on d Ai rp or t( Vi rg in ia ) Ca pi ta lB el tw ay /I- 49 5 HO T La ne sP ro je ct (V irg in ia ) SH -1 30 Co rri do r( Te xa s) In te rm od al Tr an sit Hi gh w ay Hi gh w ay Hi gh w ay Hi gh w ay In te rm od al Hi gh w ay Hi gh w ay Hi gh w ay 1, 35 0 2, 32 4 3, 18 1 65 3 33 1 24 7 22 2 74 8 1, 99 8 1, 36 0 Di re ct lo an Gu ar an te e Di re ct lo an Di re ct lo an Di re ct lo an Di re ct lo an Di re ct lo an Di re ct lo an Di re ct lo an Di re ct lo an 27 0 60 0 91 7 14 0 66 66 42 15 0 58 9 43 0 3, 27 0 Us er ch ar ge s In te rju ris di ct io na l fu nd in g ag re em en ts Us er ch ar ge s Us er ch ar ge s Us er ch ar ge s Us er ch ar ge s Us er ch ar ge s Us er ch ar ge s Us er ch ar ge s Us er ch ar ge s

Co m m itm en ts A w ai tin g Cr ed it A gr ee m en ts 20 06 To ta l Re tir ed Cr ed it A gr ee m en ts 19 99 19 99 20 00 20 00 20 01 To ta l To ta l, al lc at eg or ie s N O T E :P ro je ct co st s ar e as of da te of T IF IA fi n an ci al cl os in g. a T h e co st of th is pr oj ec ti s in cl u de d in th e $1 ,3 50 m ill io n sh ow n in th e fi rs tl in e of th e ta bl e (t h er e w er e tw o lo an s fo r on e pr oj ec t) . SO U R C E :U SD O T 20 08 e. In te rc ou nt yC on ne ct or (M ar yla nd ) M ia m iI nt er m od al Ce nt er (Fl or id a) Tr en Ur ba no (P ue rto Ri co ) Co op er Ri ve rB rid ge (S ou th Ca ro lin a) St at en Isl an d Fe rri es (N ew Yo rk ) Re no Ra il Co rri do r( N ev ad a) Hi gh w ay In te rm od al Tr an sit Hi gh w ay Tr an sit In te rm od al 2, 46 6 a 2, 25 0 67 7 48 2 28 0 18 ,5 69 Di re ct lo an Di re ct lo an Di re ct lo an Di re ct lo an Di re ct lo an Di re ct lo an 51 6 51 6 26 9 30 0 21 5 15 9 50 99 4 4, 78 0 Us er ch ar ge s Ta xr ev en ue s Ta xr ev en ue s In fra st ru ct ur e ba nk lo an re pa ym en ts To ba cc o se ttl em en t re ve nu es Ro om an d sa le st ax

108 Funding Options for Freight Transportation Projects refinanced its loan for the ReTRACwith tax-exempt bonds after 4 years. Also, the Alameda Corridor Transportation Authority repaid its 1997 federal loan, which preceded and was the model for TIFIA, in 2004, 28 years before maturity, with proceeds from the sale of taxable and tax- exempt revenue bonds, at a significant saving in interest cost (FHWA 2004). USDOT regards these early retirements as consistent with the goals of the program: “The Department believes that TIFIA assistance best meets interim, not long-term financing needs. As a project passes through the various stages of development . . . the risks to investors decline as actual costs and revenues become known. Should the project become attractive enough to enable it to obtain all financing from the existing capital markets, the Department would prefer that it do so” (USDOT 2006, 5). Assessments of TIFIA Performance The criterion for judging TIFIA should be whether the program has allowed the completion of projects that have produced high economic returns that nonetheless would not have been constructed, or whose construction would have been delayed, without the federal assistance (and that such benefits are not canceled by losses on poorly performing projects). TheTIFIAprogramcontains a requirement forUSDOT to report every 2 years to Congress on the “financial performance” of the projects receiv- ing assistance under the programand to recommendwhether the program should be continued, turned over to a government corporation, or ended (23USCSec. 609;USDOT2006). TheUSDOTreports have not contained quantitative economic assessments of the value of the program.USDOT’s 2006 report to Congress concluded that “several more years must pass before the Department can assess the program’s actual long-term costs and benefits” (USDOT 2006, 8). Nonetheless, USDOT concluded that “the TIFIA program especially benefits a clearly defined niche of project financings—user backed start-up projects lacking prior market access, where investors must absorb construction risk, performance risk, and demand risk. For these projects, which under the best of circumstances would achieve a senior debt rating no better than the lowest investment grade category, the TIFIA program seems to be filling a market gap by offering attractively priced subordinate and supplemental capital.”

Freight Transportation Infrastructure Finance Practices Today 109 A 2006 evaluation by the Office of Management and Budget (OMB) concluded as follows: “TIFIA helps fill a specificmarket niche by financ- ing large user-fee funded start-up transportation infrastructure projects, such as new toll roads. These types of projects often lack access to private capital because of their size, complexity, and risk” (OMB 2006). OMB further concluded that “TIFIA’s open-ended guidelines do not neces- sarily ensure it provides the most cost-efficient financing options. . . . Federal policy holds that it would generally be less costly for the govern- ment to guarantee loans [rather than loan directly]” and that “the pro- gram’s design does not ensure the promotion of private investment in transportation infrastructure or stipulate that TIFIA assistance addresses a market failure. TIFIA does not require a minimum level of private investment for individual projects, and it has not explicitly targeted assis- tance at projects lacking access to private capital.” Factors Hindering Use As noted above, only two primarily freight- related projects have received TIFIA assistance. Among the possible causes of the program’s failure to attract more freight project applica- tions are that its requirements are too restrictive, that the kinds of credit assistance it provides are more readily available from other sources, or that fewworthwhile projects of the kind envisioned by the framers of the law exist. As noted, the 2005 SAFETEA-LU amendments liberalized eli- gibility by expanding the kinds of facilities that qualify and lowering the minimum project size. Several features of the program have been cited as limiting TIFIA’s utility: • Until the recent interest rate movements noted above, the interest rates on loans, based on the cost to the government of borrowing through bonds with terms similar to those of TIFIA loans, may not have been attractive to highly creditworthy projects that are eligible for tax-exempt bond financing. However, the program was not con- ceived as an aid to projects with ready access to commercial credit. • The process of applying for TIFIA assistance, USDOT review, and final execution of the credit agreement has been time-consuming in some instances, and potential borrowers have been discouraged by its

110 Funding Options for Freight Transportation Projects uncertainty. The OMB 2006 evaluation reported improvement in the speed of one stage of the process, from Secretarial approval to execu- tion of the agreement, between 2000 and 2006, although only a few agreements were made in that period. Delays of 1 to 2 years have sometimes occurred in reaching the Secretarial decision. • While a TIFIA loan is normally treated as subordinate to other loans made to a project sponsor, the TIFIA legislation requires that, in the event of bankruptcy of the borrower, TIFIA debt be treated equiva- lently to other senior debt (23 USC Secs. 603, 604). This provision may reduce the attractiveness of bonds issued byTIFIA-backedprojects (Jones 2001). • As TIFIA is now administered, a federal commitment cannot be obtained until the formal loan agreement is signed and firm commit- ments are in place for all other elements of the finance plan, includ- ing the revenue stream to repay the federal loan. In the past, USDOT provided contingent commitments based on execution of a prelimi- nary term sheet (an outline of the terms of the agreement), which helped expedite the negotiating process that is essential in finalizing finance arrangements for complex projects. An earlier, contingent federal commitment sometimes could be valuable. • Projects receiving TIFIA assistancemust comply with the contracting rules (including Davis–Bacon Act employment rules and Buy Amer- ica provisions) that apply to projects receiving federal highway or transit grants (as specified by U.S. Code Titles 23 and 49), which adds to project costs. AUSDOTpolicy statement of 2008 (under the previous administration) proposed further modifications in TIFIA rules to encourage greater use. USDOT summarized the proposal as follows (USDOT 2008c, 54): [T]he proposal increases the Department’s flexibility to structure credit sup- port for vital projects expected nevertheless to produce little revenue in the early years of operation. . . . The TIFIA Program would be modified in the following manner. . . . • Repayment Flexibility: TIFIA repayment schedules, deferral periods and maturity dates would be approved on a case-by-case basis, not prescribed by statute, with a deferral preference for facilities financed in part or pri- marily by users.

Freight Transportation Infrastructure Finance Practices Today 111 • Federal Requirements: TIFIA credit assistance in the form of loan guaran- tees or lines of credit would not be subject to Title 23 and Title 49 require- ments, with the exception of Davis–Bacon prevailing wage laws. . . . • Direct Pricing: TIFIA credit assistance to be repaid from direct facility pricing would be available for up to 50% of eligible project costs. If TIFIA credit assistance were to be repaid from direct facility pricing and were provided for 33% or less of eligible project costs then such TIFIA credit assistance would not be subject to Title 23 or Title 49 requirements apart from Davis–Bacon provisions. • Guarantees and Lines of Credit: Loan guarantees and lines of credit would be available to supplement a secured loan provided for 33% or less of eli- gible project costs, as long as the total amount of TIFIA credit assistance did not exceed 40% of eligible project costs. TheseUSDOTproposals emphasize relaxing federal contracting require- ments, allowing the TIFIA loan to cover a larger share of project costs in some circumstances, and providing incentive for funding through direct facility user charges. Although no TIFIA project has yet defaulted on a commitment to the federal government, any actions to expand or promote greater use of the program may entail federal acceptance of greater risk. The budgetary cost of the program would thereby increase. OMB, rather than USDOT, is responsible for budget scoring and risk ratings of federal programs, but USDOT program managers will require analytic capability for risk assessment to evaluate proposals and design assistance packages that reasonably share risk. This capability will be critical if federal credit assis- tance programs become more active. Program managers will need con- tingency plans for dealing with the financial and political consequences of an eventual actual federal loss. RRIF A second federal program, RRIF, provides credit assistance to operators of private and public freight and passenger railroads for capital expendi- tures. Like TIFIA, it was created in 1998 and amended in SAFETEA-LU. The term of loans may be up to 25 years, and the interest rate, as in TIFIA, is the interest rate on Treasury bonds of similar terms. Unlike TIFIA, under which Congress appropriates the capital reserve required to cover the government’s expected losses on the loans, RRIF requires applicants to pay the reserve themselves to the federal government.

112 Funding Options for Freight Transportation Projects Compared with the authorized cap on its loans of $35 billion, the pro- gram has not been heavily used. Through October 2008, 21 RRIF loans totaling $748 million had been executed. A $100 million loan to Amtrak in 2002 and two loans to the Dakota, Minnesota & Eastern Railroad (DM&E) in 2003 and 2007, totaling $281 million, account for half the total. Other than the DM&E loans, the largest loan for freight infrastruc- ture was $50 million to the Tex-Mex Railroad in 2005. Most RRIF loan agreements have been for amounts less than $15million. The freight rail- roads receiving assistance have all been short lines or regional railroads (FRA 2008). Apparently the loan terms have not been attractive enough to the large railroads to compensate for the costs of administrative and regulatory requirements imposed on recipients of federal assistance. PABs The interest paid on bonds issued by state and local governments to finance public facilities is exempt from federal income tax. Government bonds that finance facilities for private use do not qualify for this favor- able tax treatment unless the facility constructed is on a list of categories of “exempt facilities” specified in federal law. SAFETEA-LU expanded the list of exempt facilities to include privately built highways and cer- tain other transportation facilities that are built with federal aid. SAFETEA-LU, Section 11143, provides that any project to construct highway or intermodal truck–rail transfer facilities that receives aid through the federal surface transportation assistance program is eligible to be financed with tax-exempt bonds. A project potentially benefiting from this provision (that is, not previously eligible for tax-exempt bond financing) would be organized as some form of public–private partner- ship, and the bonds would be issued by state and local governments on behalf of the private developers. Receipt of a TIFIA loan would be one way such projects could receive federal aid and thus become eligible for tax-exempt bond finance. The Secretary of Transportation is given broad discretion to select the projects authorized to issue the bonds, within the $15 billion cap on the total value of the bonds set in the act. The SAFETEA-LU PAB program received significant initial interest. As of December 2008, USDOThad approved eight projects to issue PABs totaling $4.9 billion (one-third of the total the law authorized), although

Freight Transportation Infrastructure Finance Practices Today 113 only one project, the Capital Beltway high-occupancy toll lanes in Vir- ginia, has issued the bonds (FHWA 2008b). Previous TRB committees recommended allowing tax-exempt finance for privately developed infrastructure competing with publicly built facilities so that tax law is neutral with respect to private versus public development (TRB 2006, 195–196; TRB 1998, 107). However, some projects eligible for PABs under the terms of SAFETEA-LU (e.g., intermodal terminals) do not compete with public infrastructure; therefore, in these cases the justifi- cation for the subsidy is not evident. A USDOT policy statement in 2008 (under the previous administra- tion) proposed modifications to the SAFETEA-LU PAB provisions to increase the attractiveness of this form of federal assistance (USDOT 2008c, 45): In order to provide the private sector with access to tax-exempt interest rates on a level-basis with the public sector, and to increase private sector invest- ment inU.S. transportation infrastructure, the PAB programwould be reau- thorized without a national volume cap. Furthermore, in order to encourage private investment inU.S. transportation infrastructure, the reauthorization bill would amend the Internal Revenue Code with respect to qualified high- way and freight transfer facilities to authorize (a) the use of an accelerated depreciation schedule for capital projects financed with PABs, (b) back- loaded structures on toll projects financedwith PABs, and (c) the use of PABs to finance private investment in existing infrastructure. PABs have other features that limit their usefulness. Conventional tax-exempt bonds may be issued with provision for deferral of initial interest payments, but deferral of interest on a PAB is not possible. Therefore PABs are not well suited for start-up projects that will depend on self-generated revenue to repay their bonds. Deferral of interest pay- ments is desirable for such projects because of the delay between initia- tion and the time when the completed facility reaches its full revenue potential. SAFETEA-LU Projects of National and Regional Significance Program and Stimulus Package Discretionary Grants SAFETEA-LU created a new federal-aid program category, Projects of National and Regional Significance (Section 1301). The program was

114 Funding Options for Freight Transportation Projects funded at $1.8 billion over 5 years (less than 1 percent of the total in the act). The act describes a competitive grant process by which the Secre- tary of Transportation is to award funding to projects proposed by the states. However, Congress also earmarked the entire authorized amount, designating 25 projects in 17 states. In the act, the ostensible features of the program are to be as follows: • It is for high-cost transportation infrastructure projects: over $500mil- lion or 75 percent of the state’s annual federal-aid apportionment. • Eligible projects may be “any surface transportation project eligible for Federal assistance under Title 23, United State Code, including freight railroad projects and activities eligible under such title.” Title 23 is the law governing the federal-aid highway program, which allows use of funds for rail or other nonhighway purposes only under lim- ited circumstances. Nonetheless, several of the earmarked projects have major rail components. • A project must be justified by showing that it will “generate national economic benefits,” “reduce congestion, including impacts on the State, region and Nation,” “improve transportation safety,” or “oth- erwise enhance the national transportation system.” Eligibility is not limited to freight-related projects. • The Secretary of Transportation is to consider the extent to which the project leverages the federal investment by bringing funding from state, local, and private sources. The federal share is to be 80 percent of project costs, or less if the applicant requests less. USDOThas published a final rule (73 FR 63362,October 24, 2008) imple- menting the project selection process in the act, anticipating that the pro- gram may at some point receive unearmarked funding. The rule states evaluation criteria in general terms similar to the language of the act. Among the 25 projects that Congress designated to receive funding under the program are two of the case studies described below, theHeart- land Corridor and CREATE. USDOT’s 2007 report to Congress on the Projects of National and Regional Significance program (USDOT 2008b) shows that, through 2007, of the 25 projects, federal funds had been obli- gated for only 12, and for six projects, USDOT had not yet received proj- ect descriptions or requests for release of federal funds from sponsors.

Freight Transportation Infrastructure Finance Practices Today 115 The Secretary’s transmittal letter to the report states: “The Department believes . . . that a number of these projects may not reflect projects that are truly of National and Regional Significance, but in fact are projects which reflect local interests, and would have been more appropriately funded from other categorically specific funds. . . .” Of 14 projects whose descriptions USDOT includes in the report, nine are urban expressway projects, including bridge replacements, interchange construction, and lane additions; three are freight rail–highway grade crossing projects in urban areas (Alameda East in SouthernCalifornia; Commonwealth Rail- way relocation in Portsmouth, Virginia, an element of the Heartland Corridor project; andCREATE inChicago); one is a railmainline double- stack clearance project (Heartland Corridor); and one is a collection of rail, highway, and transit improvements. The Section 1301 federal grant is a small share of the estimated total cost of most projects (for example, $125 million out of $4.6 billion for Alameda Corridor East). For the two elements of theHeartlandCorridor receiving Section 1301 funds, the com- bined federal share is 50 percent ($105 million out of $210 million). The American Recovery and Reinvestment Act of 2009 (the economic stimulus package) provided $1.5 billion for Supplementary Discre- tionary Grants for a National Surface Transportation System (Title XII, Public Law 111-5, February 13, 2009), a program in some respects sim- ilar to the SAFETEA-LU Projects of National and Regional Significance program but more liberal with respect to project eligibility and funding provisions. Mass transit, port, public- and private-sector rail, and high- way projects are eligible for grants to be awarded competitively by the Secretary of Transportation. Funding for the program is to be from gen- eral revenue rather than debited against the federal Highway Trust Fund, and no state or local matching share is required. The law allows USDOT to use part of the funds to pay the federal budgetary subsidy cost of credit assistance offered to transportation projects. Project Earmarking in Federal Surface Transportation Legislation OMB (an agency of the executive branch) defines earmarks as follows: Earmarks are funds provided by the Congress for projects or programswhere the congressional direction (in bill or report language) circumvents the merit-based or competitive allocation process, or specifies the location or

116 Funding Options for Freight Transportation Projects recipient, or otherwise curtails the ability of the Executive Branch to properly manage funds. Congress includes earmarks in appropriation bills—the annual spending bills that Congress enacts to allocate discretionary spending—and also in authorization bills. ByOMB’s count, SAFETEA-LU of 2005 contained 6,301 earmarks total- ing $23.1 billion in spending authorizations, 9 percent of total autho- rizations in the act. Earmarking in the federal-aid highway program grew steadily from 1 percent in the 1982 act (Surface Transportation Assistance Act) to the level in the 2005 act (TRB 2006, 45). OMB also has found that Fiscal Year 2008 appropriations for the Corps of Engi- neers Civil Works program (which includes construction and mainte- nance of harbor channels and the inland waterways) included 1,338 earmarks for $3.0 billion, about half of total appropriations for the pro- gram (OMB 2008). The TRB Fuel Tax Committee noted that the impact of earmarking depends on whether the projects that Congress chooses have greater benefits than the projects that federal, state, and local executive agencies would choose if they received the funds through formula or competitive grants. To the extent that the executive agencies have well-developed and effective processes for capital programming and project selection, earmarking will divert some funds from higher-payoff to lower-payoff projects (TRB 2006, 45–46). A possible defense of earmarking is that it may be the most practical way for government to provide large sums to projects that are rare or unique and that are concentrated geographi- cally in one or a few regions. Managing aid to projects of this nature through a rules-based bureaucratic procedure would be challenging. Constraining earmarking would not deny Congress ultimate control of the use of federal funds. For federal assistance to transit projects through the New Starts program and in federal water resources projects, federal law has created a process that requires evaluation of project pro- posals by the responsible executive agencies and final congressional approval of agency-recommended expenditures. Congress oversees the federal-aid highway program by requiring USDOT to prepare periodic reports on progress in meeting congressional goals with regard to the condition and performance of the highway system.

Freight Transportation Infrastructure Finance Practices Today 117 Regulation Affecting Foreign Investment TheOrganisation for EconomicCo-operation andDevelopment (OECD) has assessed U.S. practices affecting foreign investment in transporta- tion infrastructure to bemore restrictive than the OECD average. These practices include operational restrictions on foreign carriers that make foreign investment unattractive by reducing profit potential and restric- tions on foreign equity ownership in U.S. facilities. Such restrictions may tend to reduce the overall rate of investment in U.S. transportation infrastructure. OECD attempts to produce an objective “foreign direct investment regulatory restrictiveness index” for each of 16 industry sectors in each of 28 countries, based on ratings of the degree to which each country’s laws and regulations (for example, restrictions onmarket entry, restrictions on operations, and limits on foreign equity ownership in domestic firms) discriminate against foreign firms or foreign investment. The analysis indicates that in the United States, and typically in other high-income countries, the air and maritime sectors are among the most restrictive with regard to foreign direct investment. The U.S. restrictiveness indices were comparable with the average among OECD member countries in the maritime sector and more restrictive than average in aviation. Road transport was judged to be relatively open to foreign direct investment in the United States and in most other countries (OECD 2007, 136–143). Foreign investment is recognized as an essential source of capital throughout the U.S. economy. Foreign direct investment (i.e., the pur- chase of assets in the United States by foreign firms or individuals for the purpose of acquiring a lasting interest in an enterprise) averaged $144 bil- lion annually in 2000–2006. Foreign companies employ 5 million work- ers in the United States and produce one-fifth of all U.S. exports (GAO 2008, 1; Kaplan and Teslik 2007). Furthermore, U.S. businesses and indi- viduals are major investors abroad, and the openness of other countries to U.S. investment presumably depends to a degree on U.S. reciprocal openness. Foreign investment plays amajor role in transportation infrastructure development inmany countries, and several largemultinational firms are active in projects worldwide. An example of this activity is the concession

118 Funding Options for Freight Transportation Projects agreement between the State of Texas and an international consortium for construction and operation of segments of State Highway 130, one of the case studies summarized below. U.S. law recognizes the national security implications of foreign acqui- sition of certain categories of U.S. firms or assets (for example, defense suppliers and critical infrastructure facilities) and the need to balance security concerns with the economic benefits of foreign investment. The President has the authority to prohibit a foreign acquisition if it is deter- mined to present a security threat. The established process for review of security implications of foreign investments was revised and strength- ened in 2007 (GAO 2008, 1–7). CASE STUDY ILLUSTRATIONS OF FINANCE ARRANGEMENTS Cases are a necessary information source for examining freight infra- structure finance because of the diversity of practices among the federal, state, and local government agencies and private firms that build and operate facilities. The committee commissioned case studies of projects to help it to observe the following: • Characteristics of projects that appear to have influenced the selection of finance arrangements, • Choices of project sponsors with regard to user fees and subsidies, • The role of federal leadership or funding contributions in the projects, • The nature and distribution of the benefits of the projects and how the benefits relate to finance choices, and • Alternative institutional arrangements for initiating and managing projects. Results of past studies suggest that the freight-related projects that are the most challenging and that require special institutional and finance arrangements often share two characteristics. First, they are intended to yield amix of direct benefits both to the commercial users and operators of the freight facility and to the broader public (for example, through reduced congestion for local passenger travel and reduced pollution). Second, they are institutionally complex; that is, they require action or

Freight Transportation Infrastructure Finance Practices Today 119 assent from many jurisdictions (local governments, special authorities, sometimes more than one state government, and the federal govern- ment) and multiple private-sector parties (e.g., railroads and terminal operators). Most of the case studies selected exhibit both characteristics. The committee commissioned two authors to assemble case study information (Ortiz and Maring 2008; Smith 2008). The number of case studies obviously is too small to be representative. The committee selected projects that have been prominent in discussions of infrastructure pol- icy and sought to include examples of inland and port-related projects; highway, rail, and multimodal projects; and projects in which states, local governments, and the federal government have primary responsi- bility. The committee specified that each case study contain a history of the project; descriptions of the institutional arrangements for construct- ing and operating the facility, intended benefits, finance arrangements, and methods of evaluation; and, for completed projects, a comparison of outcomes with expectations. Annex 3-1 is a summary of the case study projects, indicating physi- cal characteristics, status, organization, finance, and intended benefits. The eight cases are as follows: • CREATE, a proposed package of capital improvement projects along five rail corridors in theChicago region. The projects include 25 under- passes andoverpasses to separate road and rail traffic; six flyovers to sep- arate intersecting freight and passenger rail lines; and improvements to tracks, switches, and signals. The purpose of the improvements is to speed the passage of rail freight through Chicago and reduce passenger travel delays caused by grade crossings and other conflicts between freight and passenger traffic. The case study refers to the original plan as it was publicly discussed in 2005–2007. Because the project in this form did not proceed, a revised form of the proposal may emerge. • ReTRAC in Reno, Nevada, a 2.3-mile-long trench through downtown Reno to carry themainline tracks of the Union Pacific Railroad, elim- inating conflicts with street traffic and reducing other community impacts of rail traffic. The project, completed in 2005, was conducted by the city. • TheHeartlandCorridor inVirginia,WestVirginia, Kentucky, andOhio, a package of rail and intermodal improvements under construction

120 Funding Options for Freight Transportation Projects between Portsmouth, Virginia, and Columbus, Ohio, to open a new double-stack container route between the Port of Virginia and the Midwest. The project includes relocation of a rail line in Portsmouth to eliminate highway grade crossings and increase capacity; tunnel modifications to provide clearance for double-stack container trains through theAppalachians along theNorfolk SouthernRailroad line; and construction of three intermodal terminals in Virginia,West Virginia, and Ohio. • TransTexas Corridor I-35, a new toll-funded highway paralleling I-35, a major north–south route through eastern Texas from to Gainesville (north of FortWorth) to Laredo on theMexican border. The state has contractedwith a private firm that will finance, build, and operate one segment of the route under a concession agreement. The project to build this segment is now undergoing environmental review. The highway is one element of the state’s TransTexas Corridor plan, a statewide network of corridors to include highways with separate truck lanes and right-of-way for rail lines. In January 2009, the state announced that it was withdrawing the TransTexas Corridor as a long-range plan. The plan had become controversial on account of the proposed reliance on toll funding and public–private partner- ships. This action did not directly affect projects already in develop- ment that were elements of the plan. • The Alameda Corridor in Los Angeles County, California, a 20-mile grade-separated rail line operated by the Alameda Corridor Trans- portation Authority, connecting the Ports of Los Angeles and Long Beach to rail yards of the BNSF and Union Pacific Railroads, com- pleted in 2002. Trains to and from the ports avoid the older, more cir- cuitous railroad branch lines, eliminating 200 grade crossings and increasing train speeds. The intended benefits are to reduce conflicts between rail and street traffic, reduce air pollution, facilitate on-dock and near-dock transfer of containers to rail in order to reduce truck transport, and provide capacity for future growth of traffic. • The Delaware River Channel dredging project, to deepen from 40 to 45 feet the navigation channel from Delaware Bay to Philadelphia Harbor, a distance of 100miles, to allow larger ships to serve the port. The project has been authorized by Congress and is supported by the

Freight Transportation Infrastructure Finance Practices Today 121 State of Pennsylvania and the Philadelphia Regional Port Authority but does not yet have full federal funding and has been controversial because of questions about benefits, the sources of local matching funds, disposal of dredging spoils, and potential impact on competi- tion between Philadelphia and the Port of New York and New Jersey. • The Port Inland Distribution Network (PIDN) of the Port of New York and New Jersey. As implemented, PIDN was a container barge service between the Port of New York and New Jersey and Albany, New York, initiated in 2003. The service was one element of a broader planned strategy to move containers by barge and rail between the port and a series of inland terminals, as a means to increase container throughput capacity and reduce the need for terminal expansion at the ports. Apor- tion of non–New York metropolitan area freight would be removed from the local highway network, reserving this capacity for the growth of local traffic. The intended benefits were the ability of the Port ofNew York and New Jersey to retain market share with less expansion of ter- minal capacity at the port, and reduced congestion and pollution from truck traffic. The service had higher operating costs and lower traffic volume than had been anticipated and in 2005 was discontinued. • The California Inter-Regional Intermodal System (CIRIS), a proposal to set up and operate a container service over the existing rail line between the Port of Oakland, California, and the Central Valley region of northern California, operated with the aid of a public sub- sidy. The service would carry mainly agricultural products that now travel to the port by truck. The railroad does not now offer intermodal service, which is normally not commercially practical over such a short distance. The intended benefits are removal of trucks from con- gested parallel highways and market development for the port. The project does not yet have funding. Other Current Projects To supplement the case studies, the committee compiled a list of signifi- cant freight infrastructure projects that have been completed recently, are under construction, or are planned or under serious consideration (Annex 3-2). For inclusion on the list, the committee sought capital proj- ects that are large (most cost more than $200 million), important for

122 Funding Options for Freight Transportation Projects freight transportation, and, if not already under way or completed, appear to have some prospect for completion. Public and private proj- ects and projects in all freight modes were included, as well as multi- modal projects. The six case studies that are capital projects are included. The list cannot be regarded as comprehensive or quantitatively repre- sentative. Inclusion of a project implies no judgment about its merit. Projects in California are overrepresented because the state is develop- ing a package of bond-funded projects and recently completed a goods movement plan, so information about potential projects is available. The projects in Annex 3-2 are grouped in seven functional categories: • Port access, • Urban hubs and bottlenecks (other than ports), • Mainline capacity expansions, • Rail and intermodal terminals, • Marine terminals, • Marine navigation, and • Air cargo facilities. The purpose of compiling the list was to illustrate characteristics of the pool of large freight infrastructure projects that have sought funding in recent years—the range of scales, objectives, and participants—and to illustrate the variety of finance arrangements employed. To design pro- grams to fund and carry out freight projects, an understanding of the characteristics of this candidate pool will be essential. Observations from the Cases and Projects The case studies and the tabulation of other projects described in the pre- ceding section offer support for the following observations relevant to the committee’s charge. The observations concern the scope and objectives of public involvement in freight infrastructure projects; the relation of finance arrangements to the characteristics and outcomes of projects; and the planning, programming, and evaluation practices of public agencies. Scope and Objectives of Public Involvement • State governments and the public port authorities are the principals for a large majority of the projects in Annex 3-2, because these public

Freight Transportation Infrastructure Finance Practices Today 123 entities own and operatemost of the infrastructure. The exceptions are the projects of the freight railroads and the directly federally operated waterways and harbor channels. The federal government is involved in some capacity in nearly every project. This involvement includes funding assistance, usually for only aminority of costs except in high- wayprojects, and regulation. Federal environmental regulation is among themotivations for someprojects, and environmental regulation affects costs and schedules. Rail projects are subject to federal review for com- petitive and environmental impacts. Federal-aid highway program rules restrict use of tolling as a revenue source and dictate design fea- tures that drive costs. • Nearly all the projects that are receiving or seeking public funding support can be classified into one of three categories according to their objectives: – Projects in which the primary or exclusive motivation is to provide capacity to serve commercial freight traffic (e.g., the Heartland Corridor and the Delaware River Channel). These projects’ justifi- cations often cite benefits to the public beyond the commercial users of the facilities, but freight capacity appears to have been their original impetus. – Projects in which a major motivation is to reduce the congestion, pollution, and other harmful community impacts of truck or rail traffic through urban areas. This is the predominant objective of ReTRAC, Alameda East, and CIRIS. It was a major motivation for the Alameda Corridor and for PIDN. – Projects to construct capacity for both freight and noncommercial road or transit traffic on shared facilities (e.g., nearly all aviation and highway projects, and some elements of CREATE that upgrade rail lines that are shared by freight and commuter traffic). Relation of Finance Arrangements to Project Characteristics • Finance arrangements for projects with public involvement are eclec- tic, especially for projects not fully covered by the established federal grant programs. In some instances, apparently similar projects have used very different finance arrangements (e.g., the Colton Crossing and Kansas City flyover projects). In some instances, public funds

124 Funding Options for Freight Transportation Projects may have supported projects that could have gone forward with less taxpayer assistance and more funding from user charges or from the resources of the private-sector participants. For example, the mag- nitude of revenue from user charges that would be required at ports to pay for substantial access infrastructure improvements would be only a small fraction of the value of the goods shipped through all U.S. ports, and therefore it is reasonable to expect that such charges would be feasible, with only small impacts on the total volume of port traffic (although the distribution of traffic among ports would be affected). • The case studies suggest that expectations of external aid influence the physical and organizational shape of a project. The Alameda Corridor sponsors originally sought a federal grant to cover a large share of the project’s costs but then proceeded with funding based on user charge revenue after the grant failed to materialize. The CREATE project’s sponsors planned an ambitious scope, dependent on external fund- ing, in which a large share of costs was for capital improvements (the rail–rail flyovers) that primarily would benefit local commuter rail service. A federal grant of the size anticipated was not obtained; now elements of the original plan are proceeding, including improvements serving both freight and passenger mobility, which presumably have been determined to be among the most cost-effective and practical (CREATE 2008). Heartland Corridor sought and received a federal grant covering half of construction costs; however, the experience of other projects suggests that an alternative form of the project might have gone forward with support from the private parties and directly involved state and local governments, if the full federal grant had not been received. • Annex 3-2 includes examples of possibly valuable projects that are not yet funded. Each of the major port regions is working on finance and organizational arrangements to carry out identified projects to expand access capacity to accommodate anticipated trade growth. CREATE, as noted above, is making slow progress, but the funding and organizational arrangements that would be required to resolve the most costly rail congestion and freight–passenger conflicts in the Chicago region are not yet in place. Potential resources to pay for

Freight Transportation Infrastructure Finance Practices Today 125 many such projects exist; for example, user fees similar to those that have paid for the Kansas City flyover and for the Alameda Corridor have been suggested in Chicago (Giblin 2006), and elements of some of the projects would be eligible for federal credit assistance. However, the parties that ultimately would be required to commit funds or to raise revenue have yet to negotiate the mutually acceptable formula that will allow the project to go forward. The Port Authority of New York and New Jersey notes in its strategic plan that many elements of the plan “require extensive, complex partnerships with public and private entities” (PANYNJ 2006c, 11). • CIRIS and PIDN are primarily noncapital solutions to problems that some of the other projects attack with capital projects. Bothwere proj- ects to provide an operating subsidy to nonhighway transport services to the port, intended in part to reduce truck traffic on port access routes. Although these two projects may not be feasible because of particular cost ormarket features, they suggest the possibility that non- capital alternatives to solving community impact problems should be explored more fully. Planning and Evaluation • In certain of the cases and projects in Annex 3-2, public officials’ assessment of the benefit of the project depends on the assumption that the government will be obligated to provide capacity for any vol- ume of future freight traffic thatmaymaterialize with the present level of user charges, regardless of the cost to the public. This assumption (sometimes called the predict-and-provide planning model) under- lies the estimates of savings in state highway costs from reduced truck traffic in the Heartland Corridor project. In PIDN, the port authority hoped it would save because the subsidy to the barge service would be less than losses it would incur if it were required to accommodate con- tainer traffic growth with new facilities at the ports. Similarly, in the Delaware River and other channel projects, the ports describe them- selves as obliged to dredge deeper channels to accommodate the larger ships that the carriers plan to operate. In each of these cases, freight traffic on public facilities is not paying charges sufficient to cover the cost of providing service. An alternative to accepting higher traffic

126 Funding Options for Freight Transportation Projects volume at high cost to the public would be to increase charges. If higher charges generated sufficient revenue, capacity couldbe expanded. If revenue fromhigher chargeswere insufficient, then expanding capac- ity would not be economically justified, but the higher charges would avoid excessive congestion and divert traffic to alternative routes and modes (for example, diverting some truck traffic to rail, or some port traffic to ports with lower costs). Historically, ports avoided imposing user charges because they were willing to operate at a loss in order to maintain market share (Ricklefs 2000). This objective was politically defined and was seen as consistent with the ports’ role as engines of local economic development. • The case studies corroborate the evidence cited in Chapter 2 that eval- uations in support of public infrastructure investment decisions are inadequate to ensure that the investments with the greatest national economic benefits are being selected. Economic evaluations often did not appear to enter into the decision-making process, but rather were prepared for the purpose of winning support for decisions already made. The shortcomings identified included failure to compare the project with alternatives (and in particular, failure to compare capital and noncapital alternatives), failure to distinguish local fromnational benefits, optimistic assumptions about demand, lack of transparency, and absence of sensitivity analysis. • Annex 3-2 includes projects whose economic justification has been called into question by independent reviews. For example, the upper Mississippi and Delaware River projects of the Corps of Engineers have been controversial. Evaluations of these projects have been heav- ily scrutinized in part because the Corps of Engineers is required to conduct detailed economic evaluations. Most other public-sector projects on the list have not been subject to nearly as detailed evalua- tion as the Corps of Engineers procedures are intended to produce. Most Corps of Engineers capital projects derive half or less of their funding from project user charges, although port channel capital proj- ects generally have 40 to 60 percent local funding. It is reasonable to expect that the greater is the responsibility of users and other local interested parties for paying for projects, the less is the likelihood that a project with low return on investment will be able to advance.

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Freight Transportation Infrastructure Finance Practices Today 129 OECD. 2007. International Investment Perspectives; Freedomof Investment in aChanging World; 2007 Edition. OMB. 2006. Program Assessment: Transportation Infrastructure Finance and Innova- tion. www.whitehouse.gov/OMB/expectmore/summary/10004007.2006.html. OMB. 2008. Earmarks. Updated Sept. 5. http://earmarks.omb.gov/. Ortiz, I. N., andG. E.Maring. 2008.Case Studies of Freight FinanceOptions.Transportation ResearchBoardof theNationalAcademies,Washington,D.C. http://onlinepubs.trb.org/ Onlinepubs/sr/sr297CaseStudies2.pdf. Page, P. 2008. Brokering the Assets. Traffic World, Aug. 11, pp. 19–22. PANYNJ. 2006a.Comprehensive Annual Financial Report for the Year Ended December 31, 2005. PANYNJ. 2006b.Minutes. Oct. 19. www.panynj.gov/abouttheportauthority/pdf/101906_ minutes.pdf. PANYNJ. 2006c. The Port Authority Strategic Plan: Transportation for Regional Prosperity. Aug. PierPASS, Inc. 2008a. Marine Terminal Schedule No. 1. Jan. 28. PierPASS, Inc. 2008b. Q&Aon PierPASS, Inc., and theOffPeak Program. Revised July 22. Port ofOakland. 2008. Agenda:MaritimeCommittee. June 19. www.portofoakland.com/ pdf/mari_shee_080619.pdf. Ricklefs, J. E. 2000. The Self-Sufficiency of U.S. Ports and the Role of State Subsidies. In Toward Improved Intermodal Freight Transport Between Europe and the United States: Report of the Third EU–US Forum, Eno Transportation Foundation, Washington, D.C. Shen, E. C. 2008. Memorandum: Infrastructure Cargo Fee Tariff. Port of Long Beach, Jan. 14. Smith, D. S. 2008. Freight Project Financing: Four Case Studies. Transportation Research Board of theNational Academies,Washington,D.C. http://onlinepubs.trb.org/Online pubs/sr/sr297CaseStudies1.pdf. TRB. 1998. Special Report 252: Policy Options for Intermodal Freight Transportation. National Research Council, Washington, D.C. TRB. 2003. Special Report 271: Freight Capacity for the 21st Century.National Academies, Washington, D.C. TRB. 2006. Special Report 285: The Fuel Tax and Alternatives for Transportation Funding. National Academies, Washington, D.C. U.S. Army Corps of Engineers. 2005. U.S. Army Corps of Engineers Civil Works Program Five-Year Development Plan: Fiscal Year 2006–Fiscal Year 2010.May 16. U.S. Congress. 2006. Energy andWater Development Appropriations Bill, 2007: Report to Accompany H.R. 5427. Report 109-474, May 19.

130 Funding Options for Freight Transportation Projects U.S. Department of the Treasury. 2007. Introduction: Inland Waterways Trust Fund. Treasury Bulletin,March, p. 134. USDOT. 2000.TIFIATrailblazers.Oct. http://tifia.fhwa.dot.gov/about/background/docs/ trailblazer.pdf. USDOT. 2002. TIFIA Report to Congress. June. USDOT. 2006. Transportation Infrastructure Finance and Innovation Act: Report to Congress. July. USDOT. 2007. TIFIA Program Guide. Jan. USDOT. 2008a. Background Reference: TIFIA Credit Program Overview. Feb. USDOT. 2008b. Projects of National and Regional Significance 2007 Report to Congress. Feb. 11. USDOT. 2008c. Refocus. Reform. Renew. A New Transportation Approach for America. USDOT. 2008d.TIFIAProgramApplicants—Applications Submitted.April 18. http://tifia. fhwa.dot.gov/projects/apps.cfm. USDOT. 2008e. TIFIA Projects. Updated March 19. http://tifia.fhwa.dot.gov/projects/ approved.cfm. Vise, A. 2007. The CCJ Top 250. Commercial Carrier Journal, Aug., pp. 61–117.

Ra il co rri do ri m pr ov em en ts , in cl ud in g gr ad e se p- ar at io n (ra il– ra il an d hi gh w ay –r ai l); sa fe ty en ha nc em en ts ;s ys te m up gr ad es ;o th er . Or ig in al ly pr op os ed pr oj ec t di d no tp ro ce ed .S om e el em en ts w er e in iti at ed in 20 07 . 2. 3- m ile -lo ng ,3 3- fo ot -d ee p tre nc h to ac co m m od at e an d se pa ra te ra il tra ffi c th ro ug h do w nt ow n Re no . Co m pl et ed : St ar t: Au gu st 20 02 Co m pl et io n: 20 05 To ll ro ad ;f ul lc or rid or (n ow ca nc el ed )i nc lu de d tru ck la ne s, se pa ra te fre ig ht an d pa ss en ge rr ai ll in es ; ut ili ty co rri do rs . Se gm en ts 1 th ro ug h 3 of SH -1 30 co m pl et ed ; Se gm en ts 4 th ro ug h 6 un de rw ay Se gm en ts 1 th ro ug h 4 St ar t: 20 02 Co m pl et io n: sp rin g 20 08 (e xp ec te d) Se gm en ts 5 an d 6 St ar t: N /A Co m pl et io n: N /A (P la nn in g/ N EP A pr oc es su nd er w ay ) Do ub le -s ta ck cle ar an ce be tw ee n Ro an ok e, Vi rg in ia ,t hr ou gh W es t Vi rg in ia to Co lu m bu s, Oh io ;t hr ee in te rm od al fa cil iti es ;a nd ra il lin e re lo ca tio n. Un de rw ay : Ri ck en ba ck er in te rm od al fa cil ity St ar t: su m m er 20 05 Co m pl et io n: M ar ch 20 08 Co m m on w ea lth Ra ilw ay re lo ca tio n St ar t: Ju ly 20 07 Co m pl et io n: N /A Do ub le -s ta ck cle ar an ce St ar t: fa ll 20 07 Co m pl et io n: N /A De sc rip tio n St at us A N N EX 3- 1 C as e St u di es Su m m ar y CR EA TE Re TR A C H ea rt la nd Co rr id or Tr an sT ex as Co rr id or I- 35 I. Pr oj ec tD es cr ip tio n (co nt in ue d on ne xt pa ge )

Pu bl ic– pr iva te pa rtn er sh ip be tw ee n st at e, Ci ty of Ch ica go ,a nd ra ilr oa ds . St at e de pa rtm en to f tra ns po rta tio n/ Ci ty of Ch ic ag o St at e of Ill in oi s Ci ty of Ch ica go M et ra Am tra k BN SF CN Ca na di an Pa cifi c CS X N or fo lk So ut he rn Un io n Pa cifi c Be lt Ra ilw ay Co m pa ny of Ch ica go In di an a Ha rb or Be lt Ra ilr oa d Ci ty of Re no Ci ty of Re no Ci ty of Re no W as ho e Co un ty St at e of N ev ad a Un io n Pa cifi c Do w nt ow n ca sin os an d bu sin es se s Tx DO T Tx DO T Tx DO T Te xa sT ra ns po rta tio n Co m m iss io n Flu or Ci nt ra -Z ac hr y N or fo lk So ut he rn fo rd ou bl e- st ac kc le ar an ce an d Ri ck en ba ck er in te rm od al fa cil ity ;V irg in ia Po rt Au th or ity fo rr ai ll in e re lo ca tio n; Vi rg in ia an d W es tV irg in ia fo rp la nn ed in te rm od al fa cil iti es . N or fo lk So ut he rn St at es of Vi rg in ia ,W es t Vi rg in ia ,a nd Oh io Vi rg in ia Po rt Au th or ity Co lu m bu sR eg io na lA irp or t Fe de ra lH ig hw ay Ad m in is- tra tio n Ea st er n Fe de ra lL an ds Hi gh w ay Di vis io n II. O rg an iz at io n A N N EX 3- 1 (c on ti nu ed ) C as e St u di es Su m m ar y CR EA TE Re TR A C H ea rt la nd Co rr id or Tr an sT ex as Co rr id or I- 35 Re sp on sib le en tit ya nd or ga ni za tio n st ru ct ur e Pr im ar ys ou rc e of le ad er sh ip St ak eh ol de rs

III . In te nd ed B en efi ts (i. e. ,a pp ar en tm ot iv at io ns of sp on so rs an d su pp or te rs ) Ro ad co ng es tio n Ra il co ng es tio n Ai rq ua lit y Ot he r IV . Fi na nc e A rr an ge m en ts Pr oj ec tc os ts : i. Ca pi ta l ii. Op er at in g/ ot he r So ur ce so ff un ds M ed iu m M ed iu m Hi gh Sa fe ty — m ed iu m Ec on om ic de ve lo pm en t— hi gh Re de ve lo pm en t— lo w $1 .5 bi lli on (fu ll pr og ra m as or ig in al ly pr op os ed ) $3 30 m ill io n (P ha se I) N /A Ph as e I: Fe de ra lg ra nt s/ ea rm ar ks : 30 .3 % St at e: 30 .3 % Lo ca l: 9% Pr iva te :3 0. 3% Hi gh M ed iu m M ed iu m Ec on om ic de ve lo pm en t— m ed iu m /h ig h Sa fe ty — hi gh $2 80 m ill io n N /A Ci ty of Re no :8 6% Fe de ra lg ra nt s/ ea rm ar ks :8 % Pr iva te (U ni on Pa cifi c): 6% Hi gh Lo w Lo w Sa fe ty — m ed iu m Ec on om ic de ve lo pm en t— m ed iu m $2 00 + bi lli on (fu ll co rri do r, no w ca nc el ed ) $5 bi lli on (S H- 13 0) N /A Se gm en ts 1– 4: St at e/ lo ca lh ig hw ay us er ta xr ev en ue an d hi gh w ay pr og ra m gr an ts Lo w Lo w M ed iu m Re du ce d fre ig ht ra il tra ve l tim es — hi gh Ec on om ic de ve lo pm en t— hi gh Sa fe ty — m ed iu m $3 09 m ill io n N /A Do ub le -s ta ck cle ar an ce Fe de ra le ar m ar k: 63 % Vi rg in ia an d Oh io gr an ts :7 % Pr iva te (N or fo lk So ut he rn ): 30 % (co nt in ue d on ne xt pa ge )

Fu ll pr oj ec t: Pr iva te :1 5% ($ 23 2m ill io n) N /A TI FIA lo an ($ 50 .5 m ill io n) Ci ty of Re no bo nd s ($ 11 1. 5 m ill io n) Se gm en ts 5– 6 Pr iva te eq ui ty :2 5% Se gm en ts 1– 4: TI FIA ($ 16 .8 m ill io n) Tx DO T fu el ta xb on ds ($ 2. 3 bi lli on ) Se gm en ts 5– 6: TI FIA ($ 41 2. 1 m ill io n) Pr iva te de bt ($ 59 6. 5 m ill io n) Ro an ok e in te rm od al fa cil ity Vi rg in ia gr an t: 70 % Pr iva te (N or fo lk So ut he rn ): 30 % Ri ck en ba ck er in te rm od al fa cil ity Fe de ra le ar m ar k: 49 % Pr iva te (N or fo lk So ut he rn ): 51 % Co m m on w ea lth Ra ilw ay re lo ca tio n Fe de ra le ar m ar k: 25 % St at e gr an ts /m at ch in g fu nd s: 72 % Pr iva te (C om m on w ea lth Ra ilw ay ): 2% N /A Lo an sa nd cr ed it as sis ta nc e A N N EX 3- 1 (c on ti nu ed ) C as e St u di es Su m m ar y CR EA TE Re TR A C H ea rt la nd Co rr id or Tr an sT ex as Co rr id or I- 35 IV . Fi na nc e A rr an ge m en ts (c on tin ue d)

I. Pr oj ec tD es cr ip tio n De sc rip tio n St at us II. O rg an iz at io n Re sp on si bl e en tit ya nd or ga ni za tio n st ru ct ur e Pr im ar ys ou rc e of le ad er sh ip (co nt in ue d on ne xt pa ge ) A 20 -m ile ,g ra de -s ep ar at ed , co ns ol id at ed ra il ro ut e fro m th e Po rts of Lo s An ge le sa nd Lo ng Be ac h to ra il te rm in al s. In op er at io n sin ce 20 02 , w ith vo lu m e at or ne ar fo re ca st s. AC TA ,a Jo in tP ow er s Au th or ity In iti al ly re gi on al po rts an d pl an ni ng ag en cie s, la te r AC TA N av ig at io n ch an ne ld ee pe n- in g fo r1 02 m ile si n th e De la w ar e Ri ve r, fro m de ep w at er to th e Po rt of Ph ila de lp hi a. Se ek in g fin al ap pr ov al sa nd fu nd in g. U. S. Ar m yC or ps of En gi ne er s an d lo ca ls po ns or — in iti al ly th e De la w ar e Ri ve rP or tA ut ho rit y, no w th e Ph ila de lp hi a Re gi on al Po rt Au th or ity Co rp s, lo ca lp or ts ,l oc al re fin er ie s, go ve rn or ,k ey le gi sla to r Sh or t-h au lr ai lc on ta in er se rv ice be tw ee n Po rt of Oa kla nd an d Ce nt ra l Va lle ym ar ke ts . Se ek in g sp on so rs hi p an d fu nd in g, ra ilr oa d ac qu ie sc en ce . N o de fin iti ve or ga ni za tio n as ye t; re la te d Jo in t Po w er s Au th or ity be in g es ta bl is he d. Po rts of Oa kl an d an d St oc kt on ,S an Jo aq ui n Co un ci lo fG ov er nm en ts Co nt ai ne rb ar ge se rv ice be tw ee n Po rts of N ew Yo rk an d N ew Je rs ey an d Po rt of Al ba ny ,N ew Yo rk . Di sc on tin ue d Po rt Au th or ity of N ew Yo rk an d N ew Je rs ey ,P or to f Al ba ny Po rt Au th or ity of N ew Yo rk an d N ew Je rs ey A la m ed a Co rr id or D el aw ar e Ri ve rD re dg in g N YN J PI D N CI RI S

AC TA St at e an d re gi on al pl an ni ng an d en vir on m en ta l ag en cie s Po rts Lo sA ng el es Lo ng Be ac h Ra ilr oa ds BN SF Un io n Pa cifi c Pa cifi cH ar bo rL in es Ci tie s Lo ng Be ac h Ca rs on Co m pt on Do w ne y Pa ra m ou nt Lo sA ng el es Co m m er ce Be ll Ga rd en s Ot he rs U. S. Ar m yC or ps of En gi ne er s Ph ila de lp hi a Di st ric t De la w ar e Ri ve rP or tA ut ho rit y Ph ila de lp hi a Re gi on al Po rt Au th or ity Po rt of Ph ila de lp hi a Re gi on al re fin er ie s De la w ar e Ri ve rM ar iti m e En te rp ris e Co un cil De la w ar e Ri ve rk ee pe r N et w or k Ot he re nv iro nm en ta lg ro up s Po rts Po rt of Oa kla nd Po rt of St oc kt on Ra ilr oa ds BN SF Un io n Pa cifi c Ca lif or ni a De pa rtm en to f Tr an sp or ta tio n Re gi on al pl an ni ng ag en cie s Sa n Jo aq ui n Co un cil of Go ve rn m en ts Sa n Fr an cis co M et ro - po lit an Tr an sp or ta tio n Co m m iss io n Po te nt ia lc us to m er s Po rt Au th or ity of N ew Yo rk an d N ew Je rs ey Po rt of Al ba ny Co lu m bi a Co as ta l( ba rg e op er at or ) Cu st om er s St ak eh ol de rs A N N EX 3- 1 (c on ti nu ed ) C as e St u di es Su m m ar y A la m ed a Co rr id or D el aw ar e Ri ve rD re dg in g N YN J PI D N CI RI S II. O rg an iz at io n (c on tin ue d)

III . In te nd ed B en efi ts (i. e. ,a pp ar en tm ot iv at io ns of sp on so rs an d su pp or te rs ) Ro ad co ng es tio n Ra il co ng es tio n Ai rq ua lit y Ca pa cit y Ot he r IV . Fi na nc e A rr an ge m en ts Pr oj ec tc os ts Ca pi ta l Op er at in g So ur ce so ff un ds Lo an sa nd cr ed it as sis ta nc e M ed iu m Hi gh M ed iu m Hi gh $2 .3 bi lli on $3 4 m ill io n an nu al ly, m or e th an co ve re d by op er at in g re ve nu e Po rts :1 7% Lo ca lg ra nt s: 15 % Re ve nu e bo nd s: 51 % Us e fe es :1 00 % of op er at in g co st an d de bt re tir em en t $4 00 m ill io n fro m US DO T: 17 % N /A N /A N /A Po rt an d w at er w ay ca pa ci ty — hi gh Ec on om ic de ve lo pm en t— lo w $3 06 m ill io n Pr op os ed : Fe de ra l: 61 % Lo ca l/s ta te m at ch in g fu nd s: 39 % N /A M ed iu m Lo w Lo w N /A Ec on om ic de ve lo pm en t— m ed iu m Up to $2 5 m ill io n At le as t$ 1 m ill io n an nu al su bs id ya ts ta rt- up ,u p to $1 0 m ill io n an nu al su b- sid ya tf ul lo pe ra tio n Un kn ow n Pr op os ed :s ta te in fra st ru c- tu re bo nd s, co un ty ta x re ve nu e, op er at in g re ve nu e, CM AQ N /A Lo w Lo w Lo w Po rt ca pa cit y— m ed iu m Ec on om ic de ve lo pm en t— lo w M in or $3 .3 m ill io n Fe de ra lC M AQ gr an t— Po rt Au th or ity of N ew Yo rk an d N ew Je rs ey — op er at in g su bs id y Ba rg e re ve nu e N /A N O T E :A C T A = A la m ed a C or ri d or T ra n sp or ta ti on A u th or it y; C M A Q = C on ge st io n M it ig at io n an d A ir Q u al it y P ro gr am ;N E P A = N at io n al E n vi ro n m en ta l P ol ic y A ct ;T xD O T = T ex as D ep ar tm en to fT ra n sp or ta ti on .

A N N EX 3- 2 Il lu st ra ti ve C u rr en tF re ig ht In fr as tr u ct u re C ap it al P ro je ct s Co st Pr oj ec t M od e St at us ($ m ill io ns ) D es cr ip tio n Pr in ci pa ls Fu nd in g Po rt A cc es s Hi gh w ay Ra il Hi gh w ay Hi gh w ay Pl an ne d; pa rti al fu nd in g Co m pl et ed 20 02 N ot fu nd ed En vir on m en ta l im pa ct st ud y un de rw ay Re pl ac e br id ge to el im in at e po rt ac ce ss bo ttl en ec k fo rt ru ck s 20 -m ile gr ad e- se pa ra te d ra il lin e co nn ec tin g Po rts of Lo sA ng el es an d Lo ng Be ac h to ra il ya rd s In cr ea se ca pa cit yo n ac ce ss ro ut e th ro ug h Lo sA ng e- le st o po rts Ca pa cit ye xp an sio n of 18 - m ile ur ba n ex pr es sw ay an d tru ck ro ut e co nn ec t- in g Po rt of Lo ng Be ac h to ce nt ra lL os An ge le s Co un ty St at e de pa rtm en to f tra ns po rta tio n an d po ss ib ly Po rt of Lo ng Be ac h Al am ed a Co rri do r Tr an sp or ta tio n Au th or ity ,p or ts , ra ilr oa ds ,c iti es Ca lif or ni aD ep ar tm en t of Tr an sp or ta tio n Lo sA ng el es Co un ty M et ro po lit an Tr an sp or ta tio n Au th or ity ,S ta te of Ca lif or ni a, lo ca l co un cil so fg ov - er nm en t, po rt au th or iti es 61 0 2, 30 0 42 0 3, 60 0 to 6, 90 0 fo rp ro m i- ne nt op tio ns Ge ra ld De sm on d Br id ge , Lo ng Be ac h, Ca lif or ni a Al am ed a Co rri do r, Lo sA ng el es Co un ty , Ca lif or ni a SR -4 7 Ex pr es sw ay , Lo sA ng el es Co un ty , Ca lif or ni a I-7 10 im pr ov em en ts , Lo sA ng el es Co un ty , Ca lif or ni a $3 00 m ill io n ea rm ar ke d fe d- er al ai d; re m ai nd er po ss i- bl yf ro m st at e or po rt ac ce ss fe e, or bo th Po rts ,$ 40 0 m ill io n; st at e an d lo ca lg ra nt s, $4 00 m ill io n; bo nd sb ac ke d by co rri do rr ev en ue ,$ 1. 2 bi l- lio n; fe de ra ll oa n to be re pa id fro m re ve nu e, $4 00 m ill io n Po ss ib ly co nv en tio na lh ig h- w ay fu nd in g or Ca lif or ni a in fra st ru ct ur e ge ne ra l ob lig at io n bo nd s N on e co m m itt ed

Ra il Hi gh w ay , ra il Ra il Hi gh w ay Ph as e Iu nd er w ay 8 pr oj ec ts in pa ck ag e of 25 co m pl et ed 7 of 10 pr oj ec ts co m pl et ed Co m pl et ed 20 05 Gr ad e se pa ra tio ns at 20 ra il hi gh w ay cr os sin gs an d sa fe ty im pr ov em en ts at 39 cr os sin gs in So ut he rn Ca lif or ni a to re du ce ra il– pa ss en ge rc on fli ct s Gr ad e- cr os sin g el im in at io ns an d hi gh w ay im pr ov e- m en ts fo rt ru ck st o im pr ov e po rt ac ce ss an d re du ce fre ig ht –p as se ng er tra ffi cc on fli ct s Pr ov id e on -d oc kr ai lf ac ili - tie s, su pp or tt ra ck ,a nd co nn ec tio ns to re gi on al ra il Re pl ac e hi gh w ay br id ge st o in cr ea se na vig at io n cle ar an ce fo rs hi ps en te rin g Ch ar le st on ha r- bo ra nd pr ov id e fo r fu tu re hi gh w ay tra ffi c gr ow th Al am ed a Co rri do r Ea st Co ns tru ct io n Au th or ity ,S ta te of Ca lif or ni a, Lo s An ge le sC ou nt y M et ro po lit an Tr an sp or ta tio n Au th or ity W as hi ng to n St at e De pa rtm en to f Tr an sp or ta tio n, po rts ,P ug et So un d Re gi on al Co un cil Po rt Au th or ity ,r ai l- ro ad ,p or tt er m i- na lo pe ra to rs St at e de pa rtm en to f tra ns po rta tio n, So ut h Ca ro lin a St at e Po rts Au th or ity ,C ity of Ch ar le st on 49 7 (P ha se I) 91 8 (P ha se II) 86 4 45 0 67 7 Al am ed a Co rri do rE as t, Ca lif or ni a FA ST ,W as hi ng to n St at e Ex pr es sR ai l, Po rt of N ew Yo rk an d N ew Je rs ey Co op er Ri ve rB rid ge , So ut h Ca ro lin a $1 .5 bi lli on re po rte d to be co m m itt ed fro m st at e tra ns po rta tio n bo nd iss ue ,L os An ge le sd ed i- ca te d sa le st ax ,s ta te hi gh w ay fu nd s, fe de ra l ea rm ar k( $1 25 m ill io n) , an d ot he rs ou rc es Of co m m itt ed fu nd sf or Ph as e Ip ro je ct s( $4 86 m ill io n) :3 9% fe de ra l gr an ts ,8 % po rts ,4 % ra il- ro ad s, 49 % ot he rs ta te an d lo ca lg ov er nm en t Fu nd ed by Po rt Au th or ity fro m ow n re so ur ce s in clu di ng co nt ai ne rf ee fo rp ro je ct $2 15 m ill io n bo nd iss ue to be re pa id by So ut h Ca r- ol in a De pa rtm en to f Tr an sp or ta tio n, Po rts Au th or ity ,c ity .R em ai n- de rc on ve nt io na lh ig hw ay fu nd in g. Bo nd iss ue re pl ac ed a TI FIA lo an (co nt in ue d on ne xt pa ge )

U rb an H ub s an d B ot tle ne ck s (o th er th an po rts ) Hi gh w ay , ra il, tra ns it Hi gh w ay Ra il, hi gh - w ay Fr ei gh tr ai l, hi gh w ay , co m m ut er ra il In iti al pr oj ec ts in pa ck ag e un de r w ay De sig n an d rig ht - of -w ay ac qu isi - tio n un de rw ay Co m pl et e So m e el em en ts un de rw ay Pa ck ag e of ro ad ,r ai l, an d tra ns it im pr ov em en ts on co rri do rf ro m N ew Yo rk – N ew Je rs ey po rts to Tr en to n, an d ne ar po rts Co ns tru ct ne w br id ge sa nd in te rc ha ng e at co nfl u- en ce of In te rs ta te ro ut es 64 ,6 5, an d 71 to re lie ve bo ttl en ec ks 2. 3- m ile tre nc h to se pa ra te ra il lin e fro m st re et tra f- fic th ro ug h Re no Ra il co rri do ri m pr ov em en ts an d gr ad e se pa ra tio ns in Ch ica go N ew Je rs ey De pa rt- m en to fT ra ns - po rta tio n, N ew Je rs ey Tu rn pi ke Au th or ity ,P or t Au th or ity of N ew Yo rk an d N ew Je rs ey ,C SX Ra ilr oa d Ke nt uc ky Tr an sp or ta - tio n Ca bi ne t, In di - an a De pa rtm en t of Tr an sp or ta tio n Ci ty of Re no ,U ni on Pa cifi cR ai lro ad St at e, cit y, co m - m ut er ra il au th or - ity ,fi ve ra ilr oa ds 60 0 (P ha se 1) 4, 10 0 28 0 1, 50 0 Lib er ty Co rri do rh ig hw ay an d ra il ca pa cit y ex pa ns io n, N ew Je rs ey Lo ui sv ill e Oh io Ri ve r br id ge s, Ke nt uc ky an d In di an a Re TR AC ,R en o, N ev ad a CR EA TE ,C hi ca go ,I lli no is A N N EX 3- 2 (c on ti nu ed ) Il lu st ra ti ve C u rr en tF re ig ht In fr as tr u ct u re C ap it al P ro je ct s Co st Pr oj ec t M od e St at us ($ m ill io ns ) D es cr ip tio n Pr in ci pa ls Fu nd in g $1 00 m ill io n fe de ra lP ro je ct s of N at io na la nd Re gi on al Si gn ifi ca nc e ea rm ar k; re m ai nd er fro m st at e, Po rt Au th or ity ,C SX Ra ilr oa d Fe de ra l-a id pr oj ec t; to lls ha ve be en co ns id er ed Ci ty ,7 4% (d ed ica te d ta xe s); Un io n Pa cifi c, 18 % (ca sh an d in -k in d) ;f ed er al gr an t, 8% Un de cid ed ;m aj or ity w ou ld be fe de ra l, st at e, an d lo ca lf un ds Po rt A cc es s (c on tin ue d)

Hi gh w ay Ra il Ra il Hi gh w ay Pa rti al ly un de r co ns tru ct io n; fu rth er ph as es in pl an ni ng In pl an ni ng Co m pl et ed 20 00 (S he ffi el d) ; 20 05 (A rg en tin e) U. S. en vir on m en - ta la pp ro va ls iss ue d; co ns tru ct io n 20 10 –2 01 3 Co ns tru ct SR -9 05 co nn ec t- in g U. S. –M ex ico po rt of en try w ith I-8 05 .L at er ph as es ar e fu rth er hi gh - w ay ex pa ns io n an d po rt of en try fa cil iti es Fly ov er to el im in at e at -g ra de cr os sin g of tw o ra il m ai nl in es Fly ov er st o el im in at e at -g ra de cr os sin g of BN SF an d Un io n Pa cifi c– Ka ns as Ci ty So ut he rn m ai nl in es Br id ge ov er De tro it Ri ve r be tw ee n De tro it an d W in ds or ,s up pl em en tin g th re e ex ist in g So ut he as t- er n M ich ig an hi gh w ay cr os sin gs ,w hi ch ca rry 60 % of U. S. –C an ad a tru ck tra ffi c St at e, Sa n Di eg o As so cia tio n of Go ve rn m en ts BN SF Ra ilr oa d, Un io n Pa cifi cR ai l- ro ad ,S ta te of Ca lif or ni a BN SF ,U ni on Pa cifi c– Ka ns as Ci ty So ut he rn ,K an sa s Ci ty Te rm in al Ra il- w ay ,U SD OT Fe de ra lH ig hw ay Ad m in ist ra tio n, M ich ig an De pa rtm en to f Tr an sp or ta tio n, Tr an sp or tC an ad a, On ta rio M in ist ry of Tr an sp or ta tio n 67 0 (S R- 90 5) ; la te r pl an ne d ph as es ,7 00 20 0 75 Sh ef fie ld ; 60 Ar ge nt in e 4, 20 0 (U .S . 1, 80 0; Ca na da 2, 40 0) Ot ay M es a po rt of en try hi gh w ay im pr ov e- m en ts ,C al ifo rn ia Co lto n Cr os sin g, Co lto n, Ca lif or ni a Sh ef fie ld an d Ar ge nt in e Fly ov er s, Ka ns as Ci ty , M iss ou ri De tro it– W in ds or Br id ge , M ich ig an Re gu la rf ed er al -a id hi gh w ay fu nd in g, SA FE TE A- LU bo r- de rp ro gr am an d ea rm ar k; ot he rf ed er al gr an ts .L at er ph as es to in clu de to lls an d pr iva te co nc es sio n $9 7 m ill io n fro m st at e 20 06 tra ns po rta tio n bo nd iss ue ,b al an ce fro m ra il- ro ad sp ro po se d, bu t te rm sn ot re so lve d Sh ef fie ld fin an ce d by bo nd s of st at e- ch ar te re d co rp o- ra tio n ba ck ed by US DO T le tte ro fc re di t; pr op er ty ta xa ba te m en t. Fly ov er us er sp ay fe es to re tir e de bt Pl an ne d to be a to ll br id ge bu ilt an d op er at ed by a pr iva te co nc es sio n. So m e pr oj ec tc om po ne nt sm ay be pu bl icl yf un de d (co nt in ue d on ne xt pa ge )

Ra il Hi gh w ay Hi gh w ay Hi gh w ay , ra il Pr el im in ar yc on - ce pt ua ls tu dy co m pl et ed En vir on m en ta l re vie w ,d es ig n in pr og re ss Co ns tru ct io n un de rw ay ;t o be co m pl et ed 20 14 Co ns tru ct io n of fir st el em en ts sc he du le d Re pl ac e tu nn el sa nd im pr ov e al ig nm en to n fre ig ht an d pa ss en ge r ra il lin es th ro ug h Ba lti - m or e to pr ov id e do ub le - st ac kc le ar an ce an d hi gh er sp ee ds Tr uc ka cc es sr ou te to Se a- Ta ca nd in du st ria la re a, by pa ss in g I-5 La ne ad di tio ns an d br id ge re pl ac em en to n 7 m ile s of I-9 5 in N ew Ha ve n, an in te rc ity co m m er cia ll in k an d lo ca lc om m ut er ro ut e El im in at e 72 ra il– hi gh w ay gr ad e cr os sin gs on BN SF an d Un io n Pa cifi cm ai n- lin es in Sp ok an e Va lle y. In clu de sm ov in g Un io n Pa cifi cm ai nl in e op er a- tio ns in to BN SF co rri do r N on e ye ti de nt ifi ed ; w ou ld re qu ire pa r- tic ip at io n of CS X Ra ilr oa d, Am tra k, an d cit y, st at e, an d fe de ra l go ve rn m en ts W as hi ng to n St at e De pa rtm en to f Tr an sp or ta tio n Co nn ec tic ut De pa rtm en to f Tr an sp or ta tio n W as hi ng to n St at e De pa rtm en to f Tr an sp or ta tio n, Id ah o De pa rtm en t of Tr an sp or ta tio n, lo ca lg ov er nm en ts , BN SF an d Un io n Pa cifi cR ai lro ad s 1, 30 0 fo r fre ig ht co m - po ne nt si n m os t pr om isi ng al te rn at ive 1, 00 6 1, 00 0– 1, 70 0 30 0 Ba lti m or e ra il tu nn el s re pl ac em en ts , M ar yla nd SR -5 09 ac ce ss hi gh w ay , W as hi ng to n St at e I-9 5 N ew Ha ve n Ha rb or Cr os sin g Co rri do r, Co nn ec tic ut Br id gi ng th e Va lle yr ai l co rri do r, Sp ok an e Va lle y, W as hi ng to n– Id ah o A N N EX 3- 2 (c on ti nu ed ) Il lu st ra ti ve C u rr en tF re ig ht In fr as tr u ct u re C ap it al P ro je ct s Co st Pr oj ec t M od e St at us ($ m ill io ns ) D es cr ip tio n Pr in ci pa ls Fu nd in g N on e ye ti de nt ifi ed .P ar tia l pu bl ic fu nd in g ha sb ee n pr op os ed Fe de ra l-a id pr oj ec t. To be fu nd ed pa rti al ly fro m st at e hi gh w ay fu nd s, pa r- tia lly fro m sp ec ia lb on d iss ue (n ot ye ta pp ro ve d) Fe de ra l-a id pr oj ec t; bo nd iss ue pl an ne d fo rs ta te m at ch in g sh ar e Fu ll fu nd in g no ty et co m m it- te d. La rg es ts ou rc e w ill be st at e tra ns po rta tio n pr og ra m fu nd s, in clu di ng fe de ra la id .F ed er al ea r- m ar kh as be en so ug ht . Ra ilr oa ds w ou ld be ar so m e co st s U rb an H ub s an d B ot tle ne ck s (o th er th an po rts )( co nt in ue d)

M ai nl in e Ca pa ci ty Ex pa ns io ns Ra il In la nd w at er - w ay s Hi gh w ay Un de r co ns tru ct io n (2 00 6– 20 10 ) Au th or ize d by Co ng re ss in 20 07 ;a w ai tin g co ns tru ct io n ap pr op ria tio n Tu rn pi ke au th or ity se gm en ts co m - pl et ed ;c on ce s- sio n in pl an ni ng Pa ck ag e of ca pa cit y en ha nc em en ts ,i nc lu di ng do ub le -tr ac kin g, te rm in al ex pa ns io ns ,o n Un io n Pa cifi cl in e fro m Lo s An ge le st o El Pa so Re pl ac e fiv e lo ck so n M iss iss ip pi an d tw o on Ill in oi s, w ith lo ck s al lo w in g pa ss ag e of 1, 20 0- fo ot ba rg e to w s Se gm en ts of a m aj or in te r- cit yh ig hw ay be in g co n- st ru ct ed as a to ll ro ad ; pa rt to be bu ilt an d op er at ed by a pr iva te co nc es sio n Un io nP ac ifi cR ai lro ad U. S. Ar m yC or ps of En gi ne er s Tu rn pi ke au th or ity , st at e, pr iva te co n- ce ss io n ho ld er s 2, 00 0 3, 60 0 (1 ,9 00 lo ck sc on - st ru ct io n; 1, 70 0 en vi- ro nm en ta l m iti ga tio n) 5, 00 0 Un io n Pa cifi cR ai lro ad Su ns et Co rri do r– Su nr ise Pr oj ec t, Ca lif or ni a, Ar izo na , N ew M ex ico ,T ex as Up pe rM iss iss ip pi – Ill in oi sR ive rl oc k re pl ac em en ts , M in ne so ta ,I ow a, W isc on sin ,I lli no is Tr an sT ex as Co rri do rI -3 5 Co rp or at e re so ur ce s Co ns tru ct io n: 50 % In la nd W at er w ay sT ru st Fu nd , 50 % fe de ra lg en er al fu nd ;m iti ga tio n: 65 % fe de ra lg en er al fu nd ,3 5% st at es an d lo ca lg ov er nm en ts Tu rn pi ke au th or ity se gm en ts : bo nd sa nd TI FIA lo an ba ck ed by to lls ;c on ce s- sio n se gm en ts :p riv at el y ra ise d ca pi ta la nd TI FIA lo an ba ck ed by to lls (co nt in ue d on ne xt pa ge )

M ai nl in e Ca pa ci ty Ex pa ns io ns (c on tin ue d) Ra il Ra il Ra il Co ns tru ct io n un de rw ay Co m pl et ed No rfo lk So ut he rn pr es en te d de ta ile d pr op os al Do ub le -s ta ck cle ar an ce on ra il ro ut e fro m Ha m pt on Ro ad st o Co lu m bu s, Oh io ; in te rm od al te rm in al s; po rt ra il lin e re lo ca tio n Up gr ad e tra ck an d br id ge s on a re gi on al sh or tl in e ra ilr oa d to ca rry he av ie r ra ilc ar s Ca pa cit ye nh an ce m en ts an d te rm in al so n 1, 40 0- m ile co rri do rf ro m N ew Or le an sa nd M em ph is to N or th ea st N or fo lk So ut he rn Ra ilr oa d, Co m m on w ea lth Ra ilw ay ,F ed er al Hi gh w ay Ad m in is- tra tio n, Vi rg in ia Po rt Au th or ity , Vi rg in ia ,W es t Vi rg in ia ,O hi o DM & E Ra ilr oa d N or fo lk So ut he rn Ra ilr oa d, fe de ra l an d st at e sp on so rs 30 9 (o rig in al 20 05 es tim at e) 40 1, 00 0– 3, 00 0 He ar tla nd Co rri do r, Vi rg in ia ,W es t Vi rg in ia ,O hi o DM & E Ra ilr oa d tra ck up gr ad e, M in ne so ta , So ut h Da ko ta ,I ow a Cr es ce nt Co rri do r A N N EX 3- 2 (c on ti nu ed ) Il lu st ra ti ve C u rr en tF re ig ht In fr as tr u ct u re C ap it al P ro je ct s Co st Pr oj ec t M od e St at us ($ m ill io ns ) D es cr ip tio n Pr in ci pa ls Fu nd in g N or fo lk So ut he rn ,$ 81 m il- lio n; Vi rg in ia ,$ 57 m ill io n; Oh io ,$ 0. 8 m ill io n; Co m - m on w ea lth Ra ilw ay , $1 1 m ill io n; fe de ra lg ov - er nm en t, $1 40 m ill io n; ot he rs ou rc es to be de te r- m in ed (2 00 5 pl an ) Fin an ce d by a 20 03 RR IF lo an of $2 34 m ill io n, in clu di ng $1 94 m ill io n fo r re fin an cin g DM & E de bt fo re ar lie ri m pr ov em en ts an d $4 0 m ill io n fo rn ew im pr ov em en ts N on e co m m itt ed ;r ai lro ad ha sp ro po se d go ve rn - m en ta ss ist an ce

Ra il an d In te rm od al Te rm in al s Ra il Ra il Ra il– hi gh w ay in te r- m od al Aw ai tin g ap pr ov al of In te rm od al Co nt ai ne r Tr an sf er Fa cil ity Jo in t Po w er s Au th or ity Un de rg oi ng lo ca l en vir on m en ta l re vie w De ve lo pe rh as ac qu ire d pr op er ty Ex pa ns io n of ne ar -d oc kr ai l ya rd fo rm ak in g up co n- ta in er tra in sa tP or ts of Lo sA ng el es an d Lo ng Be ac h N ew ne ar -d oc kr ai lt er m in al fo rt ra ns fe rri ng co nt ai n- er sb et w ee n tru ck an d ra il at Po rts of Lo s An ge le sa nd Lo ng Be ac h Ra il– tru ck co nt ai ne rt ra ns fe r fa cil ity an d w ar eh ou se pa rk Un io n Pa cifi cR ai l- ro ad ,I nt er m od al Co nt ai ne rT ra ns fe r Fa cil ity Jo in t Po w er sA ut ho rit y (la nd lo rd ) BN SF Ra ilr oa d Ce nt er Po in tP ro pe r- tie s, In c. Ra ilr oa d te na nt no ty et id en tifi ed 30 0 20 0 50 0 fo rc om - m er cia l de ve lo p- m en t; ad di - tio na lp ub lic in fra - st ru ct ur e re qu ire d In te rm od al Co nt ai ne r Tr an sf er Fa cil ity ex pa ns io n, Ca rs on , Ca lif or ni a So ut he rn Ca lif or ni a In te rn at io na lG at ew ay ne ar -d oc kr ai lt er m in al Ce nt er Po in tI nt er m od al Ce nt er ,C re te ,I lli no is Co rp or at e re so ur ce s Co rp or at e re so ur ce s Co rp or at e re so ur ce s. De ve l- op er su pp or te d ta xi nc re - m en tfi na nc in g fo rl oc al pu bl ic in fra st ru ct ur e im pr ov em en ts an d in 20 07 ap pl ie d fo r SA FE TE A- LU pr iva te ac tiv ity bo nd al lo ca tio n (co nt in ue d on ne xt pa ge )

A N N EX 3- 2 (c on ti nu ed ) Il lu st ra ti ve C u rr en tF re ig ht In fr as tr u ct u re C ap it al P ro je ct s Co st Pr oj ec t M od e St at us ($ m ill io ns ) D es cr ip tio n Pr in ci pa ls Fu nd in g M ar in e Te rm in al s M ar in e M ar in e M ar in e Ph as e Ic om pl et ed 20 07 Au th or ize d by Co ng re ss ; pl an ni ng st ud ie s co m pl et ed Pr el im in ar yp la n- ni ng an d ne go tia tio ns ; pr oj ec ti n ab ey an ce N ew 1 m ill io n TE U/ ye ar pr i- va te ly co ns tru ct ed an d ow ne d co nt ai ne rt er m i- na l; se rv ed by He ar tla nd Co rri do r La nd fil lu sin g ha rb or dr ed g- in g sp oi ls to cr ea te ar ea fo ra ne w m ar in e te rm in al Co ns tru ct a 2 m ill io n TE U/ ye ar co nt ai ne rt er - m in al at th e Po rt of Co os Ba y; de ep en na vig at io n ch an ne l; up gr ad e sh or t lin e ra il co nn ec tio ns AP M Te rm in al s N or th Am er ica , St at e of Vi rg in ia U. S. Ar m yC or ps of En gi ne er s, Po rt of Vi rg in ia Po rt of Co os Ba y; St at e of Or eg on . AP M Te rm in al s ha sh el d di sc us - sio ns w ith po rt. U. S. Ar m yC or ps of En gi ne er s w ou ld de ep en ch an ne l 43 0 67 1 la nd fil la nd dr ed gi ng ; 2, 20 0 to ta l pr oj ec t 40 0– 70 0 AP M te rm in al , Po rts m ou th ,V irg in ia Cr an ey Isl an d te rm in al , Po rts m ou th ,V irg in ia Or eg on Ga te w ay te rm in al , Co os Ba y, Or eg on $4 00 m ill io n AP M ca pi ta l ex pe nd itu re fro m co rp o- ra te re so ur ce s; $3 0 m il- lio n pu bl ic ex pe nd itu re fo rr oa ds ,e tc .; st at e ta x in ce nt ive s $3 56 m ill io n fo r5 0% fe de ra l co st sh ar e au th or ize d in W RD A 20 07 ;n o fe de ra l fu nd sa pp ro pr ia te d St at e ha sa pp ro ve d lo tte ry re ve nu e fo rs ta te sh ar e of dr ed gi ng .N o ot he rf un d- in g co m m itt ed

SS A M ar in e te rm in al , Po rt of Ta co m a, W as hi ng to n St at e Lo ng Be ac h liq ue fie d na tu ra lg as te rm in al , Ca lif or ni a Po rt of Lo ng Be ac h M id - dl e Ha rb or te rm in al re de ve lo pm en t M ar in e N av ig at io n De la w ar e Ri ve rc ha nn el dr ed gi ng ,D el aw ar e, Pe nn sy lva ni a M ar in e M ar in e M ar in e M ar in e Co op er at ive ag re em en t am on g pa rti es 20 08 ;l an d ac qu ire d; 20 12 co m pl et io n Pr oj ec to pp os ed by lo ca lo ffi - cia ls; sp on so r di d no to bt ai n le as e fro m po rt; ha sb ee n ab an do ne d En vir on m en ta l re vie w sc om - pl et ed ;c on - st ru ct io n 20 09 –2 01 9 In pl an ni ng ; ap pr ov al sa nd fu nd in g no t ob ta in ed SS A M ar in e to co ns tru ct an d op er at e 1 m ill io n TE U/ ye ar te rm in al on la nd of Pu ya llu p Tr ib e ad ja ce nt to Po rt of Ta co m a 20 05 pr op os al by pr iva te fir m st o co ns tru ct a te r- m in al to re ce ive sh ip - m en ts of liq ue fie d na tu ra lg as at Po rt of Lo ng Be ac h Re co nfi gu ra tio n of tw o ex ist in g te rm in al s. Ca pa cit yt o be in cr ea se d by 2 m ill io n TE U/ ye ar ; on -d oc kr ai le xp an de d De ep en na vig at io n ch an ne l in De la w ar e Ri ve rt o Po rt of Ph ila de lp hi a SS A M ar in e, Pu ya llu p Tr ib e, Po rt of Ta co m a So un d En er gy So lu tio ns ,L LC , Co no co Ph ill ip s, po rt, Fe de ra l En er gy Re gu la to ry Co m m iss io n Po rt of Lo ng Be ac h U. S. Ar m yC or ps of En gi ne er s; Ph ila de lp hi a Re gi on al Po rt Au th or ity 30 0 75 0 30 6 SS A M ar in e fro m co rp or at e re so ur ce s( te rm in al co n- st ru ct io n) ;p or tt o pa rti ci- pa te in ch an ne la nd ro ad im pr ov em en ts Co rp or at e re so ur ce s Po rt re ve nu e fro m te na nt le as es Fe de ra l, $1 87 m ill io n; ba l- an ce fro m po rt, fro m ow n re ve nu e an d ot he r st at e an d lo ca ls ou rc es (p ro po se d) (co nt in ue d on ne xt pa ge )

Po rt of Oa kla nd 50 -fo ot ch an ne ld re dg in g, Ca lif or ni a Po rt of N ew Yo rk an d N ew Je rs ey 50 -fo ot ha rb or ch an ne l dr ed gi ng A ir Ca rg o Fa ci lit ie s M ia m iI nt er na tio na l Ai rp or tC ar go De ve lo pm en tP ro gr am Fe dE xG re en sb or o re gi on al ai rh ub M ar in e M ar in e Ai r Ai r N ea rc om pl et io n Un de rc on st ru c- tio n; 20 14 co m pl et io n Co m pl et ed 20 05 Ai rc ar go hu b fa cil ity co m - pl et ed 20 09 ; ru nw ay un de r co ns tru ct io n W id en an d de ep en na vig a- tio n ch an ne ls an d tu rn in g ba sin s De ep en ha rb or ch an ne ls to 50 fe et Co ns tru ct 3. 5 m ill io n sq ua re fo ot ai rc ar go ha nd lin g bu ild in gs an d re la te d fa cil iti es (M ia m ii sl ar ge st in te rn at io na la ir ca rg o ai rp or ti n Un ite d St at es in te rm so ft on na ge ) Co ns tru ct Fe dE xa ir ca rg o hu b fre ig ht ha nd lin g fa cil ity an d ru nw ay to se rv e ai rf re ig ht fli gh ts U. S. Ar m yC or ps of En gi ne er s, Po rt of Oa kla nd U. S. Ar m yC or ps of En gi ne er s; Po rt Au th or ity of N ew Yo rk an d N ew Je rs ey M ia m iI nt er na tio na l Ai rp or t, ca rri er te na nt s Fe dE x, Pi ed m on t Tr ia d Ai rp or t Au th or ity 42 6 1, 59 0 50 0 30 0 ai rc ar go fa cil ity ; 14 0 ru nw ay ; ad di tio na l ex pe nd itu re s fo rr oa d co nn ec tio ns A N N EX 3- 2 (c on ti nu ed ) Il lu st ra ti ve C u rr en tF re ig ht In fr as tr u ct u re C ap it al P ro je ct s Co st Pr oj ec t M od e St at us ($ m ill io ns ) D es cr ip tio n Pr in ci pa ls Fu nd in g M ar in e N av ig at io n (c on tin ue d) Fe de ra l, $2 17 m ill io n; po rt, $2 09 m ill io n, pr im ar ily fro m ow n re so ur ce s $8 80 m ill io n fe de ra l; $7 10 m ill io n Po rt Au th or - ity of N ew Yo rk an d N ew Je rs ey Ai rp or tr ev en ue fro m te na nt le as es an d fe es Ai rc ar go fa cil ity co n- st ru ct ed by Fe dE xf ro m co rp or at e re so ur ce s; co un ty pr ov id ed ta x in ce nt ive s. Ru nw ay fu nd ed by ai rp or tr ev en ue an d fe de ra lg ra nt

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152 Funding Options for Freight Transportation Projects U.S. Army Corps of Engineers. n.d. Upper Mississippi River System. http://www2.mvr. usace.army.mil/UMRS/NESP/. Virginia Port Authority. n.d. Craney Island Eastward Expansion. http://craneyisland. info/Index.html. Watco Companies, Inc. 2007. Argentine Flyover Relieves Congestion in KC Area. Dis- patch Newsletter, Vol. 8, No. 1, Jan. Waterfront Coalition. 2007. A Program for Establishing Public–Private Partnerships for Infrastructure Financing and the Improvement ofHarborDrayage Trucks in the State of California. March 26. www.portmod.org/CA_Position.pdf.