Funding Options for Freight Transportation Projects (2009) / Chapter Skim
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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.
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Freight Transportation Infrastructure Finance Practices Today 89 tems. Highway agencies receive 20 to 25 percent of highway user tax revenue (motor fuel taxes and registration and permit fees)
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90 Funding Options for Freight Transportation Projects (Table 3-2) ,most for freight-carrying equipment (although aircraft expenditures are primarily for passenger service)
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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)
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92 Funding Options for Freight Transportation Projects 2. Dedication by law of user tax and fee revenue (about 90 percent of the total)
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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.
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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 expenditures 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)
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Freight Transportation Infrastructure Finance Practices Today 95 recently have imposed fees designed to pay for road and rail access infrastructure, environmentalmitigationmeasures, or channel improvements, and for congestionmanagement. ThePorts of LosAngeles andLongBeach have been by far themost active in introducing such fees.
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TA B LE 34 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 .
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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 .
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98 Funding Options for Freight Transportation Projects the ports for traffic and availability of public funds for port improvements 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)
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Freight Transportation Infrastructure Finance Practices Today 99 charge and may set a rate smaller than the maximum. The charge is collected by the airlines on behalf of the airports at the time of ticket sale.
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100 Funding Options for Freight Transportation Projects funds provided by the federal government. The arrangements differ greatly among the modes.
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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.
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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 governments and the private sector in infrastructure projects.
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Freight Transportation Infrastructure Finance Practices Today 103 sources (e.g., a dedicated local sales tax) , and these revenue sourcesmust also secure other project obligations.
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104 Funding Options for Freight Transportation Projects $610million for thebudget cost of theprogramover the 5 years 2005–2009, sufficient to allow about $13 billion in credit assistance. Congress has since rescinded part of the originally authorized funding.
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Freight Transportation Infrastructure Finance Practices Today 105 the 2008 financial crisis, greatly increasing the attractiveness of TIFIA loan terms.) The liberal provisions of the federal loan to a TIFIA project allow the borrower to obtain a higher credit rating and lower interest rate on the senior obligations it issues to finance the project (although, as described below, a TIFIA loan is not technically subordinate, since it is treated equivalently to senior debt in the event of a default)
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TA B LE 36 A pp ro ve d T IF IA P ro je ct s Pr oj ec t Cr ed it Ye ar Pr oj ec t Co st In st ru m en t A m ou nt Pr im ar y Re ve nu e A pp ro ve d Pr oj ec t Ty pe ($ m ill io ns )
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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.
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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 taxexempt revenue bonds, at a significant saving in interest cost (FHWA 2004)
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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 financing large user-fee funded start-up transportation infrastructure projects, such as new toll roads.
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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 execution of the agreement, between 2000 and 2006, although only a few agreements were made in that period.
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Freight Transportation Infrastructure Finance Practices Today 111 • Federal Requirements: TIFIA credit assistance in the form of loan guarantees or lines of credit would not be subject to Title 23 and Title 49 requirements, with the exception of Davis–Bacon prevailing wage laws.
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112 Funding Options for Freight Transportation Projects Compared with the authorized cap on its loans of $35 billion, the program has not been heavily used. Through October 2008, 21 RRIF loans totaling $748 million had been executed.
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Freight Transportation Infrastructure Finance Practices Today 113 only one project, the Capital Beltway high-occupancy toll lanes in Virginia, has issued the bonds (FHWA 2008b)
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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)
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Freight Transportation Infrastructure Finance Practices Today 115 The Secretary's transmittal letter to the report states: "The Department believes .
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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.
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Freight Transportation Infrastructure Finance Practices Today 117 Regulation Affecting Foreign Investment TheOrganisation for EconomicCo-operation andDevelopment (OECD) has assessed U.S.
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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.
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Freight Transportation Infrastructure Finance Practices Today 119 assent from many jurisdictions (local governments, special authorities, sometimes more than one state government, and the federal government) and multiple private-sector parties (e.g., railroads and terminal operators)
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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.
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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 competition between Philadelphia and the Port of New York and New Jersey. • The Port Inland Distribution Network (PIDN)
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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 projects and projects in all freight modes were included, as well as multimodal projects.
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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.
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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 magnitude 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.
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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.
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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.
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Freight Transportation Infrastructure Finance Practices Today 127 REFERENCES Abbreviations AAPA American Association of Port Authorities BEA Bureau of Economic Analysis CBO Congressional Budget Office FAA Federal Aviation Administration FHWA Federal Highway Administration FRA Federal Railroad Administration GAO Government Accountability Office OECD Organisation for Economic Co-operation and Development OMB Office of Management and Budget PANYNJ Port Authority of New York and New Jersey TRB Transportation Research Board USDOT U.S. Department of Transportation AAPA.
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128 Funding Options for Freight Transportation Projects CREATE.
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Freight Transportation Infrastructure Finance Practices Today 129 OECD.
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130 Funding Options for Freight Transportation Projects U.S. Department of the Treasury.
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Ra il co rri do ri m pr ov em en ts , in cl ud in g gr ad e se par at io n (ra il– ra il an d hi gh w ay –r ai l)
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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 est 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 .
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Fu ll pr oj ec t: Pr iva te :1 5% ($ 23 2m ill io n)
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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
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A N N EX 32 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 )
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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 ecr os sin g el im in at io ns an d hi gh w ay im pr ov em 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 rbo 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 lro ad ,p or tt er m ina 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)
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U rb an H ub s an d B ot tle ne ck s (o th er th an po rts )
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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)
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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 aTa 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 nlin 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 atio 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 rtic 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 32 (c on ti nu ed )
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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 ssio 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 0fo ot ba rg e to w s Se gm en ts of a m aj or in te rcit yh ig hw ay be in g co nst 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
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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 0m 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 istra 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)
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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 rm 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 nta 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 ner 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 lro 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 rtie s, In c.
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A N N EX 32 (c on ti nu ed )
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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 rm 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.
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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 ctio 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 atio 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.
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Freight Transportation Infrastructure Finance Practices Today 149 SOURCES FOR ANNEX 3-2 Airport-technology.com.
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Federal Highway Administration.
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Freight Transportation Infrastructure Finance Practices Today 151 Pacific Builder and Engineer.
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152 Funding Options for Freight Transportation Projects U.S. Army Corps of Engineers.
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