Funding Sources - PowerPoint PPT Presentation


Title: Funding Sources


1
Funding Sources Financial Strategies for
Regional Freight Projects
  • Mr. Prabhat A Diksit
  • FHWA Resource Center
  • Ohio Conference on Freight
  • Toledo, OH
  • Sep 18 2007

2
The challenge of funding freight !
  • Putting together a freight project of any
    complexity involves coalition building.
  • The coalition may even revolve around the
    engineering of funding packages. Local, regional,
    state, federal, and private funding sources may
    be involved.
  • The Federal Govt., particularly the USDOT, has
    several old funding sources and several new
    financial instruments which could potentially be
    directed towards freight.

3
Grant based approaches!
4
Federal agencies with possible freight funding
programs
  • FHWA
  • Formula grants to States
  • Allocations
  • Earmarks
  • Money flexed to other modes
  • FTA
  • Formula grants (5307)
  • Capital grants (5309)
  • FAA
  • Airport Improvement Grants
  • Earmarks
  • Transportation and water authorization bills
  • Annual appropriations bills
  • FRA
  • RRIF Credit program
  • Sec. 330 earmarks
  • MARAD
  • Title 11 loan guarantees
  • Dept. of Commerce
  • Economic Development Administration (EDA) grants
  • EPA, Brownfield Revitalization programs
  • Army Corps of Engineers, Harbor Maintenance
    Programs

5
FHWA formula grants
  • The FHWA with its 39 ½ b appropriation in 2007,
    in mostly formula grants awarded to the states,
    earns pride of place.
  • The formula grants are in the form of familiar
    categories IMNHSSTPBridgeCMAQSafety
  • Freight projects, depending on type, are eligible
    for most of these grants. For instance, CMAQ
    money goes mainly to transit rides-share
    programs, yet freight projects which take trucks
    off of the roads or reduce their emissions are
    also eligible for CMAQ. Similarly, with other
    categories.

6
CMAQ
  • CMAQ (Congestion Mitigation Air Quality)
  • First established in 1991 it is meant to fund
    projects and programs which bring air quality
    (CO, O3, Particulates) in non-attainment areas up
    to national ambient standards.
  • Nationally funded at about 1.6 b a year. For OH,
    around 87m /yr.
  • Any project reducing emissions is potentially
    eligible for these monies.

7
CMAQ Freight
  • Many projects which improve freight mobility,
    have the benefit of improving emissions and are
    likely to be eligible for CMAQ.
  • Improvements in connector roadways to ports
  • HOT lanes
  • Barge Systems taking trucks off of roads
  • Rail spurs, rail trenchings, rail grade
    improvements
  • Truck to rail transfer yards
  • Truck-stop idling facilities
  • Roadway signalizations, ITS projects

8
Examples
  • Columbia Slough Intermodal Bridge, Portland, OR
    Railroad bridge to access deep water port,
    eliminating truck trips.
  • 6.1 million project, 1 million CMAQ ,2.1
    million in demonstration funds. Port of Portland
    1.5 million , private railroads 1.5 million.
  • Red Hook Container Barge, New York, NY 1.9
    million in CMAQ funding, in 50 match for barge
    purchase operating assistance.
  • Remove 54,000 truck trips from the NY/NJ streets
    annually.

9
The flexibility of CMAQ
  • Can be used for multi-modal projects!
  • Can be used for operating assistance for up to
    three years!
  • CMAQ can be granted to profit making cos.
  • CMAQ project selection is via MPO in OH.
  • CMAQ can be very useful in constructing
    multi-modal public private partnership deals in
    the freight area.
  • Its high quality money!

10
Funding Sources NHS
  • National Highway System
  • The NHS consists of 162,000 miles of designated
    US highways, which connect cities, ports and
    border crossings.
  • Nationally some 6.1 b/yr of Fed-aid formula
    funds are apportioned for the NHS program. Some
    237 m/yr in OH.
  • NHS funds can also go to some 1220 miles of
    intermodal connector roadways that tie NHS
    highways to rail yards , ports and intermodal
    facilities.
  • It is probably the principal source of funds for
    port and railhead access roadways.
  • The WA state FAST program (port access
    improvements) relied substantially on this source.

11
Funding sources STP
  • The largest and most flexible of the Fed-aid
    sources.
  • 6.5 b/yr nationally, and 290m /yr in OH.
  • Of some 4 million miles of roads in this country
    , 3 million are Fed-aid roadways. STP comprises
    the bulk of this mileage, and goes down to the
    local collector level.
  • Can be used for planning, construction,
    environmental mitigation, transit, truck stop
    idle reduction, and many other types of projects.
  • In OH projects are selected by MPO.
  • Safety, formerly part of STP, now is its own
    program.

12
Safety Program (HSIP)
  • A new core program established by SAFETEA-LU.
    Doubled from TEA21.
  • 1.2 b annually in US 39m in OH.
  • Set-asides for rail-grade improvements (8.5m) ,
    and high risk rural roads.
  • The rail-grade improvement program is of interest
    to freight project designers.
  • Most projects aiming to improve port or rail
    access include rail grade improvements as a major
    project element.
  • These monies can then be applied towards such a
    project.
  • The Alameda Corridor project, the Chicago
    CREATE project heavily involved rail grade
    improvements.

13
Bridge Program (HBP)
  • 4.3 b nationally in 2007 for bridge
    improvements mostly on a formula basis.
  • 15 mandatory set-aside for off-system bridges.
  • In OH 176 m program.
  • Many port access projects will include a bridge
    element.

14
Generally speaking,
  • A port or rail yard or intermodal yard access
    roadway project can draw on several Fed-aid
    funding sources.
  • CMAQ, or NHS can probably apply to a whole
    project, whereas other categories like Safety or
    Bridge will have to be matched to appropriate
    expenditure elements.

15
Grants from other federal agencies
16
FAA Airport Improvement Program
  • Provides funding for planning improvements to
    cargo airports of 100 m pounds annual capacity.
  • Most within airport improvements including
    capacity, safety, environmental projects
    eligible.
  • Some 3.7 b annually
  • Funded through taxes on airline tickets

17
EDA (Economic Development Administration) grants
  • A 300 m annual program, via the Dept. of
    Commerce, for projects in designated economically
    distressed industrial sites that promote job
    creation.
  • Industrial roads, port areas, rail projects all
    eligible.

18
EPA Brownfield Redevelopment Grants
  • EPA program of grants and loans for the cleanup
    and redevelopment of industrial, commercial
    brownfield sites, including intermodal
    facilities.
  • 20 local match
  • Maximum 200,000 per site

19
US Army Corps, Harbor Maintenance Trust Fund
(HMTF)
  • Funding for OM dredging of Federally authorized
    commercial navigation channels, including ports
    along these channels.
  • 100 funding of OM in ports less than 45 ft
    deep 50 in ports deeper.

20
Pulling grants from multiple sources together
FAST corridor
  • Freight projects will often require cobbling
    funding from many sourcespublic and private.
  • The Puget Sound area FAST (Freight Action
    Strategy) corridor is a successful example of
    this approach.

21
FAST Corridor
  • Anticipating freight traffic increases to the
    ports of the Puget Sound area, local governments
    got together in 1996 to propose projects that
    eliminated bottlenecks, and improve freight
    access to area ports and rail. Phase I , costing
    about 550 m, consisted of 15 projects Phase II
    an additional 10 projects, costing 318m.
  • Funds for Phase I included Federal earmarks, FHWA
    formula grants, State Dot grants, other state
    grants, and funds from local ports, other local
    governments, as well as from private railroads.
  • Most of the Phase I projects are completed.
  • Note that funds were virtually all cash grants,
    and no new institutional structures had to be
    created.

22
Direct Revenues Credit
23
Direct user charges
  • There are projects which can have revenues
    attached to them, either because this is the
    nature of the projecttoll roads, port projects
    etc or because governmental revenues (sales
    taxes, property taxes, general fund sources) can
    be dedicated to them.
  • Dedicated revenues open up a whole variety of
    financing options, including that commonly called
    project finance!

24
Financing approaches
  • Project revenue bonds can be issued against
    future revenues (tolls, for instance) to provide
    the initial funds to build the project. Tolled
    roads, tunnels and bridges, and port authority
    projects have been built this way for 50 years.
    Examples
  • Chicago Skyway, Indiana Toll road 5,100 miles
    of turnpikes around the nation.
  • Alameda Corridor project

25
Self funding
  • Project finance is a self funding (more or less)
    approach to project construction. It does not
    reach into a states or local governments budget
    or bonding authority. It is an approach to use
    when funding is scarce.
  • If a public sector subsidy, beyond project
    financing, is needed this can be determined on a
    projects relative merits.
  • The USDOT has several favorable financial
    instruments (long terms, low rates) available for
    such projects.
  • Many states also have credit facilities, such as
    State Infrastructure banks for project borrowers.

26
Two caveats
  • Project finance does require the creation (or the
    use of an existing) local authority that has at
    minimum, the power to levy user charges and also
    bond against future charges. Usually, this
    requires legislative action.
  • Further, financing via bonds backed by project
    revenues is inherently more risky than cash,
    obviously, but also more so than financing via
    revenue bonds or G.O. bonds issued by a
    government. Interest rates are therefore higher!!

27
USDOT credit TIFIA
  • TIFIA provides credit for highway projects, as
    well as for rail, transit, ferries, freight
    transfer facilities, public and private rail
    projects.
  • It has about 2 billion a year to lend, and has
    provided credit for numerous transportation
    projects.
  • Some basic rules are written into the legislation
    authorizing it
  • Minimum project size 50 m
  • Maximum loan limit of 33 of project size
  • Interest rate are set at slightly above the
    Federal borrowing rate for instruments of that
    maturity at time of closing. (around 4.8 for 10
    year loan)
  • Long loan terms permitted, 30 yrs. With payments
    beginning 5 years after substantial completion.
  • See TIFIA web site for further info
  • http//tifia.fhwa.dot.gov/

28
Approved TIFIA Loans
Staten Island Ferries 159 Retired paid in full
Moynihan Station 160

Reno Rail Corridor 74
Warwick Train Station 58
Washington Metro CIP 600
Cooper River Bridge Retired - refinanced 215
SR 125 Toll Road 140
Tren Urbano Retired - paid in full 300
Total TIFIA Assistance 3.2 Billion Total
Project Investment 12.7 Billion
LA-1 66
Central Texas Turnpike 917
Miami Intermodal Center 439
PR
US 183-A Turnpike 66
29
Advantages/disadvantages
  • Patient Flexible Lender
  • 30 year terms. payments can begin 5 yrs after
    substantial completion.
  • Will negotiate on lending issues if not written
    into legislation. Back loaded interest, payments
    geared to revenue receipts etc.
  • The mandated interest rate could be low for some
    borrowers.
  • Federal Restrictions
  • The mandated interest rate is taxable could be
    high for some borrowers.
  • Minimum project size possible bar to local
    governments.
  • Project becomes Federalized and subject to Title
    23 reviews NEPA, Davis-Bacon, Buy America,
    MBE/DBE, Section 4f, environmental justice, no
    local preferences on contracts etc etc

30
RRIF loans
  • The Federal Railroad Administration has a credit
    assistance program very similar to the TIFIA
    program, meant for railroads and intermodal
    projects.
  • There are no project size or project lending or
    project term rules, but there is an up-front
    project risk premium that has to be paid. Credit
    assistance is tailored to each applicant upon
    successful negotiation.
  • Over 500 m in RRIF lending to date.
  • http//www.fra.dot.gov/us/content/177

31
Private activity tax exempt bonds, PAB
  • The privilege of issuing tax exempt bonds is
    normally reserved for state and local
    governments. However,
  • IRS rules provide exemptions for private sector
    owners/leasers of certain exempt facilities
    housing, hospitals, schools, sea and air port
    facilities.
  • Private owners/financiers of highways
    intermodal freight facilities have now been made
    eligible by SAFETEA-Lu

32
PAB procedures
  • Private project owners will need to work closely
    with a state or local govt.
  • The project will have to be on STIP/TIP and
    receiving at least 1 of Title 23 assistance.
  • A local government has to act as conduit issuer
    of the bond!
  • That is, a local government actually issues the
    bond but the private co. makes the payments and
    is responsible for the debt.
  • Bond issuance has to be applied for thru USDOT.(
    15 billion total.)
  • See Jack Bennett, Office of Under Secretary of
    Transportation for Policy. 202-366-6222
  • Several freight projects have either applied for
    or received conditional allocations Miami Tunnel
    (900m) Centrepoint (500m)-- an intermodal
    freight center in Crete, Il.

33
State Infrastructure Bank, Sib
  • The Federal govt. permits states to set aside up
    to 10 of highway formula grants in a revolving
    fund-- which then provides loans for eligible
    transportation projects.
  • OH has used this to advantage and has a very
    active effective Sib
  • 260 m in lending to date to local govts.
  • Recently a new bond fund has been established
    that issues bonds based on local demand for funds.

34
OH Sib
  • Lending is available for highway, transit, rail
    and intermodal projects for local govts. Freight
    projects generally eligible. Federally ineligible
    projects funded thru state facility.
  • See OH Dot Sib website http//www.dot.state.oh.us/
    sib1/sum.htm or contact Melinda Lawrence
    (614-644-7275)
  • Note Projects such as truck to rail container
    transfer yards have been financed with Sib loans
    in other states. Federal rules would not bar
    these or idle reduction facilities, truck only
    lanes etc from being financed via a Sib.

35
Financial Partnerships with the Private Sector
36
Public Private Partnerships, PPP
  • In recent years an entirely new way of financing
    roadway projects has emerged, PPP. The new
    approach could be applied to freight
    infrastructure generally.
  • It relies on corporate equity and debt,
    insurance co. and pension fund investments for
    finances-- there is said to be 250 b of private
    sector money available for investment in US
    infrastructure but these investors will require
    a return on investment (typically thru tolls on
    roadways).
  • Numerous tolled projects of this type are in
    progress and a handful completed, with the
    states of Texas, Florida, Georgia, and the DC
    beltway areas most active.

37
Truck intensive highway concessions
  • Miami Port Tunnel
  • 865 m tunnel project awarded as a 35 year
    contract to design-build finance-operate-maintain
    concession. Payments, are monthly following
    construction, based on availability. Multiple
    revenue streams, including tolls. State local
    partnership.
  • US 460 Va.
  • Improvements and expansion of existing 50 year
    old road to Norfolk ports of Chesapeake Bay.
    Growth in truck traffic main driver. Will likely
    be bid out as a design-build-finance-operate-maint
    ain concession. Likely tolled.
  • Both projects provide a possible model for port
    access intermodal connector roadway improvements.

38
Other types of partnerships a)
  • The standard local government economic
    development model
  • Roadway access, interchange improvements, water
    sewer lines to property boundary, with private
    sector doing the rest.
  • Possible approach to development of well situated
    freight logistics intermodal transfer
    facilities, truck stop idling reduction
    facilities etc. Perhaps assistance from federal
    grant streams, described earlier as well as state
    grants.

39
Partnerships b) rail
  • The Heartland Corridor provides an example of a
    type of partnership fueled by Federal earmarks to
    private railroads, and beneficial to local
    transportation economies.
  • I see that Norfolk Southern has proposed another
    partnership with governments for a new rail line
    from Newark to New Orleans.
  • It is worth noting that Class 1 railroads have
    contributed to the CREATE project, the Alameda
    Corridor project, the FAST Corridor projects etc.
  • States too numerous to mention have revolving
    fund lending programs and grants available to
    fertilize partnerships with short-line railroads.
  • The FHWA Freight Finance guidebook, lists many of
    these funding streams.

40
Partnerships c) cost share, contributions
  • Cost sharing on interchanges with developers is
    not uncommon. Sometimes the Dot or local govt.
    takes on debt whose payments are shared among
    several parties.
  • ROW contributions by local govts. or private
    developers to a road project is another approach.
  • Fl Tx Dots will cost share on OM or
    signalization, or ROW, or interchanges on locally
    sponsored toll roads.

41
Partnerships d) tax exempt corporations
  • A legal vehicle used occasionally to enable
    public private partnerships is the non- profit
    corporation, called 63-20s.
  • These are all debt corps. created thru a
    partnership with developers to build and manage a
    project. It allows for the issuance of cheaper
    tax exempt debt.
  • The Las Vegas Monorail Route 3 in Ma were
    constructed thru these approaches.
  • Missouri Dot often uses these vehicles. The
    Highline Bridge the Argentine Connection were
    two projects built with bonds issued by a tax
    exempt corp. Bond payments are made with user
    fees from railroads who use these facilities.

42
DOT credit instruments partnerships
  • The TIFIA RRIF credit facilities mentioned
    earlier are available to public or private bodies
    or partnerships.
  • Private activity bonds, of their nature require
    close working relationships between governments
    and applying private sector entities.
  • Many various are the approaches that can be
    used to create public private partnerships. These
    are often project driven, and give free room for
    local creativity.

43
Freight finance guidebook
  • The FHWA Financing Freight Infrastructure
    guidebook is now available.
  • It elaborates greatly on many of the themes
    touched on here. Numerous sources of freight
    funds, both Federal State, are listed. Many
    examples of funded freight projects are detailed.
    On the web at
  • http//www.ops.fhwa.dot.gov/freight/publications/f
    reightfinancing/pdf.pdf
  • A Freight Finance Class is also being prepared.
    Ready in early 2008
  • See Carol Keenan, 202-366-6993
  • Carol.Keenan_at_fhwa.dot.gov

44
Thank you! For further info contact
  • Mr. Prabhat A Diksit
  • Innovative Finance Specialist
  • FHWA Resource Center
  • Prabhat.Diksit_at_fhwa.dot.gov
  • 720-963-3202
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Funding Sources

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Title: Funding Sources


1
Funding Sources Financial Strategies for
Regional Freight Projects
  • Mr. Prabhat A Diksit
  • FHWA Resource Center
  • Ohio Conference on Freight
  • Toledo, OH
  • Sep 18 2007

2
The challenge of funding freight !
  • Putting together a freight project of any
    complexity involves coalition building.
  • The coalition may even revolve around the
    engineering of funding packages. Local, regional,
    state, federal, and private funding sources may
    be involved.
  • The Federal Govt., particularly the USDOT, has
    several old funding sources and several new
    financial instruments which could potentially be
    directed towards freight.

3
Grant based approaches!
4
Federal agencies with possible freight funding
programs
  • FHWA
  • Formula grants to States
  • Allocations
  • Earmarks
  • Money flexed to other modes
  • FTA
  • Formula grants (5307)
  • Capital grants (5309)
  • FAA
  • Airport Improvement Grants
  • Earmarks
  • Transportation and water authorization bills
  • Annual appropriations bills
  • FRA
  • RRIF Credit program
  • Sec. 330 earmarks
  • MARAD
  • Title 11 loan guarantees
  • Dept. of Commerce
  • Economic Development Administration (EDA) grants
  • EPA, Brownfield Revitalization programs
  • Army Corps of Engineers, Harbor Maintenance
    Programs

5
FHWA formula grants
  • The FHWA with its 39 ½ b appropriation in 2007,
    in mostly formula grants awarded to the states,
    earns pride of place.
  • The formula grants are in the form of familiar
    categories IMNHSSTPBridgeCMAQSafety
  • Freight projects, depending on type, are eligible
    for most of these grants. For instance, CMAQ
    money goes mainly to transit rides-share
    programs, yet freight projects which take trucks
    off of the roads or reduce their emissions are
    also eligible for CMAQ. Similarly, with other
    categories.

6
CMAQ
  • CMAQ (Congestion Mitigation Air Quality)
  • First established in 1991 it is meant to fund
    projects and programs which bring air quality
    (CO, O3, Particulates) in non-attainment areas up
    to national ambient standards.
  • Nationally funded at about 1.6 b a year. For OH,
    around 87m /yr.
  • Any project reducing emissions is potentially
    eligible for these monies.

7
CMAQ Freight
  • Many projects which improve freight mobility,
    have the benefit of improving emissions and are
    likely to be eligible for CMAQ.
  • Improvements in connector roadways to ports
  • HOT lanes
  • Barge Systems taking trucks off of roads
  • Rail spurs, rail trenchings, rail grade
    improvements
  • Truck to rail transfer yards
  • Truck-stop idling facilities
  • Roadway signalizations, ITS projects

8
Examples
  • Columbia Slough Intermodal Bridge, Portland, OR
    Railroad bridge to access deep water port,
    eliminating truck trips.
  • 6.1 million project, 1 million CMAQ ,2.1
    million in demonstration funds. Port of Portland
    1.5 million , private railroads 1.5 million.
  • Red Hook Container Barge, New York, NY 1.9
    million in CMAQ funding, in 50 match for barge
    purchase operating assistance.
  • Remove 54,000 truck trips from the NY/NJ streets
    annually.

9
The flexibility of CMAQ
  • Can be used for multi-modal projects!
  • Can be used for operating assistance for up to
    three years!
  • CMAQ can be granted to profit making cos.
  • CMAQ project selection is via MPO in OH.
  • CMAQ can be very useful in constructing
    multi-modal public private partnership deals in
    the freight area.
  • Its high quality money!

10
Funding Sources NHS
  • National Highway System
  • The NHS consists of 162,000 miles of designated
    US highways, which connect cities, ports and
    border crossings.
  • Nationally some 6.1 b/yr of Fed-aid formula
    funds are apportioned for the NHS program. Some
    237 m/yr in OH.
  • NHS funds can also go to some 1220 miles of
    intermodal connector roadways that tie NHS
    highways to rail yards , ports and intermodal
    facilities.
  • It is probably the principal source of funds for
    port and railhead access roadways.
  • The WA state FAST program (port access
    improvements) relied substantially on this source.

11
Funding sources STP
  • The largest and most flexible of the Fed-aid
    sources.
  • 6.5 b/yr nationally, and 290m /yr in OH.
  • Of some 4 million miles of roads in this country
    , 3 million are Fed-aid roadways. STP comprises
    the bulk of this mileage, and goes down to the
    local collector level.
  • Can be used for planning, construction,
    environmental mitigation, transit, truck stop
    idle reduction, and many other types of projects.
  • In OH projects are selected by MPO.
  • Safety, formerly part of STP, now is its own
    program.

12
Safety Program (HSIP)
  • A new core program established by SAFETEA-LU.
    Doubled from TEA21.
  • 1.2 b annually in US 39m in OH.
  • Set-asides for rail-grade improvements (8.5m) ,
    and high risk rural roads.
  • The rail-grade improvement program is of interest
    to freight project designers.
  • Most projects aiming to improve port or rail
    access include rail grade improvements as a major
    project element.
  • These monies can then be applied towards such a
    project.
  • The Alameda Corridor project, the Chicago
    CREATE project heavily involved rail grade
    improvements.

13
Bridge Program (HBP)
  • 4.3 b nationally in 2007 for bridge
    improvements mostly on a formula basis.
  • 15 mandatory set-aside for off-system bridges.
  • In OH 176 m program.
  • Many port access projects will include a bridge
    element.

14
Generally speaking,
  • A port or rail yard or intermodal yard access
    roadway project can draw on several Fed-aid
    funding sources.
  • CMAQ, or NHS can probably apply to a whole
    project, whereas other categories like Safety or
    Bridge will have to be matched to appropriate
    expenditure elements.

15
Grants from other federal agencies
16
FAA Airport Improvement Program
  • Provides funding for planning improvements to
    cargo airports of 100 m pounds annual capacity.
  • Most within airport improvements including
    capacity, safety, environmental projects
    eligible.
  • Some 3.7 b annually
  • Funded through taxes on airline tickets

17
EDA (Economic Development Administration) grants
  • A 300 m annual program, via the Dept. of
    Commerce, for projects in designated economically
    distressed industrial sites that promote job
    creation.
  • Industrial roads, port areas, rail projects all
    eligible.

18
EPA Brownfield Redevelopment Grants
  • EPA program of grants and loans for the cleanup
    and redevelopment of industrial, commercial
    brownfield sites, including intermodal
    facilities.
  • 20 local match
  • Maximum 200,000 per site

19
US Army Corps, Harbor Maintenance Trust Fund
(HMTF)
  • Funding for OM dredging of Federally authorized
    commercial navigation channels, including ports
    along these channels.
  • 100 funding of OM in ports less than 45 ft
    deep 50 in ports deeper.

20
Pulling grants from multiple sources together
FAST corridor
  • Freight projects will often require cobbling
    funding from many sourcespublic and private.
  • The Puget Sound area FAST (Freight Action
    Strategy) corridor is a successful example of
    this approach.

21
FAST Corridor
  • Anticipating freight traffic increases to the
    ports of the Puget Sound area, local governments
    got together in 1996 to propose projects that
    eliminated bottlenecks, and improve freight
    access to area ports and rail. Phase I , costing
    about 550 m, consisted of 15 projects Phase II
    an additional 10 projects, costing 318m.
  • Funds for Phase I included Federal earmarks, FHWA
    formula grants, State Dot grants, other state
    grants, and funds from local ports, other local
    governments, as well as from private railroads.
  • Most of the Phase I projects are completed.
  • Note that funds were virtually all cash grants,
    and no new institutional structures had to be
    created.

22
Direct Revenues Credit
23
Direct user charges
  • There are projects which can have revenues
    attached to them, either because this is the
    nature of the projecttoll roads, port projects
    etc or because governmental revenues (sales
    taxes, property taxes, general fund sources) can
    be dedicated to them.
  • Dedicated revenues open up a whole variety of
    financing options, including that commonly called
    project finance!

24
Financing approaches
  • Project revenue bonds can be issued against
    future revenues (tolls, for instance) to provide
    the initial funds to build the project. Tolled
    roads, tunnels and bridges, and port authority
    projects have been built this way for 50 years.
    Examples
  • Chicago Skyway, Indiana Toll road 5,100 miles
    of turnpikes around the nation.
  • Alameda Corridor project

25
Self funding
  • Project finance is a self funding (more or less)
    approach to project construction. It does not
    reach into a states or local governments budget
    or bonding authority. It is an approach to use
    when funding is scarce.
  • If a public sector subsidy, beyond project
    financing, is needed this can be determined on a
    projects relative merits.
  • The USDOT has several favorable financial
    instruments (long terms, low rates) available for
    such projects.
  • Many states also have credit facilities, such as
    State Infrastructure banks for project borrowers.

26
Two caveats
  • Project finance does require the creation (or the
    use of an existing) local authority that has at
    minimum, the power to levy user charges and also
    bond against future charges. Usually, this
    requires legislative action.
  • Further, financing via bonds backed by project
    revenues is inherently more risky than cash,
    obviously, but also more so than financing via
    revenue bonds or G.O. bonds issued by a
    government. Interest rates are therefore higher!!

27
USDOT credit TIFIA
  • TIFIA provides credit for highway projects, as
    well as for rail, transit, ferries, freight
    transfer facilities, public and private rail
    projects.
  • It has about 2 billion a year to lend, and has
    provided credit for numerous transportation
    projects.
  • Some basic rules are written into the legislation
    authorizing it
  • Minimum project size 50 m
  • Maximum loan limit of 33 of project size
  • Interest rate are set at slightly above the
    Federal borrowing rate for instruments of that
    maturity at time of closing. (around 4.8 for 10
    year loan)
  • Long loan terms permitted, 30 yrs. With payments
    beginning 5 years after substantial completion.
  • See TIFIA web site for further info
  • http//tifia.fhwa.dot.gov/

28
Approved TIFIA Loans
Staten Island Ferries 159 Retired paid in full
Moynihan Station 160

Reno Rail Corridor 74
Warwick Train Station 58
Washington Metro CIP 600
Cooper River Bridge Retired - refinanced 215
SR 125 Toll Road 140
Tren Urbano Retired - paid in full 300
Total TIFIA Assistance 3.2 Billion Total
Project Investment 12.7 Billion
LA-1 66
Central Texas Turnpike 917
Miami Intermodal Center 439
PR
US 183-A Turnpike 66
29
Advantages/disadvantages
  • Patient Flexible Lender
  • 30 year terms. payments can begin 5 yrs after
    substantial completion.
  • Will negotiate on lending issues if not written
    into legislation. Back loaded interest, payments
    geared to revenue receipts etc.
  • The mandated interest rate could be low for some
    borrowers.
  • Federal Restrictions
  • The mandated interest rate is taxable could be
    high for some borrowers.
  • Minimum project size possible bar to local
    governments.
  • Project becomes Federalized and subject to Title
    23 reviews NEPA, Davis-Bacon, Buy America,
    MBE/DBE, Section 4f, environmental justice, no
    local preferences on contracts etc etc

30
RRIF loans
  • The Federal Railroad Administration has a credit
    assistance program very similar to the TIFIA
    program, meant for railroads and intermodal
    projects.
  • There are no project size or project lending or
    project term rules, but there is an up-front
    project risk premium that has to be paid. Credit
    assistance is tailored to each applicant upon
    successful negotiation.
  • Over 500 m in RRIF lending to date.
  • http//www.fra.dot.gov/us/content/177

31
Private activity tax exempt bonds, PAB
  • The privilege of issuing tax exempt bonds is
    normally reserved for state and local
    governments. However,
  • IRS rules provide exemptions for private sector
    owners/leasers of certain exempt facilities
    housing, hospitals, schools, sea and air port
    facilities.
  • Private owners/financiers of highways
    intermodal freight facilities have now been made
    eligible by SAFETEA-Lu

32
PAB procedures
  • Private project owners will need to work closely
    with a state or local govt.
  • The project will have to be on STIP/TIP and
    receiving at least 1 of Title 23 assistance.
  • A local government has to act as conduit issuer
    of the bond!
  • That is, a local government actually issues the
    bond but the private co. makes the payments and
    is responsible for the debt.
  • Bond issuance has to be applied for thru USDOT.(
    15 billion total.)
  • See Jack Bennett, Office of Under Secretary of
    Transportation for Policy. 202-366-6222
  • Several freight projects have either applied for
    or received conditional allocations Miami Tunnel
    (900m) Centrepoint (500m)-- an intermodal
    freight center in Crete, Il.

33
State Infrastructure Bank, Sib
  • The Federal govt. permits states to set aside up
    to 10 of highway formula grants in a revolving
    fund-- which then provides loans for eligible
    transportation projects.
  • OH has used this to advantage and has a very
    active effective Sib
  • 260 m in lending to date to local govts.
  • Recently a new bond fund has been established
    that issues bonds based on local demand for funds.

34
OH Sib
  • Lending is available for highway, transit, rail
    and intermodal projects for local govts. Freight
    projects generally eligible. Federally ineligible
    projects funded thru state facility.
  • See OH Dot Sib website http//www.dot.state.oh.us/
    sib1/sum.htm or contact Melinda Lawrence
    (614-644-7275)
  • Note Projects such as truck to rail container
    transfer yards have been financed with Sib loans
    in other states. Federal rules would not bar
    these or idle reduction facilities, truck only
    lanes etc from being financed via a Sib.

35
Financial Partnerships with the Private Sector
36
Public Private Partnerships, PPP
  • In recent years an entirely new way of financing
    roadway projects has emerged, PPP. The new
    approach could be applied to freight
    infrastructure generally.
  • It relies on corporate equity and debt,
    insurance co. and pension fund investments for
    finances-- there is said to be 250 b of private
    sector money available for investment in US
    infrastructure but these investors will require
    a return on investment (typically thru tolls on
    roadways).
  • Numerous tolled projects of this type are in
    progress and a handful completed, with the
    states of Texas, Florida, Georgia, and the DC
    beltway areas most active.

37
Truck intensive highway concessions
  • Miami Port Tunnel
  • 865 m tunnel project awarded as a 35 year
    contract to design-build finance-operate-maintain
    concession. Payments, are monthly following
    construction, based on availability. Multiple
    revenue streams, including tolls. State local
    partnership.
  • US 460 Va.
  • Improvements and expansion of existing 50 year
    old road to Norfolk ports of Chesapeake Bay.
    Growth in truck traffic main driver. Will likely
    be bid out as a design-build-finance-operate-maint
    ain concession. Likely tolled.
  • Both projects provide a possible model for port
    access intermodal connector roadway improvements.

38
Other types of partnerships a)
  • The standard local government economic
    development model
  • Roadway access, interchange improvements, water
    sewer lines to property boundary, with private
    sector doing the rest.
  • Possible approach to development of well situated
    freight logistics intermodal transfer
    facilities, truck stop idling reduction
    facilities etc. Perhaps assistance from federal
    grant streams, described earlier as well as state
    grants.

39
Partnerships b) rail
  • The Heartland Corridor provides an example of a
    type of partnership fueled by Federal earmarks to
    private railroads, and beneficial to local
    transportation economies.
  • I see that Norfolk Southern has proposed another
    partnership with governments for a new rail line
    from Newark to New Orleans.
  • It is worth noting that Class 1 railroads have
    contributed to the CREATE project, the Alameda
    Corridor project, the FAST Corridor projects etc.
  • States too numerous to mention have revolving
    fund lending programs and grants available to
    fertilize partnerships with short-line railroads.
  • The FHWA Freight Finance guidebook, lists many of
    these funding streams.

40
Partnerships c) cost share, contributions
  • Cost sharing on interchanges with developers is
    not uncommon. Sometimes the Dot or local govt.
    takes on debt whose payments are shared among
    several parties.
  • ROW contributions by local govts. or private
    developers to a road project is another approach.
  • Fl Tx Dots will cost share on OM or
    signalization, or ROW, or interchanges on locally
    sponsored toll roads.

41
Partnerships d) tax exempt corporations
  • A legal vehicle used occasionally to enable
    public private partnerships is the non- profit
    corporation, called 63-20s.
  • These are all debt corps. created thru a
    partnership with developers to build and manage a
    project. It allows for the issuance of cheaper
    tax exempt debt.
  • The Las Vegas Monorail Route 3 in Ma were
    constructed thru these approaches.
  • Missouri Dot often uses these vehicles. The
    Highline Bridge the Argentine Connection were
    two projects built with bonds issued by a tax
    exempt corp. Bond payments are made with user
    fees from railroads who use these facilities.

42
DOT credit instruments partnerships
  • The TIFIA RRIF credit facilities mentioned
    earlier are available to public or private bodies
    or partnerships.
  • Private activity bonds, of their nature require
    close working relationships between governments
    and applying private sector entities.
  • Many various are the approaches that can be
    used to create public private partnerships. These
    are often project driven, and give free room for
    local creativity.

43
Freight finance guidebook
  • The FHWA Financing Freight Infrastructure
    guidebook is now available.
  • It elaborates greatly on many of the themes
    touched on here. Numerous sources of freight
    funds, both Federal State, are listed. Many
    examples of funded freight projects are detailed.
    On the web at
  • http//www.ops.fhwa.dot.gov/freight/publications/f
    reightfinancing/pdf.pdf
  • A Freight Finance Class is also being prepared.
    Ready in early 2008
  • See Carol Keenan, 202-366-6993
  • Carol.Keenan_at_fhwa.dot.gov

44
Thank you! For further info contact
  • Mr. Prabhat A Diksit
  • Innovative Finance Specialist
  • FHWA Resource Center
  • Prabhat.Diksit_at_fhwa.dot.gov
  • 720-963-3202
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