LAGUNA NIGUEL, Calif. -- Newly revised financial figures indicate that the Alameda Corridor transportation project will cost $2 billion, of which as much as $800 million will be financed through revenue bonds, a project official disclosed this week.
Those figures represent upward revisions from an earlier financing plan released in January, which estimated the project would cost $1.835 billion, of which $600 million would be financed through long-term debt issuance.
"We expect ... we will issue about $750 million to $800 million" of longterm debt in three or four separate revenue bond issues, said James P. Preusch, chief financial officer for the Port of Los Angeles.
Preusch made his comments Wednesday to about 120 public finance professionals attending a one-day seminar sponsored by Moody's Investors Service Inc. The seminar, held at the Ritz-Carlton hotel, was titled "Innovations in Transportation Financing -- Spotlight on California."
The Alameda Corridor is considered the nation's largest intermodal infrastructure project. "Intermodal" refers to a change in the mode of transportation -- in this case, from ship to rail to truck.
The 25-mile-long joint rail and highway project will expedite the movement of cargo between the ports of Los Angeles and Long Beach and rail yards in downtown Los Angeles. It will consolidate three existing rail corridors into one, and improve traffic flow on the adjacent Alameda Street to better accommodate trucks.
The Alameda Corridor Transportation Authority, a joint powers authority comprised of representatives from 16 local governments, is designing and building the project. Preusch is treasurer of the authority.
The revised $2 billion price tag includes "about $1.6 billion for construction, and slightly under $400 million for right-of-way acquisition," Preusch said. He said Southern Pacific Transportation Co., Santa Fe Railway, and Union Pacific Railroad have agreed to route their trains over the corridor. The fees they pay for the use of the tracks will support debt service on the revenue bonds.
Sources of funds for the project include the issuance of the revenue bonds, $400 million from the two ports, $135 million from federal and state agencies, and an additional $700 million from the federal government.
While the authority hopes for an outright $700 million grant from the federal government, Preusch said the authority has "had some discussions" with the U.S.Department of Transportation "about the concept of using federally sponsored loans" that would be guaranteed by the federal government.
"The reality is [that the authority] will probably get some portion of that [$700 million] in actual grant funds, [and] some portion of that money will come as a federal promise to repay in the event that the project cannot repay," Preusch said.
Federal loan backing would allow the issuance of the bonds because investors then would have "a sense of assurance that there will be enough money to complete this project," Preusch said.
Still to be determined is whether the project financing will be tax-exempt, Preusch said.
Last year, members of the California congressional delegation introduced legislation in both chambers to make the revenue bonds tax-exempt for federal income tax purposes. In addition, the authority "will need to get special legislation" to make the $700 million grant tax-exempt, he said.
"Without special legislation and federal support ... that would have to be taxable money," he said. "That is one of the challenges that is ahead of us."
A separate panel at the Moody's seminar on the privatization of traditional public services examined a debt issuance planned next spring for a toll road in Orange County.
The 23-mile-long Eastern Transportation Corridor will be financed with an issuance of between $1.3 billion and $1.5 billion of toll road revenue bonds, said Walter D. Kreutzen, executive vice president of finance and administration for the Transportation Corridor Agencies.
The Santa Ana, Calif.-based joint powers authority is overseeing construction of three public tollways in Orange County.
The toll road's cost will be "approximately $1 billion," but the bond sizing includes "probably two years' of capitalized interest, and a $100 million construction contingency fund," Kreutzen said. The project will take four and a half years to build.
The authority plans to issue non-recourse toll revenue bonds in a combination of rated senior lien and unrated junior lien bonds, he said.
The three rating agencies will be asked to rate the bonds, Kreutzen said, marking a departure from the authority's March 1993 issuance of $1.1 billion of toll road bonds for the 15-mile San Joaquin Hills transportation corridor, now under construction.
Fitch Investors Service assigned a BBB rating to the senior lien portion of the San Joaquin Hills bonds, while neither Moody's nor Standard & Poor's Corp. provided a rating.
"We would clearly like to see a Moody's rating" on the Eastern Transportation Corridor, Daniel N. Heimowitz, executive vice president and director of Moody's public finance department, told The Bond Buyer following Kreutzen's presentation. "We will work with them ... Investors would like to see us come out with" an investment-grade rating, Heimowitz added.
Moody's has looked at a number of start-up toll systems in the last several years, but assigned an investment-grade rating to related revenue bonds for only one: the Harris County, Tex., toll road senior lien revenue bonds, according to a Moody's "Perspective" article provided to conference attendees. "This sole investment-grade rating reflects the inadequate bondholder protections typically provided by start-up toll revenue bond offerings," the article said.