Post on 05-Jan-2016
Freight Project FinancingFreight Project Financing
Challenges, Questions and OptionsChallenges, Questions and Options
presented bypresented by
Michael P. HuertaMichael P. HuertaCambridge Systematics, Inc.Cambridge Systematics, Inc.
April 30, 2001April 30, 2001
Presentation OverviewPresentation Overview
Characteristics of freight projectsCharacteristics of freight projects
Existing freight financing programsExisting freight financing programs
Effectiveness of current financing programsEffectiveness of current financing programs
Policy questionsPolicy questions
Future financing optionsFuture financing options
Characteristics of Freight ProjectsCharacteristics of Freight Projects
Diverse project sponsorshipDiverse project sponsorship
• Public sectorPublic sector
• Private sectorPrivate sector
• Public/PrivatePublic/Private
Wide range of project typesWide range of project types
• ModalModal
- HighwayHighway
- RailRail
- MarineMarine
- AirAir
• IntermodalIntermodal
Public
Private
Modal Intermodal
Range of Freight Project FormsRange of Freight Project Forms
Private Sector InvolvementPrivate Sector Involvement
High level of private sector involvement is a major High level of private sector involvement is a major distinguishing feature of freight projectsdistinguishing feature of freight projects
Virtually all freight transportation carriers are private Virtually all freight transportation carriers are private companiescompanies
Both public and private sectors have invested heavily in the Both public and private sectors have invested heavily in the nation’s transportation networknation’s transportation network
Dual public/private nature of freight infrastructure creates Dual public/private nature of freight infrastructure creates challenges in planning and financing freight projectschallenges in planning and financing freight projects
Freight Transportation PerspectivesFreight Transportation PerspectivesState and MPO Focus is Regional and Local; State and MPO Focus is Regional and Local; Private Sector Focus is Increasingly National and GlobalPrivate Sector Focus is Increasingly National and Global
Public Sector(States, MPOs)
Private Sector(Shippers, Carriers)
National
Regional
Local
Global
Regional
National
Local
Intermodal Project ChallengesIntermodal Project Challenges
Funding programs tend to be modally focusedFunding programs tend to be modally focused
Multiple project advocates and beneficiariesMultiple project advocates and beneficiaries
““Ownership” of the project may not be clearOwnership” of the project may not be clear
Projects are more complexProjects are more complex
Financing is more complicatedFinancing is more complicated
Existing Freight Financing ProgramsExisting Freight Financing Programs
Federal-aid apportionments and grantsFederal-aid apportionments and grants
Federal credit programsFederal credit programs
State and local transportation fundsState and local transportation funds
State and local credit programsState and local credit programs
Private sector financingPrivate sector financing
ISTEA Funding Programs Applicable to ISTEA Funding Programs Applicable to Freight ProjectsFreight Projects
Congestion Mitigation and Air Quality Program (CMAQ)Congestion Mitigation and Air Quality Program (CMAQ)
• Requires finding that the proposed project will result in Requires finding that the proposed project will result in improved air quality in a non-attainment areaimproved air quality in a non-attainment area
• Can be used for rail and other non-highway projectsCan be used for rail and other non-highway projects
Surface Transportation Program (STP)Surface Transportation Program (STP)
• Applicable to highways and highway-related projectsApplicable to highways and highway-related projects
National Highway System (NHS)National Highway System (NHS)
• Includes a series of “Intermodal Connectors”Includes a series of “Intermodal Connectors”
ISTEA ScorecardISTEA Scorecard
State and metropolitan focus did not match the cost benefit State and metropolitan focus did not match the cost benefit framework of many freight projectsframework of many freight projects
No funding program dedicated specifically to freight No funding program dedicated specifically to freight projectsprojects
No explicit authorization for rail, marine or air freight No explicit authorization for rail, marine or air freight projectsprojects
Other than the NHS, no means for identifying nationally Other than the NHS, no means for identifying nationally significant projectssignificant projects
TEA-21 Funding Programs Applicable to TEA-21 Funding Programs Applicable to Freight ProjectsFreight Projects
National Corridor Planning and Development Program, National Corridor Planning and Development Program, Coordinated Border Infrastructure ProgramCoordinated Border Infrastructure Program
• Federal discretionary grants awarded through a competitive Federal discretionary grants awarded through a competitive processprocess
• National program scopeNational program scope
Transportation Infrastructure Finance and Innovation Act (TIFIA)Transportation Infrastructure Finance and Innovation Act (TIFIA)
• Credit program for large projectsCredit program for large projects
• Limited applicability to non-highway freight projectsLimited applicability to non-highway freight projects
Rail Revitalization and Improvement Financing (RRIF)Rail Revitalization and Improvement Financing (RRIF)
• Credit program for rail infrastructure and equipmentCredit program for rail infrastructure and equipment
• No appropriations provided by CongressNo appropriations provided by Congress
TEA-21 ScorecardTEA-21 Scorecard
Addressed some but not all of the limitations in ISTEA Addressed some but not all of the limitations in ISTEA relating to freight projectsrelating to freight projects
• Created national funding programsCreated national funding programs
• Provided limited support for rail projectsProvided limited support for rail projects
Did not authorize use of funds for the full range of potential Did not authorize use of funds for the full range of potential freight projectsfreight projects
No dedicated funding program for freight projectsNo dedicated funding program for freight projects
Questions remain on how to assess public benefits of Questions remain on how to assess public benefits of improvements to privately owned infrastructureimprovements to privately owned infrastructure
Effectiveness of Current Federal Financing Effectiveness of Current Federal Financing ProgramsPrograms
Project eligibility – many freight projects do not fit within Project eligibility – many freight projects do not fit within the guidelines of existing funding programsthe guidelines of existing funding programs
Project prioritization – freight projects have difficulty in Project prioritization – freight projects have difficulty in competing for funding through the state and metropolitan competing for funding through the state and metropolitan focused planning and project selection processesfocused planning and project selection processes
Despite the priority given to freight projects in ISTEA and Despite the priority given to freight projects in ISTEA and TEA-21, significant impediments remain for financing TEA-21, significant impediments remain for financing freight projectsfreight projects
Transportation planners have been creative given what Transportation planners have been creative given what they have had to work with – does more need to be done?they have had to work with – does more need to be done?
Policy QuestionsPolicy Questions
Should public funding be used to support projects in Should public funding be used to support projects in private ownership or under private control?private ownership or under private control?
Should there be a means of identifying and funding freight Should there be a means of identifying and funding freight projects having national significance?projects having national significance?
Are current funding levels sufficient for freight project Are current funding levels sufficient for freight project needs – is it necessary to identify new sources of funding? needs – is it necessary to identify new sources of funding?
Public Support for Private ProjectsPublic Support for Private Projects
Current federal programs are limited in their applicability to Current federal programs are limited in their applicability to privately owned infrastructureprivately owned infrastructure
Private infrastructure improvements can result in Private infrastructure improvements can result in substantial public benefitssubstantial public benefits
Some public agencies have been concerned about whether Some public agencies have been concerned about whether using public funds to support private projects results in using public funds to support private projects results in competitive advantages to one company versus anothercompetitive advantages to one company versus another
There is a need to clarify whether and under what There is a need to clarify whether and under what conditions public support might be provided to private conditions public support might be provided to private projectsprojects
Nationally Significant ProjectsNationally Significant Projects
ISTEA and TEA-21 delegated most project selection ISTEA and TEA-21 delegated most project selection decisions to the state and metropolitan leveldecisions to the state and metropolitan level
Scope of freight operations often extends beyond the Scope of freight operations often extends beyond the jurisdiction of a given state or MPOjurisdiction of a given state or MPO
Does the federal government need to take a more active Does the federal government need to take a more active role to identify and fund freight projects?role to identify and fund freight projects?
If so, when is it appropriate for the federal government to If so, when is it appropriate for the federal government to get involved?get involved?
Funding Levels and Funding SourcesFunding Levels and Funding Sources
Is the overall level of funding available for freight projects Is the overall level of funding available for freight projects sufficient to meet anticipated needs? sufficient to meet anticipated needs?
If more funding is needed, is it necessary to look beyond If more funding is needed, is it necessary to look beyond the Highway Trust Fund? the Highway Trust Fund?
What other funding sources might be available? What other funding sources might be available?
Future Financing OptionsFuture Financing Options
Expanded project eligibilityExpanded project eligibility
Freight set-asidesFreight set-asides
Incentive programsIncentive programs
Expanded Project EligibilityExpanded Project Eligibility
Add specific types of freight projects to eligibility guidelines of Add specific types of freight projects to eligibility guidelines of existing federal funding programsexisting federal funding programs
How far should eligibility be expanded -- Rail? Marine? Other?How far should eligibility be expanded -- Rail? Marine? Other?
AdvantagesAdvantages
• Preserves the basic framework of ISTEA and TEA-21Preserves the basic framework of ISTEA and TEA-21
• Provides support from a wide range of programsProvides support from a wide range of programs
DisadvantagesDisadvantages
• Does not ensure that projects will actually get fundedDoes not ensure that projects will actually get funded
• Does not address fully the reality that many freight projects Does not address fully the reality that many freight projects extend beyond a state or metropolitan areaextend beyond a state or metropolitan area
Freight Set-AsidesFreight Set-Asides
Establish a funding program or programs specifically for freight Establish a funding program or programs specifically for freight projectsprojects
Could be established as a category within formula allocations to the Could be established as a category within formula allocations to the states, or as a national programstates, or as a national program
AdvantagesAdvantages
• Gives freight projects a dedicated pool of fundingGives freight projects a dedicated pool of funding
• Addresses intermodal projectsAddresses intermodal projects
DisadvantagesDisadvantages
• Runs counter to the flexibility of ISTEA and TEA-21 – many states Runs counter to the flexibility of ISTEA and TEA-21 – many states would view it as an unwelcome mandatewould view it as an unwelcome mandate
• A national program would be a target for Congressional A national program would be a target for Congressional earmarkingearmarking
Incentive ProgramsIncentive Programs
Grants and other support designed to encourage and Grants and other support designed to encourage and reward efforts to address freight needsreward efforts to address freight needs
AdvantagesAdvantages
• Encouragement rather than rigid directionEncouragement rather than rigid direction
• Preserves flexibility and choice under ISTEA and TEA-21Preserves flexibility and choice under ISTEA and TEA-21
DisadvantagesDisadvantages
• Difficult to structure an incentive must be tangible and Difficult to structure an incentive must be tangible and significant enough to achieve the objectivesignificant enough to achieve the objective
• May not go far enough the address freight needsMay not go far enough the address freight needs
Recent Policy ProposalsRecent Policy ProposalsIntermodal ConnectorsIntermodal Connectors
New credit program, similar to TIFIA, for smaller intermodal connector New credit program, similar to TIFIA, for smaller intermodal connector projects (set-aside)projects (set-aside)
Expanded eligibility for RRIF for intermodal connectors (expanded Expanded eligibility for RRIF for intermodal connectors (expanded eligibility)eligibility)
Expanded SIB program (expanded eligibility)Expanded SIB program (expanded eligibility)
Encourage state level credit programs or infrastructure funds (incentive Encourage state level credit programs or infrastructure funds (incentive program)program)
Connector incentive grants (incentive program)Connector incentive grants (incentive program)
Reduced federal match (incentive program)Reduced federal match (incentive program)
NHS funds set aside for intermodal connectors (set-aside)NHS funds set aside for intermodal connectors (set-aside)
ConclusionConclusion
Financing needs for freight projects are different from and Financing needs for freight projects are different from and more complex than traditional transportation projectsmore complex than traditional transportation projects
• Private sector involvementPrivate sector involvement
• Intermodal projectsIntermodal projects
ISTEA and TEA-21 identified freight as a priority, but did ISTEA and TEA-21 identified freight as a priority, but did not address fully the unique needs of the freight industrynot address fully the unique needs of the freight industry
Financing freight projects is a significant challengeFinancing freight projects is a significant challenge
Careful consideration must be given to how best to address Careful consideration must be given to how best to address the needs of the freight transportation industry in the futurethe needs of the freight transportation industry in the future