LOS ANGELES – U.S. Transportation Secretary Norman Y. Mineta on April 29 accepted $573 million as payment with interest for a $400 million federal loan that helped launch the Alameda Corridor transportation project but wasn’t due until 2032.
The loan is being repaid 28 years ahead of schedule with low-interest bonds, saving the Alameda Corridor Transportation Authority about $65 million. Studies estimate that more than 2 million jobs nationwide are associated with international trade moving through the ports of Los Angeles and Long Beach. Building the corridor created 10,000 construction jobs in the Los Angeles area.
"In 1997, we invested in a project that had a strong vision for the future that included two compelling new concepts – intermodalism and innovative financing," Mineta said. "Now, seven years later, we are seeing how much the Alameda Corridor is contributing to the local, national and global economy. This, combined with effective use of taxpayer money, makes the Alameda Corridor a model project for the country."
The repayment is an indication of the project’s initial success and revenue-producing potential. Mineta noted that 35 trains loaded at the ports already are running daily through the Alameda Corridor, and that by 2020, the number of trains is expected to grow to more than 100 per day. The corridor is designed to handle up to 150 trains per day that will carry goods to store shelves throughout the nation, and to Mexico and Canada, he said.
"The Alameda Corridor improves the quality of life of Los Angeles. By reducing congestion and eliminating highway-rail crossings, it cleans the air, makes roads safer, reduces congestion, and keeps goods moving," Mineta said.
The Alameda Corridor, which opened on April 15, 2002, is a 20-mile rail line between the ports of Los Angeles and Long Beach and rail yards near downtown Los Angeles. Central to the project is the mid-corridor trench, a below-ground railway that is 10 miles long, 30 feet deep and 50 feet wide.
By combining 90 miles of branch railroads into one high-speed rail line, the Alameda Corridor eliminated more than 200 railroad crossings where cars and trucks previously had to wait for long freight trains. It also cut by more than half, to approximately 45 minutes, the time it takes to transport cargo containers by train between the ports and downtown Los Angeles.
The project was built at a cost of $2.4 billion by the Alameda Corridor Transportation Authority – a joint powers agency governed by the cities and ports of Los Angeles and Long Beach and the Los Angeles County Metropolitan Transportation Authority.
It was funded through an innovative blend of public and private sources, including the debt repaid today, a $400 million 35-year loan by the U.S. Department of Transportation, and $1.16 billion from bonds. Other funding was derived from the ports and federal, state and local grants, including $347 million in Federal Highway Administration federal-aid grant funds
The ports of Los Angeles and Long Beach represent the third largest port complex in the world. About one-quarter of all U.S. waterborne international trade depends on the ports to reach market.
ACTA held a public bond sale April 21. The joint-powers authority will formally pay off the DOT loan with a wire transfer scheduled for May 6. The bonds will save the joint-powers authority $65.8 million in present value. The terms were approved by ACTA’s Governing Board and the Los Angeles and Long Beach City Councils and Harbor Commissions.
ACTA sold the bonds at a 5.99 percent interest rate. Goldman Sachs and Public Financial
Management handled the transaction. The insured bond issue has received an AAA rating and a stable outlook from Standard & Poor’s, Fitch Ratings and Moody’s. Ambac, which insures ACTA’s bonds, has a financial strength rating of AAA.
"By paying off this loan early, we will be saving millions of dollars, which will allow us to work on new projects that will relieve congestion throughout Los Angeles," said Los Angeles Councilwoman Janice Hahn.
The rate on ACTA’s 1999 Department of Transportation was 6.79 percent. Payoff of the loan and funding costs of issuance, underwriting, insurance and debt reserve account amounted to a par issuance of $686 million. ACTA can sell the new bonds for two primary reasons: two years of operational performance that confirms revenue forecasts and a recent IRS ruling that confirms the tax-exempt eligibility of a portion of the project bonds.
"Interest rates remain near historically low levels, and ACTA wanted to refinance its debt and achieve the same types of savings homeowners have been tapping into for the last couple of years,’’ said ACTA Chair Frank Colonna, Vice Mayor of Long Beach.
— Business Wire and PRNewswire