Bill Mongelluzzo, Associate Editor | May 24, 2012 2:59PM EDT
The Los Angeles City Council has accepted a financing arrangement between the Alameda Corridor Transportation Authority and the Federal Rail Administration that will minimize ACTA’s reliance on assistance from the ports of Los Angeles and Long Beach in the near-term.
Under the agreement, ACTA will sell $83.7 million in surety bonds to FDRA and will use the money to retire bonds that carry a higher interest rate. The deal is expected to close by July 1.
The corridor authority should then be able to cover its debt obligations for at least three to five years, assuming cargo volumes at the ports return to more traditional growth patterns, said John Doherty, chief executive officer.
The 20-mile long Alameda Corridor opened in 2002. Dozens of grade crossings were removed, allowing trains to move quickly through the congested metropolitan area to connect with transcontinental rail networks.
Container volumes at the ports in the early years of operation exceeded initial projections and ACTA had no problem meeting is debt obligations on the $2.4 billion project. However, growth stalled in 2008 and cargo volumes plunged during the economic recession, falling below projections upon which the debt repayment plan was based.
Under terms of the ACTA’s charter, the ports of Los Angeles and Long Beach are committed to cover any shortfalls, although the ports will eventually be paid back.
The agreement with FDRA will allow ACTA to push certain payments out into the future, allowing time for cargo volumes to return to a more normal growth pattern. Although the ports will most likely have to cover a small portion of the debt obligation in October, a return to about 4 percent growth per year in cargo volume should make further appropriations by the ports unnecessary in the near-term, Doherty said.
Container volume growth in Los Angeles-Long Beach was only about 1 percent in the first four months of 2012, but industry analysts and retailers expect cargo volumes to pick up in the second half of the year as the trans-Pacific trade returns to a more traditional summer-fall peak-shipping season.
About 40 to 44 trains transit the corridor each day. By expediting the movement of trains to and from the harbor, the Alameda Corridor is credited with helping to make Los Angeles-Long Beach the top intermodal gateway in the U.S.
Contact Bill Mongelluzzo at bmongelluzzo@joc.com. Follow him on Twitter @billmongelluzzo.
